As filed with the Securities and Exchange Commission on August 10, 2010.

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

The Aveon Group L.P.

(Exact name of registrant as specified in its charter)

Delaware

6282

27-1767815

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

The America’s Cup Building

30 Doaks Lane

Marblehead, Massachusetts 01945

Telephone: (781) 639-3000

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Randy Carrigan

Chief Legal Officer

Aveon Management L.L.C.

The America’s Cup Building

30 Doaks Lane

Marblehead, Massachusetts 01945

Telephone: (781) 639-3000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

David S. Huntington

John C. Kennedy

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019

Telephone: (212) 373-3000

Facsimile: (212) 757-3990

David J. Goldschmidt

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Telephone: (212) 735-3000

Facsimile: (212) 735-2000

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after the Registration Statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ¨		Accelerated filer ¨		Non-accelerated filer þ		Smaller reporting company ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of

Securities to be Registered

Proposed Maximum
Aggregate Offering

Price(1)(2)

Amount of
Registration Fee

Common Units Representing Limited Partner Interests

$205,000,000

$14,616.50

(1)

Estimated solely for the purpose of determining the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Includes common units subject to the underwriters’ option to purchase additional common units.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to completion, dated August 10, 2010

Preliminary prospectus

Common units

Representing limited partner interests

This is the initial public offering of common units representing limited partner interests in The Aveon Group L.P. No public market currently exists for our common units. We are offering all of the common units representing limited partner interests in this offering. We anticipate that the initial public offering price will be between $ and $ per common unit. We intend to apply to list the common units on the New York Stock Exchange under the symbol “AVO.”

We are an investment management firm focused on acquiring controlling interests in the general partners or managing members of a diversified group of hedge funds. We are managed by our general partner, Aveon Management L.L.C., which is owned by our founding investors. Immediately following the completion of this offering, we will enter into a series of transactions whereby we will, among other things, acquire interests in six hedge fund general partners or managing members, which we refer to as our “manager affiliates.” Our manager affiliates currently manage eight investment funds that pursue a range of alternative investment strategies.

Investing in our common units involves risks. See “Risk factors” beginning on page 26. These risks include the following:

•

We are a newly organized firm without any operating history and are subject to the risks attendant to a new business venture.

•

Our common unitholders will have only limited voting rights, and unless our founding investors and their affiliates collectively cease to own at least 4% of the voting power of our outstanding voting units (whether through common units or special voting units), our common unitholders will have no right to elect the directors of our general partner.

•

Immediately following this offering, our founding investors will generally have sufficient voting power to significantly influence the outcome of those few matters that may be submitted for a vote of our limited partners.

•

Our limited partnership agreement limits the liability of our general partner, reduces or eliminates certain duties owed by our general partner to our common unitholders and restricts the remedies available to our common unitholders for actions that might otherwise constitute breaches of our general partner’s duties.

•

Difficult market and economic conditions can adversely affect our business in many ways, including reducing the value or performance of the funds we manage or reducing our ability to raise or deploy capital, which could materially reduce our revenue and cash flow and negatively affect our financial condition.

•

As discussed in “Material U.S. federal tax considerations,” we believe that The Aveon Group L.P. will be treated as a partnership for U.S. federal income tax purposes, and you therefore will be required to take into account your allocable share of items of income, gain, loss and deduction of The Aveon Group L.P. in computing your U.S. federal income tax liability. You may not receive cash distributions equal to your allocable share of our net taxable income or even the tax liability that results from that income.

•

Legislation has been introduced that would, if enacted, preclude us from qualifying as a partnership for U.S. federal income tax purposes or otherwise increase our tax liability. If this or any similar legislation or regulation were to be enacted and to apply to us, we would incur a material increase in our tax liability that could result in a reduction in the value of our common units.


	Price to public	Underwriting discounts	Proceeds to The Aveon Group L.P.
Per Common Unit	$	$	$
Total	$	$	$

To the extent that the underwriters sell more than common units, the underwriters have the option to purchase up to an additional common units from us at the initial public offering price less the underwriting discount.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the common units to purchasers on or about .


J.P. Morgan		Jefferies & Company

Table of contents


		Page
Summary		1
Risk factors		26
Forward looking statements		63
Presentation of financial information		63
Market and industry data		65
Formation and structure of our Company		66
Use of proceeds		73
Cash distribution policy		74
Capitalization		76
Dilution		77
Unaudited pro forma financial information		79
Selected financial data		93
Management’s discussion and analysis of financial condition and results of operations		94
Industry		117
Business		123


Management		145
Certain relationships and related person transactions		154
Principal unitholders		161
Conflicts of interest and fiduciary responsibilities		162
Description of common units		169
Material provisions of The Aveon Group L.P. partnership agreement		170
Material U.S. federal tax considerations		183
Common units eligible for future sale		204
Underwriting		208
Legal matters		213
Experts		213
Where you can find more information		215
Index to financial statements		F-1
Appendix A—form of Amended and Restated Agreement of Limited Partnership of The Aveon Group L.P.		A-1

You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered to you. Neither we nor the underwriters have authorized anyone to provide you with additional or different information. We and the underwriters are offering to sell, and seeking offers to buy, our common units only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common units.

Through and including , (25 days after the date of this prospectus), all dealers that effect transactions in our common units, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Unless the context suggests otherwise, references in this prospectus to “Aveon,” the “Company,” “we,” “us” and “our” refer to The Aveon Group L.P. and its consolidated subsidiaries after giving effect to the transactions described in greater detail under “Formation and structure of our Company.” We refer to these transactions collectively as the “formation transactions.” We refer to Aveon Management L.L.C. as our “general partner.” We refer to Founding Investors, LLC, which is the sole owner of our general partner, together with the direct and indirect equityholders of Founding Investors, LLC, collectively, as our “founding investors.”

As described in greater detail under “Formation and structure of our Company,” immediately following the completion of this offering, we will acquire controlling interests, which we refer to as our “interests,” in the general partners or managing members, which we refer to as our “manager affiliates,” of the initial funds we will manage from the investment professionals who currently own these entities, whom we refer to as the “selling investment professionals.” Certain of these selling

investment professionals will, as part of these formation transactions, receive ownership interests in our business. We refer to such selling investment professionals, together with our founding investors, as our “existing owners.”

We use the term “our initial funds” to refer to the investment funds managed by the manager affiliates that we will acquire upon the closing of this offering as described under “Formation and structure of our Company.” We use the term “our funds” to refer to our initial funds together with any additional funds that we may establish or acquire in the future, including any investable multi-fund composites and other investment vehicles that we may establish. We refer to each investment firm, together with such firm’s investment advisory team, which will be responsible for the day-to-day operation and investment activity of one or more of our respective funds, as our “operating member.”

“Assets under management” or “AUM” refers to the assets we manage. Our assets under management equal the sum of net asset value (which we refer to as “NAV,” and which we define, with respect to any of our funds, accounts or portfolios as of any given date, as the assets minus liabilities of such fund, account or portfolio) of all of our private investment funds and our managed accounts. Assets under management presented in this prospectus include assets under management from investments made by our funds’ investors and from investments in our funds made by us and by the investment professionals who conduct the operations of our funds on a day-to-day basis. Our calculation of assets under management may differ from the calculations of other investment managers and as a result this measure may not be comparable to similar measures presented by other investment managers. Our definition of assets under management is not based on any of the definitions of assets under management that are set forth in the agreements governing our funds.

“Net investment return” refers to the historical investment performance of a fund that is returned to investors over a monthly time period. Net investment return is a fund’s gross trading return on underlying investments less all expenses charged to the fund, including trading costs, fund administration and accounting expenses, management fees on assets under management and incentive fees. Our calculation of “annualized net investment return” for our initial funds is the compounded average annual return of the monthly net investment returns in any specified period.

“Volatility” describes a fund’s performance risk measured by the annualized standard deviation of monthly net investment returns, which is calculated as the monthly standard deviation of monthly net returns over a given time period times the square root of twelve.

We use “correlation” of a fund’s net returns over a given time period to measure the dependence of a fund’s return on another set of returns for the same time period. Correlations are most often used to measure the historical tendency of a fund’s return to go up or down with, for example, its strategy benchmark or a broader market index such as the S&P 500. We have also calculated correlations between the net investment returns of our funds over a given period because, generally, lower correlations between managers may improve the diversification of a portfolio of funds and lower the volatility of returns of a portfolio of such funds taken as a whole.

We use the term “investable multi-fund composite” to refer to an investment product that reflects the combined returns of all or a subset of our funds and that benefits from netting of incentive fees across such funds.

Unless indicated otherwise, the information included in this prospectus assumes no exercise by the underwriters of the option to purchase up to an additional common units from us and that the common units to be sold in this offering are sold at $ per common unit, which is the midpoint of the price range indicated on the front cover of this prospectus.

Summary

This summary highlights information contained elsewhere in this prospectus and does not contain all the information you should consider before investing in our common units. You should read this entire prospectus carefully, including the section entitled “Risk factors” and the financial statements and the related notes before deciding to purchase our common units. The description of our business in this prospectus gives effect to the acquisition of the manager affiliates of our initial funds, as well the other transactions described under “Formation and structure of our Company.”

The Aveon Group L.P.

We are a newly formed investment management firm focused on acquiring controlling interests in the general partners or managing members of a diversified group of hedge funds, which we refer to as our “manager affiliates.” We will use a portion of the proceeds of this offering to acquire our interest in each of our six initial manager affiliates, which have investment track records ranging from five to 19 years. Each of our manager affiliates currently has assets under management (“assets under management” or “AUM”) of less than $1 billion and generally focuses on a single investment strategy. As of March 31, 2010, the eight funds managed by these six manager affiliates had aggregate AUM of approximately $1.9 billion. As of the date of this prospectus, our general partner, Aveon Management L.L.C., employed seven investment professionals and our six initial manager affiliates employed an additional 52 investment professionals.

Each of our manager affiliates seeks to deliver consistently positive risk-adjusted returns throughout all market cycles while concentrating on risk management and capital preservation. We believe that specialized investment professionals, each focusing on a single investment strategy, have the potential to provide attractive investment returns as a result of their focus, ability to pursue smaller investment opportunities relative to larger funds, ability to move quickly in response to market conditions and streamlined coordination among investment professionals. We believe that strategies designed to achieve consistent, risk-adjusted returns not correlated across our manager affiliates should contribute to the stability of both our revenues and assets under management. We intend to create long-term value for our unitholders by driving organic growth in assets under management, acquiring additional manager affiliates and creating innovative products such as broad and diversified investable multi-fund composites that reflect the combined returns of all or a subset of our funds.

We employ a rigorous screening process to identify prospective manager affiliates. This process involves a top-down assessment of the overall macroeconomic environment, including the relative attractiveness of investment strategies, as well as a thorough bottom-up, manager-specific due diligence process based on qualitative and quantitative analyses. We employ investment and portfolio risk criteria, many of which are described below, to examine the structure of each manager affiliate’s portfolio and determine whether it is appropriately diversified to achieve return targets in different economic and capital cycles. Our selection of manager affiliates is based largely on their ability to drive attractive risk-adjusted returns with limited correlation to our other manager affiliates and market indices. We only seek to acquire manager affiliates that we believe will be both financially and strategically accretive to our unitholders. The selection process we employ when evaluating prospective manager affiliates includes a comprehensive assessment of the following:

•

investment strategy;

•

level and quality of assets under management;

•

historical performance;

•

risk management systems and controls and operational infrastructure;

•

correlation of returns to our other manager affiliates and to market indices;

•

quality of investor base; and

•

quality and experience of the management team.

We believe that the structure by which we acquire our manager affiliates will provide strong incentives for us and our manager affiliates to build value for our unitholders while fulfilling our fiduciary duties to the investors in our funds. We will be the general partner or managing member and will hold 100% of the voting interests in each of our manager affiliates, which will allow us to implement the necessary additional risk and operational oversight that we believe will create long-term value for our unitholders. At the time of each acquisition, we will admit as limited partners or members of the manager affiliate the investment professionals and investment firm that have historically led the day-to-day investment and operational activities of its fund. We refer to each such investment firm, together with the firm’s investment advisory team, as our “operating member.”

We will generate income from management and incentive fees or allocations pursuant to contractual arrangements with our manager affiliates and from any returns on our general partner or managing member interests in our funds. Our manager affiliates will receive 100% of the gross amount of management fees and incentive fees or allocations generated by their respective funds. As the general partner or managing member of each manager affiliate, we will generally have the right to retain approximately 30% of the gross fees (with our operating member receiving the remaining approximately 70% of gross fees) resulting from the fund’s total AUM until the fund reaches a specified level of AUM, generally $600 million, above which all incremental fees and allocations will be allocated to our operating members. In the case of Viridian, and possibly other funds we may acquire in the future, we will have the right to retain approximately 30% of the gross fees associated with only a portion of the fund’s total current AUM, initially $450 million for Viridian. As a result of this structure, our operating members will retain significant economic interests in their respective manager affiliates and will have the opportunity to realize future value and be rewarded for growth in assets under management and investment performance of those manager affiliates. Under our oversight, our operating members will maintain day-to-day operational and investment authority over our funds, an arrangement which we believe will preserve the independence and entrepreneurial culture that contributed to the past investment performance and asset growth of our manager affiliates.

We will use our own risk management systems to provide a second level of enterprise oversight for our funds, which will enable us to monitor, among other things, limits for gross and net exposures, position concentrations, stress test sensitivities for key macroeconomic factors such as high interest rates and inflation, maintenance of historical investment characteristics and daily profits and losses. We believe that investors in our funds will value such oversight, which can help attract new investor assets to our funds. In addition, we intend to support the business development efforts of our manager affiliates through investor referrals from our management team’s extensive network of institutional investor contacts and from cross-referencing our manager affiliates’ investors. We also intend to create investable multi-fund composites composed of ownership interests in a number of our funds. Unlike typical hedge fund-of-funds,

we expect that these investable multi-fund composites will not charge any additional management and incentive fees above those charged by the underlying funds and will benefit from incentive fee netting since investors in such composites will only pay incentive fees on the aggregate, not individual, net returns of the underlying funds. We believe these investment vehicles will be attractive to institutional and other qualified investors and will contribute to the growth in assets under management of our manager affiliates.

The management fees earned from our funds will typically be 1% to 2% of assets under management and will be based on the balance of assets under management at the beginning of the relevant period, as adjusted for inflows and redemptions during such period, for which management fees are generally pro-rated. The incentive fees earned on our funds will typically be equal to 20% of the net realized and unrealized profits earned for which all contingencies have been resolved based on the fair value of an unaffiliated investor’s net assets. There are, however, certain limitations to these incentive fees, such as the “high-water mark,” which serve to encourage the manager affiliates to recoup losses. Under a high-water mark arrangement, a manager affiliate does not earn incentive fees until the net asset value exceeds the highest historical value on which incentive fees were last paid. All of our initial funds have high-water mark arrangements. Our operating members also have the discretion to charge reduced fees in order to retain AUM during periods of volatility or lower negative returns.

We will reimburse our general partner for the expenses and costs incurred in managing and operating the general partner on our behalf, including base compensation for management and other employees, payroll taxes, travel and entertainment expenses and selling, general and administrative expenses generally. The amount of reimbursement for such general partner expenses and costs will be initially limited to $6 million per year. In addition, we will reimburse our general partner for annual cash bonuses paid to our general partner’s employees, initially in an aggregate amount up to $3.4 million, based on the return performance of one or more composite segments of our business exceeding a pre-defined target hurdle return. We will also directly incur costs and expenses related to our operation as a public company, including costs related to audits, public reporting obligations, professional fees, rent, preparation and mailings of K-1s and other unitholder communications, transfer agent fees and other similar operating costs. Our management team has received long-term incentive compensation in the form of restricted common units that will not vest until the company has achieved Economic Income of $55 million over any four consecutive quarters. See “Management’s discussion and analysis of financial condition and results of operations—Segment analysis—Aveon Multi-Strategy Funds—Economic Income” for a description of how we calculate Economic Income. Following the acquisition of our manager affiliates, we will not pay cash or incentive compensation to our operating members other than through the portion of gross fees we allocate to them. We believe that our relatively low cost of operations and significant reliance on equity-based incentive compensation will differentiate us from our competitors and will align the interests of management with those of our unitholders.

As described in greater detail under “Formation and structure of our Company,” immediately following the completion of this offering, we will acquire our interests in the six initial manager affiliates which manage our initial funds from the investment professionals or other entities who currently own the manager affiliates and whom we refer to as the “selling investment professionals.” The existing investment firms and investment teams will be admitted as operating members of our manager affiliates to conduct the day-to-day operations of their respective

funds. The selling investment professionals will generally be required to invest a significant portion of their after-tax proceeds from the acquisition transactions either into the funds managed by their respective manager affiliates or into an investable multi-fund composite that we may establish. We intend to employ this requirement for the acquisition of our initial manager affiliates and for subsequent acquisitions. We believe that this structure—which provides the selling investment professionals with significant benefits as a result of their affiliation with The Aveon Group L.P., while also providing significant investment and operational autonomy and minimal disruption to their ongoing businesses—best aligns the interests of the selling investment professionals with the interests of our unitholders, our management and the investors in our funds.

Our manager affiliates

We will acquire our interests in the six initial manager affiliates of our eight initial funds, which will continue to be managed according to their single strategy investment styles by our operating members and their principal investment professionals:

Banyan Capital Partners, LLC (“Banyan”)—Global macro discretionary: focused on global futures, options and equity contracts to identify and take advantage of relative market dislocations created by macroeconomic factors.

Banyan Equity Management, LLC, the operating member that advises Banyan’s fund, is managed by two full-time investment professionals, who are based in Boca Raton, Florida and led by Laurence Benedict. As of March 31, 2010, the Banyan fund’s AUM was approximately $501 million. In addition to the Banyan fund, Banyan Equity Management, LLC advises separately managed client accounts, using the same strategy as the Banyan fund, from which we will receive no fees.

Chesapeake SP Partners, LLC (“Chesapeake”)—Trend-following managed futures: employs global futures contracts to identify well-defined price trends in approximately 100 global markets in financial futures and commodity futures.

Chesapeake Capital Corporation, the operating member that advises Chesapeake’s funds, is managed by thirteen full-time investment professionals, who are based in Richmond, Virginia, and led by Jerry Parker. As of March 31, 2010, the Chesapeake funds’ AUM was approximately $26 million. In addition to the Chesapeake funds, Chesapeake Capital Corporation advises separately managed client accounts, using the same strategy as the Chesapeake funds, from which we will receive no fees.

Cura Capital, LLC (“Cura”)—Fixed income arbitrage: focused on relative value and macro opportunities in the sovereign debt markets of the United States and developed markets in Europe and Asia.

Cura Capital Management, LLC, the operating member that advises Cura’s fund, is managed by five full-time investment professionals, who are based in New York City and led by Thomas Schnepp. As of March 31, 2010, the Cura fund had approximately $227 million in AUM.

Glenrock Asset Management Associates, LP (“Glenrock”)—Global long-short equity: focused on specific fundamental opportunities at valuation extremes in equity markets in the United States, Europe and Asia.

Glenrock, Inc., the operating member that advises Glenrock’s fund, is managed by eight full-time investment professionals, who are based in New York City and led by Michael Katz. As of March 31, 2010, the Glenrock fund had approximately $422 million of AUM. In addition to the Glenrock fund, Glenrock, Inc. advises combined assets, from which we will receive no fees, in a long-short Japan equity fund and a dedicated short-only equity fund.

Viridian Partners, LLC (“Viridian”)—Relative value global commodities: employs diverse market neutral trading strategies across the spectrum of commodity instruments, including physical commodities, in approximately 40 agricultural, energy, metals and soft commodity markets.

Vermillion Asset Management, LLC, the operating member that advises Viridian’s fund, is managed by more than 15 full-time investment professionals led by Andrew Gilbert and Christopher Nygaard. As of March 31, 2010, the Viridian fund had approximately $645 million of AUM. For the Viridian fund, we will earn fees on a portion of the fund’s AUM, initially $450 million, and we will receive fees on certain additional net fund inflows (primarily attributable to Aveon and its affiliates and certain other net fund inflows attributable to the Viridian operating member) until the AUM in which we participate equals $650 million, above which we will allocate all incremental fees and allocations earned to the operating member and its principals as described under “Management’s discussion and analysis of financial condition and results of operations—Understanding our results/key financial measures—Revenues.” In addition to the Viridian fund, Vermillion Asset Management, LLC manages certain other assets, in three other distinct fund strategies focused on physical commodities, liquid managed futures and a commodity tracking index, from which we will receive no fees.

WA Partners, LLC (“Welton”)—Multi-model managed futures: employs global futures contracts and foreign exchange instruments in a broadly diversified portfolio architecture.

Welton Investment Corporation, the operating member that advises Welton’s funds, is managed by eight full-time investment professionals, who are based in Carmel, California and led by Patrick Welton and Brent Hankins. As of March 31, 2010, the Welton funds’ AUM was approximately $70 million. In addition to the Welton funds, Welton Investment Corporation advises separately managed client accounts, using the same strategy as the Welton funds, from which we will receive no fees.

Our initial manager affiliates have been selected to position us to be well-diversified across a spectrum of liquid investment strategies with strong historical, absolute and relative performance track records. Our manager affiliates pursue various investment strategies, including long/short equity, special situations, global macro, fixed income, credit/distressed, event driven and managed futures, among others. Acquiring manager affiliates representing a wide range of investment strategies is fundamental to our risk management strategy, which is aimed at diversifying our revenue risk in different economic and capital market cycles. We will seek to decrease the volatility in our earnings by acquiring interests in manager affiliates of funds with low correlations to one another and to major investing indices such as the S&P 500 and the Greenwich Global Hedge Fund Index. Correlation between investment funds is measured on a scale of 1 to -1; a correlation of 1 indicates a 1:1 positive relationship between the investment strategies, a correlation of 0 indicates no relationship between the investment strategies and a

correlation of -1 indicates a 1:1 negative relationship between the investment strategies. The table below summarizes key correlation and performance metrics of our initial funds:

As of March 31, 2010:


	Strategy	AUM ($MM)		Date of inception	Annualized net investment returns			3-year volatility	3-year correlation to the S&P 500	3-year correlation to the Greenwich Global Hedge Fund Index
Name	Strategy	AUM ($MM)		Date of inception	1 year	3 years	5 years	3-year volatility	3-year correlation to the S&P 500

Banyan fund	Global Macro	$	501	Apr-04	7.8%	12.6%	14.5%	5.6%	0.20	-0.04

Chesapeake funds	Global Managed Futures, Trend- Following
Select fund Preferred fund	Global Managed Futures, Trend- Following		10 16 26	Mar-94 Apr-94	1.9% 7.7%	5.5% -0.7%	5.9% 3.8%	21.1% 37.1%	-0.02 -0.02	0.34 0.33

Cura fund	Fixed Income Arbitrage		227	Dec-04	6.9%	9.9%	8.4%	14.2%	0.25	0.38

Glenrock fund	Global Long-Short		422	Jul-91	2.1%	5.2%	6.5%	5.5%	-0.32	-0.05

Viridian fund	Global Commodities		645	Jun-05	-7.7%	11.6%	N/A	9.1%	-0.22	-0.15

Welton funds	Global Managed Futures, Multi- Model
G fund H fund	Global Managed Futures, Multi- Model		58 12 70	May-06 Dec-08	-2.6% -4.7%	10.3% N/A	N/A N/A	14.3% N/A	0.02 N/A	0.26 N/A

Total AUM		$	1,891

*S&P 500*					49.8%	-4.2%	1.9%	20.1%		0.78

*Greenwich Global Hedge Fund Index*					22.0%	3.7%	6.7%	8.1%	0.78

Assets under management as of March 31, 2010 and the quarterly investment returns for the funds for the period January 1, 2010 to March 31, 2010 are unaudited.

Note: One-, three- and five-year annualized net investment return results for each of our initial funds are the compounded average annual return of the monthly returns of each of our initial funds in the respective period. Volatility, as measured by annualized standard deviation, is the monthly standard deviation of returns over the three year period times the square root of twelve. Three-year correlations of initial funds returns against the S&P 500 are a measure of the dependence of fund return to the S&P 500. AUM and performance measures reflect asset levels in the funds’ audited and unaudited financial statements. Performance variances for certain investors may occur due to various factors, including timing of investments and eligibility to participate in new issues. Past performance is not indicative of future returns and is no guarantee of future results. The S&P 500 Index is presented for comparison purposes as it is a leading indicator of the performance of the overall market. See “Business—Initial funds” for additional performance information on each of our initial funds. See also “Risk factors—The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our common units.”

Our management team

Our general partner is managed by seasoned investment management and mergers and acquisitions professionals who have joined to form Aveon along with the principals of our initial funds. Our President and Chief Executive Officer, John Hassett, has been responsible for numerous

mergers, acquisitions and licensing arrangements, including the founding of Vialog Corporation, which was a consolidation of nine conferencing service companies. Since 2004, Mr. Hassett has been a Managing Principal, Chief Executive Officer and member of the Board of Directors of Tuckerbrook Alternative Investments, LLC, an investment firm specializing in the seeding and development of hedge funds and hedge fund products. Our Chief Investment Officer, Jeff Landle, has been a principal investor in hedge funds for over 18 years while at Commonfund, Blackstone Management, HVB Alternative Advisors and the HARDT GROUP. Mr. Landle was a founding principal of HARDT GROUP, a registered investment adviser that manages hedge fund-of-funds strategies, has been a member of its Executive Committee since January 2004 and remains Chairman of the Investment Management Committee of HARDT GROUP Global Management.

Mr. Hassett and Mr. Landle are joined by senior executive officers Moses Grader, our Chief Operating Officer, William Park, our Chief Financial Officer, and Randy Carrigan, our Chief Legal Officer. Mr. Grader was a co-founder and Chief Operating Officer of Tuckerbrook Alternative Investments and prior to that served in various senior roles at Radius Capital Partners, Comdisco Ventures, MTDC Ventures and Price Waterhouse. Mr. Park served as the Chief Financial Officer of United Asset Management for 15 years and was most recently a senior executive of Prizm Capital Management, Structured Capital Partners and Commercial Industrial Finance Corp. He also serves as an independent trustee of the Eaton Vance family of mutual funds. Prior to joining Aveon, Mr. Carrigan was Senior Counsel to State Street Global Alliance and Senior Counsel to the fixed income group at State Street Global Advisors.

Industry overview

The asset management business involves managing investments on behalf of third parties in exchange for contracted fees and other income. This industry can be broadly split into two categories: traditional asset management and alternative asset management. Traditional asset management is based on managing long portfolios of actively-traded equity, fixed income and/or derivative securities with the investment objectives of total return, current income, appreciation or replicating the returns of a specific index. Alternative asset management, in contrast to traditional asset management, is based on a variety of investment strategies such as private equity, hedge fund and commodity approaches that have a common objective of absolute performance within certain risk parameters. Hedge funds are viewed as a subset of alternative asset management and are generally differentiated from private equity by the more liquid characteristics of their underlying assets. Typical hedge fund strategies include: long/short equity, event-driven, global macro, fixed income/convertible arbitrage, equity market neutral and managed futures. Because hedge funds are generally not subject to the investment restrictions of the Investment Company Act of 1940, as amended (the “Investment Company Act”), they may invest in a much broader range of asset classes than traditional collective investment vehicles, such as mutual funds.

Between 2000 and the end of 2007, hedge fund assets under management grew by approximately $1.3 trillion largely as a result of new investments by institutional investors. Beginning in the third quarter of 2008, hedge funds experienced a reduction in AUM as a result of deteriorating investment returns and increased redemption requests as investors sought liquidity in response to the severe dislocation of global financial markets. For three consecutive quarters starting in the second half of 2008 and continuing into the first quarter of 2009, the

hedge fund industry experienced a cumulative contraction of $468 billion, as reported in the Lipper TASS Asset Flows Report, “Hedge Funds First Quarter 2010,” from an industry peak of approximately $1.5 trillion in AUM. Of the total contraction, approximately 60%, or about $281 billion, was the result of investor net redemptions, with the balance due to performance losses. The second, third and fourth quarters of 2009 witnessed a broad improvement in economic conditions, the availability of credit and positive market performance. The Lipper TASS report estimated that in the second and third quarters of 2009, overall hedge fund assets grew by approximately $92.0 billion or 8.5% from the asset low of the first quarter 2009; however, those gains in total assets were due to approximately $143.9 billion in performance gains offset by net redemptions from investors of approximately $51.9 billion. In the fourth quarter of 2009, investor interest rebounded with approximately $7.5 billion of net subscriptions and, together with performance gains of approximately $38.1 billion, added another approximately $45.6 billion to the asset level of the industry in the quarter. In the first quarter of 2010, the resurgence of sovereign debt risk—triggered by the deterioration of the fiscal position of Greece and other European countries—weakened the Euro and caused a flight to the U.S. dollar and also led to a downturn in the global securities market. We believe that selective investor profit taking and portfolio reallocation decisions caused a mix of subscription and redemption between strategies in the first quarter of 2010, resulting in net hedge fund redemptions of under 1% of hedge fund assets or $11.1 billion. The bulk of redemptions were concentrated in select hedge fund strategies namely equity market neutral, event-driven, managed futures and multi-strategies, while emerging markets, long/short equity and global macro strategies continued to gather assets with subscription inflows of $6.0 billion, $4.6 billion and $0.9 billion, respectively. Despite approximately flat net redemptions in the first quarter of 2010, absolute performance gains of $42.8 billion caused net hedge fund AUM to increase by $31.8 billion in the first quarter of 2010.

Hedge fund-of-funds also grew rapidly between 2000 and 2007 as an important channel for institutions because many institutions had little prior experience investing in hedge funds and lacked the infrastructure and size to prudently invest directly into hedge funds. In exchange for an added layer of fees, hedge fund-of-funds offered institutions the potential to source managers, conduct due diligence, provide diversification and monitor the underlying hedge funds in their portfolio. According to an April 2009 research report by The Bank of New York Mellon and Casey Quirk titled “The Hedge Fund of Tomorrow: Building an Enduring Firm,” the hedge fund-of-funds channel represented 17% of assets invested in hedge funds in 2000, 37% in 2004 and 47% in 2008. Despite the growth of hedge fund-of-funds prior to the economic downturn, we believe the turmoil of 2008 highlighted some important limitations in the fund-of-funds model: prominent fund-of-funds were invested with managers who defrauded them, hedge fund-of-funds correlations to the equity markets were much higher than expected and investors paid incentive fees to underlying managers who achieved individual positive performance despite losses in the aggregate hedge fund-of-funds portfolios. We believe that because hedge fund-of-funds lack ownership or other forms of legal control over the funds in which they invest, most have restricted and infrequent transparency rights which, together with limited liquidity rights, reduces the ability of fund-of-funds to oversee and respond to the risk in their portfolios. We believe that our approach to acquiring and combining our funds into investable composites may be an attractive alternative to hedge fund-of-funds due to the diversification of our single strategy managers, the absence of a second layer of fees, netting of performance fees between funds, and daily transparency and risk oversight provided by our systems.

While recent disruptions in the markets with respect to equity prices, interest rates, credit spreads and other factors, including liquidity, have adversely affected, and may continue to adversely affect, the alternative and traditional asset management industries, we believe such disruptions present significant new opportunities for investment, particularly for quality hedge funds that have historically outperformed their fund peers and benchmarks. Further, we believe investors are readily differentiating between those strategies that have employed effective hedging techniques and those that have not. Although investors may perceive higher risk with smaller, single strategy hedge funds compared to larger, multi-strategy hedge funds, we believe that as investors continue to return to the market, single strategy hedge funds that posted relatively strong performance and were able to honor the escalated redemption requests in 2008 and 2009 will be in a strong competitive position to attract assets under management.

We believe that single strategy managers that maintain AUM levels within the limits of their investment capacity have certain organizational advantages that contribute to better performance. These managers tend to be more nimble in applying specific expertise to their chosen markets and generally rely on performance fees for a significant portion of their compensation. A comprehensive 2004 study sponsored by the MIT Laboratory of Financial Engineering presented quantitative evidence that hedge funds, controlling for different hedge fund categories, exhibit an optimal size (demonstrating a positive concave relationship between size and return) and that further increases beyond an optimal asset size can decrease returns. The study concludes that investors should try to invest in hedge funds that are near their optimal size and that hedge fund managers benefit competitively by adhering to their optimal capacity to maintain performance. Our acquisition approach is to identify single strategy managers that are generally below, or in some cases approaching, what we estimate to be their asset capacity, while demonstrating a commitment to their single strategy focus.

Management estimates there are approximately 5,200 hedge funds in operation, excluding hedge fund-of-funds. Of these funds, management estimates approximately 2,500 have historical track records of five years or greater and roughly another 1,400 have track records between three and five years. We intend to target managers whose fund track records approximate or exceed five years, although we may make exceptions for funds with shorter track records if there is evidence that the manager has run a highly successful predecessor fund or has rapidly expanded assets under management as a result of its skill. We will generally review funds that fall between $100 million and $2 billion in AUM. We will screen the managers for absolute, risk-adjusted and relative performance characteristics against their strategy benchmarks. These screens represent broad guidelines and we will rely on our relationships in the hedge fund industry to further identify strong managers. We attempt to maintain ongoing informational contact and relationships with over 250 firms and consider 50 to 60 our core prospects, subjecting 10 to 15 managers to our full investment selection process at any given time (see “Business—Manager affiliate acquisition process”).

Competitive strengths

Ability to identify and acquire financially and strategically accretive manager affiliates. Our management and our founding investors have extensive experience and relationships in the alternative asset management industry. We believe that these relationships, coupled with our thorough vetting process, will allow us to identify single strategy hedge funds that are financially and strategically accretive. In addition, we seek to acquire manager affiliates that will augment

the diversification of our portfolio of underlying funds. We look for low correlations across funds and investment strategies, as well as a history of strong absolute and relative returns within a solid risk management infrastructure. We believe the structure we employ when acquiring our manager affiliates best aligns the interests of the selling investment professionals with the interests our unitholders, our management and the investors in our funds.

Track record of positive, non-correlated returns. Our initial funds have a strong track record of positive, non-correlated returns. The annualized net investment returns of our initial funds for the three-year period from April 1, 2007 through March 31, 2010, shown in the chart on page 6, are favorable when compared to the returns of the Greenwich Global Hedge Fund Index and the S&P 500, which were approximately 3.7% and -4.2%, respectively, over the same period. We believe the track records of our manager affiliates will contribute to their ability to maintain existing capital and to attract new assets under management, which will in turn contribute to our earnings, subject to the limits of the AUM levels above which we will allocate all incremental fees to our operating members.

Ability to drive growth organically and through the creation of innovative products. We believe that our ownership of our manager affiliates will help contribute to the growth of their assets under management. Through our management’s extensive network of institutional investors, we intend to help direct investors seeking to deploy capital into specific strategies to our manager affiliates. In addition, we plan to create innovative products that will leverage the expertise of our manager affiliates by combining the funds they manage into investable multi-fund composites that take advantage of the low correlation they provide while at the same time offering fee arrangements that provide for netting of incentive fees across funds. We expect that the investable multi-fund composites will also increase the assets under management of our manager affiliates.

Comprehensive, daily risk oversight. We believe that in selecting alternative asset managers, particularly smaller managers such as those we seek to acquire, investors are increasingly focused on operational infrastructure, risk management and the use of multiple layers of oversight. We will require that each of our funds’ administrator and/or prime broker connect directly into our risk systems so that our management can apply daily oversight and reporting on all aspects of each investment program. We will provide this additional layer of oversight as the managing member of our manager affiliates, an arrangement which we believe will enhance existing risk management cultures and help assuage investor concerns resulting from recent hedge fund industry upheaval.

Stable revenue and expense structure aligned with unitholder interests. Our earnings will be derived primarily from the management and incentive fees we earn from managing and overseeing our manager affiliates and providing services to our funds. We believe the diversification across investment strategies and the low correlation across our initial funds should contribute to revenue stability going forward. Unlike typical alternative asset management holding companies, we will receive management and incentive fee revenue on a gross basis, thereby removing the variability associated with the operating member’s discretionary operating expenses. Furthermore, our general partner’s operational expenses, which includes our management team’s base salaries, will initially be fixed at $6 million per year, and management cash bonuses will initially be limited to an aggregate maximum of $3.4 million per year, thereby providing a clear measure of margin expansion as we grow. We believe that by principally relying

on equity-based incentive compensation, the interests of our management will be better aligned with the interests of our unitholders because the value of our incentive compensation will be directly correlated to the continued growth and profitability of our business and the performance of our unit price.

Highly experienced team at both Aveon and the manager affiliates. Our management team has extensive experience investing in alternative asset managers and managing alternative asset management businesses. Our senior investment management team has an average of over 15 years of experience in the investment management industry, and the investment professionals of our initial manager affiliates also have average investing experience of over 15 years. We have established an Investment Committee comprised of highly experienced investment professionals, which will meet regularly to review our funds’ performance and risk, as well as other risks relating to our operations. The principal investment professionals at our initial manager affiliates average more than 20 years of experience investing in the strategies that have made them historically successful and will be personally investing approximately $ million of additional aggregate capital into our funds at or near the time of this offering.

Growth strategy

We intend to create long-term value for our unitholders by:

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increasing assets under management in our funds through performance gains and net AUM inflows;

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pursuing financially and strategically accretive acquisitions of manager affiliates using the same structure employed for the acquisitions of our initial manager affiliates; and

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developing innovative new products, including investable multi-fund composites that will be designed to produce non-correlated returns and that will provide for a single layer of fees and incentive fee netting.

Key aspects of our organizational structure and this offering

Organizational structure. Following the formation transactions and this offering, The Aveon Group L.P. will be a holding partnership and will, through wholly-owned subsidiaries, hold equity interests in three Aveon Holdings partnerships (which we refer to collectively as “Aveon Holdings”), which in turn will directly or indirectly own our operating subsidiaries. Each of the Aveon Holdings partnerships will have an identical number of partnership units outstanding, and we use the terms “Aveon Holdings partnership unit” or “partnership unit in/of Aveon Holdings” to refer collectively to a partnership unit in each of the three Aveon Holdings partnerships. The Aveon Group L.P. will hold, through wholly-owned subsidiaries, a number of Aveon Holdings partnership units equal to the number of common units that The Aveon Group L.P. has issued. Immediately following this offering, The Aveon Group L.P. will hold Aveon Holdings partnership units representing % of the total number of partnership units of Aveon Holdings, or % if the underwriters exercise in full their option to purchase additional common units, and our existing owners will hold Aveon Holdings partnership units representing % of the total number of partnership units of Aveon Holdings, or % if the underwriters exercise in full their option to purchase additional common units. The Aveon Holdings partnership units that will be held by The Aveon Group L.P.’s wholly-owned subsidiaries will be economically identical in all respects to

the Aveon Holdings partnership units that will be held by existing owners. Accordingly, the income of Aveon Holdings will benefit The Aveon Group L.P. to the extent of its equity interest in Aveon Holdings. See “Formation and structure of our Company—Formation transactions” and “—Holding partnership structure.”

Acquisitions of manager affiliates. We do not currently own the general partners or managing members of our initial funds. Immediately following the completion of this offering, Aveon Holdings will use an aggregate of $ million of the proceeds from this offering to make cash payments to the selling investment professionals who currently own the general partners or managing members of each of our initial funds in exchange for our interests in the general partners and managing members, whereupon they will become our manager affiliates. See “Business—Initial funds” for greater detail. We will acquire 100% of the voting interests in each of our manager affiliates and we will have the right to retain approximately 30% of the gross amount of management fees and incentive fees and allocations generated by the total AUM in most of our funds, subject to the specified level of AUM for each fund, generally $600 million, above which we will allocate all incremental fees and allocations earned to the operating member of the manager affiliate of that fund. In the case of Viridian, and possibly other funds we may acquire in the future, we will have the right to retain approximately 30% of the gross fees associated with only a portion of the fund’s total current AUM, initially $450 million for Viridian. This approach allows us to acquire manager affiliates of larger funds, such as the Viridian fund, without taking a disproportionate level of exposure to the fund’s strategy relative to the strategies of our other initial funds. Although Viridian is currently the only fund for which we use this approach, we expect to employ it for some of our future acquisitions of manager affiliates. See “Formation and structure of our Company—Formation transactions.”

Distributions. We intend to cause Aveon Holdings to make distributions to its partners, including The Aveon Group L.P.’s wholly-owned subsidiaries, in order to fund any distributions we may declare on the common units. If Aveon Holdings makes such distributions, our existing owners, as limited partners of Aveon Holdings, will be entitled to receive equivalent distributions pro rata based on their vested partnership interests in Aveon Holdings. See “Cash distribution policy.”

Tax consequences. Investors in this offering will become limited partners of The Aveon Group L.P. As discussed in “Material U.S. federal tax considerations,” we believe that The Aveon Group L.P. will be treated as a partnership and not as a corporation for U.S. federal income tax purposes. An entity that is treated as a partnership for U.S. federal income tax purposes is not a taxable entity and incurs no U.S. federal income tax liability. Instead, each partner is required to take into account its allocable share of items of income, gain, loss and deduction of the partnership in computing its U.S. federal income tax liability, regardless of whether or not cash distributions are then made. Accordingly, an investor in this offering will generally be required to pay U.S. federal income taxes with respect to the income and gain of The Aveon Group L.P. that is allocated to such investor, even if The Aveon Group L.P. does not make cash distributions. See “Material U.S. federal tax considerations” for a summary discussing certain United States federal income tax considerations related to the purchase, ownership and disposition of our common units as of the date of this prospectus.

Deconsolidation of initial funds. In accordance with U.S. generally accepted accounting principles (“GAAP”), a number of our initial funds have historically been consolidated into the

financial statements of the respective manager affiliates of those funds. As a result, the historical combined financial statements of the manager affiliates reflect the assets, liabilities, revenues, expenses and cash flows of these investment funds on a gross basis rather than reflecting only the value of the manager affiliate’s principal investments in such investment funds. Following the completion of this offering, the manager affiliate of each of our initial funds that is consolidated into the financial statements of such manager affiliate will endeavor to take the necessary steps to grant rights to the third-party investors in that fund to provide that a simple majority of the fund’s investors will have the right, without cause, to accelerate the liquidation date of that fund in accordance with certain procedures. The granting of these rights will result in such investment funds no longer being consolidated in our consolidated financial statements. Because the interests of the investors in our initial funds will also be eliminated in connection with the deconsolidation of these investment funds from the financial statements of the relevant manager affiliates, our equity in and net income from our manager affiliates will not be altered by the deconsolidation of these investment funds. See “Unaudited pro forma financial information” for a more detailed description of the deconsolidation of certain initial funds from the relevant manager affiliates’ financial statements.

Our general partner

Our general partner, Aveon Management L.L.C., is a newly formed investment management firm. In addition to sourcing acquisition prospects developed through shared investor networks, resources and relationships with financial sponsors, financial institutions, hedge funds and other investment firms, our general partner brings together the respective strengths of its employees which combine a focus on alternative asset management company selection, allocation and portfolio monitoring, as well as a focus on business planning, marketing and managerial assistance. We expect that the combination of these organizational skill-sets will enhance our investment selection process and the structuring of our investments in each manager affiliate.

The limited liability company agreement of our general partner establishes a board of directors that will be responsible for the oversight of our business and operations, including the hiring and firing of our management. Our general partner’s board of directors will be elected in accordance with its limited liability company agreement and is expected to be comprised of seven directors at the time of the completion of this offering, a majority of whom are expected to be independent.

Investment risks

An investment in our common units involves substantial risks and uncertainties. Some of the more significant challenges and risks relating to an investment in our partnership include the following:

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the fact that we are a newly organized firm without any operating history and are subject to the risks attendant to a new business venture;

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the fact that our common unitholders will have only limited voting rights and, unless our founding investors and their affiliates cease to own at least 4% of the voting power of our outstanding voting units (whether through common voting units or special voting units), our common unitholders will have no right to elect the directors of our general partner.

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the fact that immediately following this offering our founding investors will generally have sufficient voting power to significantly influence the outcome of those few matters that may be submitted for a vote of our limited partners;

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our susceptibility to market and economic conditions and the risk that such conditions may prevent us from executing our business plan;

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the fact that our partnership agreement limits the liability of our general partner, reduces or eliminates certain duties owed by our general partner to our common unitholders and restricts the remedies available to common unitholders for actions that might otherwise constitute breaches of our general partner’s duties;

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the current lack of strength and liquidity of U.S. and global financial institutions;

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our dependence on our general partner to help us implement our acquisition strategy; and

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our dependence on our operating members for the day-to-day operation of our investment funds.

In addition, legislation has been introduced that would tax as a corporation a publicly traded partnership, such as us, that directly or indirectly derives income from investment advisor or asset management services. Separately, legislation has been passed in the U.S. House of Representatives that would generally:

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treat carried interest as non-qualifying income under the tax rules applicable to publicly traded partnerships, which could preclude us from qualifying as a partnership for U.S. federal income tax purposes; and

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tax carried interest as ordinary income for U.S. federal income taxes, which could require us to hold our interest in carried interest through taxable subsidiary corporations.

If any of this legislation or any similar legislation or regulation were to be enacted and apply to us, we would incur a material increase in our tax liability, which could result in a reduction in the value of our common units. Please see “Risk factors” for a discussion of these and other factors you should consider before making an investment in our common units.

The Aveon Group L.P. was formed in Delaware on January 27, 2010. Our principal executive offices are located at The America’s Cup Building, 30 Doaks Lane, Marblehead, Massachusetts 01945 and our telephone number is (781) 639-3000.

Organizational structure

Immediately following the completion of this offering, we will effect the formation transactions described in greater detail under “Formation and structure of our Company.” Following the formation transactions and this offering, the manager affiliates of our initial funds will become consolidated subsidiaries of Aveon Holdings. Our manager affiliates will be entitled to all management fees and incentive fees and allocations payable by our initial funds and all returns on investments made by these manager affiliates in our funds.

We will allocate approximately 70% of the gross amount of management fees and incentive fees and allocations that the manager affiliates earn from our funds to the operating members who conduct the operations of our funds on a day-to-day basis until a fund or our level of participation reaches a specified level of AUM, generally $600 million, above which all incremental fees and allocations earned will be allocated to the operating member of the manager affiliate of that fund.

The income of Aveon Holdings (including management fees, incentive fees and allocations and investment returns) will benefit The Aveon Group L.P. to the extent of its equity interest in Aveon Holdings. See “Business—Initial funds.”

Following the formation transactions and this offering, The Aveon Group L.P. will be a holding partnership and, through wholly-owned subsidiaries, will hold equity interests in the three Aveon Holdings partnerships. Through wholly-owned subsidiaries, The Aveon Group L.P. will be the sole general partner of each of the Aveon Holdings partnerships. Accordingly, The Aveon Group L.P. will operate and control all of the business and affairs of Aveon Holdings and will consolidate the financial results of the Aveon Holdings partnerships and their consolidated subsidiaries. The Aveon Group L.P. is itself managed and operated by its general partner, Aveon Management L.L.C., which we refer to as our “general partner,” which is in turn wholly-owned by our founding investors.

The diagram below depicts our organizational structure immediately following this offering.

LOGO

(1)

The Aveon Group L.P. has formed wholly-owned subsidiaries to serve as the general partners of the three Aveon Holdings partnerships: Aveon Holdings I GP Inc. (a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes), Aveon Holdings II GP L.P. (a Delaware limited partnership that is a disregarded entity and not an association taxable as a corporation for U.S. federal income tax purposes) and Aveon Holdings III GP L.P. (a Québec société en commandite that is a foreign corporation for U.S. federal income tax purposes).

The Aveon Group L.P. intends to conduct all of its material business activities through Aveon Holdings. Each of the Aveon Holdings partnerships was formed to hold our interests in different operating subsidiaries. While our operating subsidiaries will initially all be held by Aveon Holdings I L.P., we expect over time that our U.S. fee-generating subsidiaries will be held by

Aveon Holdings I L.P., that a variety of assets, including our interests in any future investable multi-fund composites, will be held by Aveon Holdings II L.P. and that our non-U.S. fee generating subsidiaries will be held by Aveon Holdings III L.P.

As discussed in “Material U.S. federal tax considerations,” we believe that The Aveon Group L.P. will be treated as a partnership and not as a corporation for U.S. federal income tax purposes. An entity that is treated as a partnership for U.S. federal income tax purposes is not a taxable entity and incurs no U.S. federal income tax liability. Instead, each partner is required to take into account its allocable share of items of income, gain, loss and deduction of the partnership in computing its U.S. federal income tax liability, whether or not cash distributions are then made. Investors in this offering will become limited partners of The Aveon Group L.P. However, our partnership agreement does not restrict our ability to take actions that may result in our being treated as an entity taxable as a corporation for U.S. federal (and applicable state) income tax purposes. We believe that the Aveon Holdings partnerships will also be treated as partnerships and not as corporations for U.S. federal income tax purposes. Accordingly, the holders of partnership units in Aveon Holdings, including The Aveon Group L.P.’s wholly-owned subsidiaries, will incur U.S. federal, state and local income taxes on their proportionate share of any net taxable income of Aveon Holdings. See “Material U.S. federal tax considerations” for more information about the tax treatment of The Aveon Group L.P. and Aveon Holdings.

Each of the Aveon Holdings partnerships will have an identical number of partnership units outstanding. The Aveon Group L.P. will hold, through wholly-owned subsidiaries, a number of partnership units in each Aveon Holdings partnership equal to the number of common units that The Aveon Group L.P. has issued. Immediately following this offering, The Aveon Group L.P. will hold Aveon Holdings partnership units representing % of the total number of partnership units of Aveon Holdings, or % if the underwriters exercise in full their option to purchase additional common units, and our existing owners will hold Aveon Holdings partnership units representing % of the total number of partnership units of Aveon Holdings, or % if the underwriters exercise in full their option to purchase additional common units. The Aveon Holdings partnership units held by our existing owners will be exchangeable for our common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. The Aveon Holdings partnership units that will be held by The Aveon Group L.P.’s wholly-owned subsidiaries will be economically identical in all respects to the Aveon Holdings partnership units that will be held by our existing owners. Accordingly, immediately following this offering, investors in this offering will own % of the equity in our business and our existing owners will own % of the equity in our business. If the underwriters exercise in full their option to purchase additional common units, immediately following this offering, investors in this offering will own % of the equity in our business and our existing owners will own % of the equity in our business.

Under the terms of the partnership agreements of the Aveon Holdings partnerships, all of the Aveon Holdings partnership units received by our existing owners as described in “Formation and structure of our Company” will be subject to certain restrictions on transfer, and the Aveon Holdings partnership units held by the selling investment professionals will be subject to vesting requirements. See “Common units eligible for future sale—Transfer restrictions.”

The Aveon Group L.P. is managed and operated by our general partner. Our general partner will not have any business activities other than managing and operating us. We will reimburse our

general partner for the management and operation expenses and costs incurred by the general partner on our behalf, including the cash compensation of our management and other employees, payroll taxes, travel and entertainment expenses and selling, general and administrative expenses of the general partner. The amount of this reimbursement obligation will initially be limited to $6 million per year, plus up to $3.4 million for performance-based cash bonuses, and will only be increased by the board of directors of our general partner after considering certain factors, including the number of our manager affiliates and our funds, the assets under management of our funds and any investable multi-fund composites, and future debt or equity financing transactions. In addition, we will directly incur costs and expenses related to our operation as a public company, including costs related to audits, public reporting obligations, professional fees, rent, preparation and mailings of K-1s and other unitholder communications, transfer agent fees and other similar operating costs. The Aveon Group L.P. will in turn be entitled to be reimbursed by the Aveon Holdings partnerships for such costs and expenses.

Unlike the holders of common stock in a corporation, our common unitholders will have only limited voting rights and, unless the founding investors and their affiliates collectively cease to own at least 4% of the voting power of our outstanding voting units (whether through common units or special voting units), will have no right to elect our general partner or its directors. In addition, on those few matters that may be submitted for a vote of our common unitholders, our founding investors will hold special voting units in The Aveon Group L.P. that provide them with a number of votes on any matter that may be submitted for a vote of our common unitholders that is equal to the number of Aveon Holdings partnership units that they hold on the relevant record date and entitle them to participate in the vote on the same basis as our common unitholders. Accordingly, immediately following this offering, on those few matters that may be submitted for a vote of the limited partners of The Aveon Group L.P., investors in this offering will collectively have % of the voting power of The Aveon Group L.P. limited partners, or % if the underwriters exercise in full their option to purchase additional common units, and our founding investors will collectively have % of the voting power of The Aveon Group L.P. limited partners, or % if the underwriters exercise in full their option to purchase additional common units.

Although our general partner has no business activities other than the management of our business, conflicts of interest may arise in the future between us and our common unitholders, on the one hand, and our general partner and its affiliates, on the other. The resolution of these conflicts, which will be overseen by a conflicts committee composed of independent members of our general partner’s board of directors, may not always be in our best interests or that of our common unitholders. In addition, we have fiduciary and contractual obligations to the investors in our funds that may not align with the interests of our common unitholders.

Our partnership agreement limits the liability of our general partner and reduces or eliminates certain duties owed by our general partner to our common unitholders. Our partnership agreement also restricts the remedies available to our common unitholders for actions that might otherwise constitute breaches of our general partner’s duties. By purchasing our common units, you will be treated as having consented to the provisions set forth in our partnership agreement, including the provisions regarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of duties under applicable state law. For a more detailed description of the conflicts of interest and fiduciary responsibilities of our general partner, see “Conflicts of interest and fiduciary responsibilities.”

The offering

Common units offered by The Aveon Group L.P.

common units, or common units if the underwriters exercise in full their option to purchase additional common units.

Common units outstanding after the offering and the formation transactions

common units, including restricted common units granted to directors and employees pursuant to our Equity Incentive Plan, or common units if the underwriters exercise in full their option to purchase additional common units. If all outstanding Aveon Holdings partnership units held by our existing owners were exchanged for newly issued common units on a one-for-one basis, we would have common units outstanding after this offering and the formation transactions, or common units if the underwriters exercise in full their option to purchase additional common units.

Use of proceeds

We estimate that our net proceeds from this offering, at an assumed initial public offering price of $ per common unit and after deducting estimated underwriting discounts and offering expenses, will be approximately $ million, or $ if the underwriters exercise in full their option to purchase additional common units.

We intend to use all of the net proceeds from this offering to purchase a number of newly issued Aveon Holdings partnership units that is equal to the number of common units that we sell in this offering.

Aveon Holdings will use approximately $ million of these proceeds to acquire the manager affiliates of our initial funds from the selling investment professionals and will use approximately $ million of these proceeds to acquire additional general partner or managing member interests in our initial funds. See “Formation and structure of our Company—Formation transactions—Acquisitions of manager affiliates of initial funds” and “Business—Initial funds.”

Aveon Holdings will use the remaining proceeds, or approximately $ million, or approximately $ if the underwriters exercise in full their option to purchase additional common units, for general corporate purposes, including, together with proceeds from future debt or equity financings, carrying out future acquisitions and acquiring additional general partner or managing member interests in future funds.

Our founding investors will not receive any of the proceeds from this offering.

Voting rights

Our general partner, Aveon Management L.L.C., will manage all of our operations and activities. You will not hold securities of our general partner, which is wholly-owned by our founding investors. Unlike the holders of common stock in a corporation, you will have only limited voting rights on matters affecting our business and, unless our founding investors and their affiliates collectively cease to own at least 4% of the voting power of our outstanding voting units (whether through common units or special voting units), will have no right to elect our general partner or its directors.

In addition, our founding investors will generally have sufficient voting power to significantly influence the outcome of those few matters that may be submitted for a vote of our limited partners. Immediately following this offering, our founding investors will hold special voting units in The Aveon Group L.P. that provide them with a number of votes on any matter that may be submitted for a vote of our common unitholders that is equal to the number of Aveon Holdings partnership units that they hold on the relevant record date and entitles them to participate in the vote on the same basis as our common unitholders. See “Material provisions of The Aveon Group L.P. partnership agreement—Withdrawal or removal of the general partner” and “—Meetings; voting.”

Cash distribution policy

The declaration and payment of any distributions on the common units will be at the sole discretion of our general partner, which may change our distribution policy at any time. Our general partner will take into account general economic and business conditions, our strategic plans and prospects, our business and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, legal, tax and regulatory restrictions, restrictions and other implications on the payment of distributions by us to our common unitholders or by our subsidiaries to us and such other factors as our general partner may deem relevant.

The Aveon Group L.P. will be a holding partnership and will have no material assets other than its ownership of partnership units in Aveon Holdings held through wholly-owned subsidiaries. We intend to cause Aveon Holdings to make distributions to its partners, including our wholly-owned subsidiaries, in order to fund any distributions we may declare on the common units. If Aveon Holdings makes such distributions, the limited partners of Aveon Holdings will be entitled to receive equivalent distributions pro rata based on their vested partnership interests in Aveon Holdings. Aveon Holdings limited partners holding unvested partnership interests at the time of any distribution will be entitled to a catch-up distribution at the time of

subsequent distributions, in respect of partnership interests that have since vested, to provide such limited partners with a cumulative amount of distributions equal to the amount such limited partners would have received if such limited partners’ partnership interests had been vested at the time of all prior distributions.

In addition, the partnership agreements of the Aveon Holdings partnerships will provide for cash distributions, which we refer to as “tax distributions,” to the partners of such partnerships if our wholly-owned subsidiaries which are the general partners of the Aveon Holdings partnerships determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses and the character of our income). The Aveon Holdings partnerships will make tax distributions only to the extent that distributions from such partnerships for the relevant year were otherwise insufficient to cover such tax liabilities.

Exchange rights of holders of Aveon Holdings partnership units

Prior to this offering, we will enter into an exchange agreement with our existing owners so that they may, up to four times each year, subject to the terms of the exchange agreement and the vesting requirements and transfer restrictions set forth in the Aveon Holdings partnership agreements, exchange their Aveon Holdings partnership units for The Aveon Group L.P. common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. An Aveon Holdings limited partner must exchange one partnership unit in each of the three Aveon Holdings partnerships to effect an exchange for a common unit. If and when an Aveon Holdings limited partner exchanges Aveon Holdings partnership units for common units of The Aveon Group L.P., the relative equity ownership positions of the exchanging holder and of the other equity owners of Aveon (whether held at The Aveon Group L.P. or at Aveon Holdings) will not change.

Tax receivable agreement

Future exchanges of Aveon Holdings partnership units for The Aveon Group L.P. common units or other consideration are expected to result in increases in the tax basis of the tangible and intangible assets of Aveon Holdings I L.P., primarily attributable to a portion of the goodwill inherent in our business, that would not otherwise have

been available. These increases in tax basis will increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that Aveon Holdings I GP Inc. would otherwise be required to pay in the future. We will enter into a tax receivable agreement with our existing owners whereby Aveon Holdings I GP Inc. will agree to pay to our existing owners (or their transferees) 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that it actually realizes as a result of these increases in tax basis. A termination of the agreement or a change of control could give rise to similar payments based on tax savings that we would be deemed to realize in connection with such events. In the event that other of our current or future subsidiaries become taxable as corporations and acquire Aveon Holdings partnership units in the future, or if we become taxable as a corporation for U.S. federal income tax purposes, we expect that each will become subject to a tax receivable agreement with substantially similar terms. Although we are not aware of any issue that would cause the U.S. Internal Revenue Service (the “IRS”) to challenge a tax basis increase, our existing owners and their transferees will not reimburse us for any payments previously made under the tax receivable agreement if such tax basis increase were successfully challenged by the IRS. See “Certain relationships and related person transactions—Tax receivable agreement.”

Risk factors

See “Risk factors” for a discussion of risks you should carefully consider before deciding to invest in our common units.

Proposed New York Stock Exchange symbol

“AVO.”

In this prospectus, unless otherwise indicated, the number of common units outstanding and the other information based thereon does not reflect:

•

common units issuable upon exchange of Aveon Holdings partnership units that will be held by our existing owners immediately following this offering, which are exchangeable, subject to certain restrictions, for our common units on a one-for-one basis;

•

common units issuable upon exercise of the underwriters’ option to purchase additional common units from us; or

•

common units granted or that may be granted under the 2010 The Aveon Group L.P. Equity Incentive Plan, or our “Equity Incentive Plan,” consisting of:

•

restricted common units that we granted to our executive officers and other employees and directors of our general partner prior to this offering (of which none will be vested at the time of this offering); and

•

additional common units available to be issued under our Equity Incentive Plan.

See “Management—Equity Incentive Plan.”

Summary unaudited pro forma financial and other data

The summary unaudited pro forma financial information presented below was derived from the application of pro forma adjustments to the financial statements of Aveon Holdings I L.P., which is deemed to be the acquirer and predecessor for accounting purposes. These pro forma adjustments, which are described under “Unaudited pro forma financial information,” include adjustments to give effect to: (i) this offering of common units and the application of a portion of the net proceeds from this offering to acquire our six initial manager affiliates, (ii) the acquisition of our interests in the manager affiliates of our initial funds, (iii) the deconsolidation of the general partner or managing member of our initial funds and (iv) certain other adjustments described under “Unaudited pro forma financial information.” The unaudited pro forma balance sheet information as of March 31, 2010 has been prepared as if the transactions described under “Formation and structure of our Company” had been completed as of March 31, 2010; the unaudited pro forma operating information for the three months ended March 31, 2010 and for the year ended December 31, 2009 have been prepared as if such transactions had been completed as of January 1, 2009.

The summary unaudited pro forma financial information should be read in conjunction with “Unaudited pro forma financial information,” “Management’s discussion and analysis of financial condition and results of operations” and the financial statements and the related notes included elsewhere in this prospectus.

The pro forma adjustments are based upon available information and methodologies that we believe are reasonable. The unaudited pro forma operating and balance sheet information is presented solely for illustrative and informational purposes and is not necessarily indicative of what our actual operations or financial position would have been had the pro forma adjustments taken place on the dates indicated, or during the periods presented, nor does it purport to represent our results for any future period.


(US$ millions)	Three months ended March 31, 2010			Year ended December 31, 2009

*Unaudited pro forma operating information*
Revenues
Management fees	$	6.5		$	30.4
Incentive income		2.6			27.0
Interest income and other		0.0			0.3

Total revenues		9.2			57.7

Expenses
Operating and administrative expenses		1.9			7.6
Amortization		14.4			57.7

Total expenses		16.3			65.2

Other income:
Net gains from Aveon funds		0.4			2.6

Income (loss) before non-controlling interests		(6.7	)		(5.0	)
Non-controlling interests		(4.6	)		0.2

Pro forma net income (loss)	$	(2.1	)	$	(5.2	)

Net income (loss) per common unit	$			$


	As of March 31, 2010

*Unaudited pro forma balance sheet information*
Assets
Cash and cash equivalents	$	81.3
Investments, at fair value		62.5
Intangible and other assets		288.6

Total assets	$	432.3

Liabilities and partners’ capital
Liabilities	$	0.5
Non-controlling interests		245.0
Capital contributions		186.8

Total liabilities and partners’ capital	$	432.3


	Three months ended March 31, 2010			Year ended December 31, 2009

*Unaudited pro forma assets under management*
Beginning balance	$	1,737		$	2,376
Subscriptions		255			681
Redemptions		(119	)		(1,298	)
Net gains from investment performance		18			(22	)

Ending balance	$	1,891		$	1,737

Pro forma Economic Income

The following table presents our pro forma “Economic Income” for the three months ended March 31, 2010 and for the year ended December 31, 2009 and provides a reconciliation of our pro forma Economic Income for these periods to pro forma net income (loss).


(US$ millions)	Three months ended March 31, 2010			Year ended December 31, 2009

Net income (loss)	$	(2.1	)	$	(5.2	)

Add: net adjustments for amortization expense
Total amortization of customer based intangibles		14.4			57.7
Less non-controlling amortization of customer based intangibles		(11.8	)		(47.3	)

Net adjustments for amortization		2.6			10.4

Add: net revenue and expense adjustments for noncontrolling interest
Pro-rata share of revenues in consolidated subsidiaries		1.0			6.4
Less pro-rata share of expenses in consolidated subsidiaries		(0.7	)		(2.9	)

Total non-controlling interests		0.3			3.5

Economic Income	$	0.8		$	8.6

We use Economic Income to evaluate our overall performance and allocate our resources. Economic Income:

•

reflects management fees, incentive income and other revenues from our funds on an unconsolidated basis because we view the business as an institutional alternative asset management firm, assessing performance using the combined total of incentive income and management fees from each of our funds;

•

excludes any income allocations and distributions to our founding investors because Economic Income is used to measure our performance for the year and determine the amount of income available for allocation to our partners at the end of the year;

•

excludes amortization expense and non-controlling interests that arise out of the acquisition of customer-based intangibles and are not related to our performance;

•

excludes interest, depreciation and taxes because we do not take those items into account when evaluating our performance; and

•

in future periods will exclude other non-cash items, such as compensation expense relating to equity-based compensation.

We believe Economic Income is useful to investors because it is frequently used by analysts, investors and other interested parties to evaluate companies in the investment management industry. Economic Income is not a term under GAAP. Because all companies do not calculate Economic Income or similarly titled measures in the same way, those measures as used by other companies may not be consistent with the way we calculate Economic Income or similarly titled financial measures and should not be considered as alternative measures of operating profit or net income (loss). For additional information, see “Management’s discussion and analysis of financial condition and results of operations—Segment analysis—Aveon Multi-Strategy Funds—Economic Income.”

Risk factors

An investment in our common units involves risks. You should carefully consider the following information about these risks, together with the other information contained in this prospectus, before investing in our common units. Any of the risk factors we describe below could adversely affect our business, results of operations, financial condition and liquidity. The market price of our common units could decline if one or more of these risks and uncertainties develop into actual events, causing you to lose all or part of the money you paid to buy our common units. While we believe these risks and uncertainties are most important for you to consider, we may face additional risks or uncertainties which may also adversely affect our business. Certain statements in “Risk factors” are forward looking statements. See “Forward looking statements.”

Risks related to our business

Our business may be affected by the recent unprecedented conditions in the U.S. and global economies and in the capital markets worldwide. Record volatility, lack of liquidity and the resultant flight from equities to cash and cash equivalent holdings in late 2008 and early 2009 resulted in a substantial decline in value for virtually every asset class globally. While these conditions have generally improved since March 2009, they have not fully recovered and have begun to deteriorate again and may adversely affect the ability of our funds to consistently generate non-volatile investment performance and to retain and attract new assets under management, which may negatively impact our financial condition and results of operations.

Conditions in late 2008 and early 2009 in the U.S. and global economies and in the capital markets worldwide deteriorated significantly, and while the financial market crisis has somewhat abated, it continues to contribute to market turbulence, a lack of liquidity, increased mortgage default rates and weakness in the value of residential real estate and other asset classes. Write-downs and capital-related issues across all industries resulted in the failures of multiple global financial institutions and other businesses, which further negatively impacted the global economy. These factors have raised concerns about a prolonged global economic recession and have resulted in a significant loss of corporate and investor confidence. Furthermore, well-publicized scandals involving certain financial services firms have further eroded confidence in the global financial system and in the investment management industry. Although the U.S. and other governments have taken a number of significant steps to stem the crisis and improve economic and market conditions, such efforts to date have resulted in only tenuous stability and liquidity in the global financial markets and marginally improved corporate and investor confidence, which have begun to deteriorate again in the second quarter of 2010. Global market conditions are rapidly changing, are inherently outside of our control and cannot be predicted. The financial crisis which began in the second half of 2008 has caused the investment industry in general, and the hedge fund industry in particular, to retrench with the rest of the financial services industry. If these difficult conditions continue, they may impact our investment performance and ability to retain and attract new assets under management, and may result in higher redemptions than what our funds have historically experienced. These factors may reduce our revenues and the distributions we make on our common units and may slow or reduce the long-term growth of our business. In particular, we may face the following heightened risks:

•

Our funds’ investment performance may be negatively impacted. Negative fund performance reduces assets under management, which decreases the management fees and incentive income we earn. Lower revenues result in lower income and therefore reduced distributions paid on our common units.

•

The dislocation of asset values and associated decreased liquidity in the global equity and debt markets have caused a material depreciation in equity and fixed income asset values, greater price volatility and weaker economic conditions around the globe. Additionally, there has been a reduction in market trading activity. This reduction and concern over market conditions have resulted in significant declines in valuations of debt and equity assets by third party brokers and pricing agents. A worsening or continuation of the current circumstances might make it more difficult for asset managers to generate positive returns, which could lead to reduced assets under management and impair the revenue flow from our funds.

•

Investors worldwide reduced or eliminated their investments in many asset classes through redemptions and maximized their cash or equivalent holdings as confidence in the global financial system eroded. Losses on capital investments, the lack of liquidity in the capital markets and a loss of confidence in the markets have contributed to increased redemptions for the asset management industry worldwide, including hedge funds. Redemption rates have stabilized since their lowest point in the third quarter of 2008, but may again increase while market conditions remain unsettled. We may see significant redemptions from our funds, which would reduce our assets under management and, consequently, our revenues. A resumption of increased redemptions may affect our funds’ investment decisions and impair the viability of our funds. Funds that do not have sufficient cash on hand to satisfy redemption requests may be forced either to sell assets at distressed prices in order to generate cash or take other measures.

•

Our ability to attract new capital to our initial funds or any other funds we may manage in the future may be limited until economic and market conditions improve further and investors regain confidence in the global financial markets and in the alternative asset management industry.

•

Contraction and consolidation in the hedge fund industry has accelerated, as hedge funds have experienced declines in investment performance, increased redemptions and counterparty exposures that have impaired their businesses. Some funds have reduced or may reduce their fees or revise their fee structure in an attempt to avoid additional redemptions or otherwise remain competitive. We may need to consider similar actions to remain competitive, which would reduce our revenues.

•

Our industry has been and may continue to be subject to increased regulation and public scrutiny. Such additional regulation could increase our compliance costs or limit our ability to pursue investment opportunities. For example, recent rulemaking by the SEC and other regulatory authorities outside the United States has imposed trading and reporting requirements on short selling, which could adversely affect trading opportunities, including hedging opportunities, for our funds and disclosure of their hedging strategies.

•

Defaults by counterparties with which we execute transactions, or even rumors or questions about their solvency, may increase our operational risks or transaction costs, which may result in lower investment performance by our funds.

•

Due to the presence of high-water marks, below which we do not earn incentive income, the ability of our funds to earn incentive income may be reduced or eliminated following periods in which the funds have sustained losses. In addition, our manager affiliates have the discretion to reduce the management and incentive fees they collect, which could reduce our revenues and adversely affect our results of operations.

•

Over the past two years, interest rate spreads have widened significantly. In addition to potentially reducing the relative attractiveness of hedge fund investment products, this widening may increase our funds’ costs when financing investments using debt, which, in turn, may reduce the net return earned by our funds.

We do not know and cannot predict the full extent to which current or future market disruptions will affect the markets in which we intend to operate. If disruptions continue, or result in permanent, fundamental changes in the credit and equity capital markets, we may experience reduced earnings and cash flow, impairment charges or increased margin requirements, as well as substantial challenges in raising capital, obtaining investment financing and making investments on attractive terms.

We are a newly organized investment management firm with no operating history.

Aveon Holdings I L.P. was formed on September 25, 2009, and The Aveon Group L.P. was formed on January 27, 2010. As of the date of this prospectus, we have entered into binding agreements to acquire controlling interests in our six initial manager affiliates, which manage eight investment funds, but we have no operating history. We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our business objectives and that the value of your investment could decline substantially or fall to zero.

We have an unproven business model, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment.

We have an unproven business model, which makes our current business and future prospects difficult to evaluate. We have not yet acquired any of the manager affiliates for our initial funds and, as a result, have not commenced the core business operations upon which our business model is based, and we cannot assure you that our strategy will be successful.

Our revenues, cash flows and ability to make distributions, if any, to our common unitholders will depend largely on the ability of our funds to increase assets under management and generate positive returns on those invested assets.

Our management fee revenues are subject to increases or decreases corresponding to increases or decreases in the aggregate assets under management in our funds. Our incentive fee income is directly correlated to the positive or negative performance of our funds. Unfavorable economic or capital market environments, a general reduction in assets under management, or the failure or underperformance of one or more of our funds could reduce management and incentive fee income, limit inflows of investments to our funds or cause investors in our funds to redeem their investments, thereby adversely affecting our revenues and cash flows and decreasing or eliminating the availability of current distributions to our common unitholders.

Once our funds reach specified levels of assets under management, we will cease to receive incremental management fees and incentive income from additional assets under management of those funds.

Pursuant to arrangements with our operating members, once assets under management in each fund reach a specified level, generally $600 million, we have agreed to allocate 100% of all incremental management fees and incentive fees and allocations to the operating member of the manager affiliate of that fund. As a result, potential revenues from management and incentive fees from our manager affiliates are subject to inherent limits.

Our growth strategy may not be successful.

We intend to grow our assets under management by organically increasing the assets managed in our initial funds and through the formation of new investable multi-fund composites as well

as through future acquisitions of additional manager affiliates. However, there can be no assurance that our initial funds, or any future funds that we manage, will have favorable performance, or that will be able to attract additional assets to these funds. Moreover, some of our initial funds have, and we anticipate that some of the funds that we may manage in the future may have, AUM levels that may impede our ability to attract a larger and broader asset base of institutional investors to these funds or that may already be at a level at which we will not receive incremental revenue from increased AUM. Furthermore, we may not be successful in the formation of new funds or in growing assets under our management through future acquisitions of other manager affiliates. See “—We may be unable to successfully execute our acquisition strategy, and we may fail to successfully integrate and operate acquired manager affiliates” below. Accomplishing our growth objectives on a cost-effective basis will require us to successfully manage our initial funds and successfully execute the acquisitions of additional manager affiliates that meet our investment criteria, and we can give no assurance that we will be able to do so.

In addition, even if we are able to grow our AUM, we may not be compensated for this growth. Pursuant to arrangements with our operating members, once the total assets under management of each fund (or in the case of Viridian, a portion of total assets under management) reaches a specified level, generally $600 million, we have agreed to allocate 100% of all incremental management fees and incentive fees and allocations to the operating member of the manager affiliate of that fund. As a result, potential revenues from management and incentive fees from our manager affiliates are subject to inherent limits.

We may be unable to successfully execute our future acquisition strategies, and we may fail to successfully integrate and operate acquired manager affiliates.

We have not at this time entered into any binding agreements with respect to any future acquisitions beyond the acquisitions of the manager affiliates of our initial funds, and we cannot assure you that we will actually make any additional acquisitions. Our ability to execute our acquisition strategy will depend on our ability to identify manager affiliates that meet our investment criteria and to successfully negotiate with the owners/managers who may not wish to give up control of the target fund general partner or managing member, as the case may be. We cannot be certain that we will be successful in finding or investing in such manager affiliates or that they will have favorable operating results following our acquisitions.

Moreover, our future acquisition strategies will focus on privately-held manager affiliates that pursue single strategy specialized investments. This approach presents challenges, including the lack of publicly available information, and greater risks than are generally associated with transactions with more traditional asset managers. The manager affiliates we intend to acquire and their financial information will not be subject to the reporting requirements and other rules that govern public companies, including the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Moreover, our manager affiliates may not be subject to regulation under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) at the time we acquire them. As a result, such manager affiliates could be more susceptible to irregular accounting or fraudulent practices. The targets we seek to acquire in the future may have shorter operating histories than our initial funds on which to estimate future performance and may not have significant or any operating revenues. They also may have a lower capitalization and fewer resources (including cash) and be more vulnerable to failure than traditional asset managers. We will be required to rely on the ability of the professionals employed by us to obtain adequate information to evaluate the manager affiliates we intend to acquire.

In addition, our ability to acquire manager affiliates on favorable terms and successfully integrate and operate them is subject to the following significant risks:

•

we may acquire manager affiliates that are not accretive to our financial results upon acquisition, and we may not successfully manage those funds to meet our expectations;

•

we may be unable to generate sufficient management fees or incentive income from operations, or obtain the necessary debt or equity financing to consummate an acquisition on favorable terms or at all;

•

agreements for the acquisition of manager affiliates will typically be subject to customary conditions to closing, including satisfactory completion of due diligence investigations and negotiation of ancillary documentation, and we may spend significant time and money on potential acquisitions that we do not consummate;

•

the process of acquiring or pursuing the acquisition of additional manager affiliates may divert the attention of our management team from the operations of our initial funds;

•

we will need to attract, hire, train, supervise and manage new employees as a result of the acquisitions of additional manager affiliates;

•

we may acquire manager affiliates without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as claims against the former owners of the manager affiliates and claims for indemnification by manager affiliates, limited partners and others indemnified by the former owners of the managers of the funds; and

•

we may be unable to quickly and efficiently integrate new acquisitions into our existing operations.

If we cannot complete acquisitions of additional manager affiliates on favorable terms, or integrate or operate acquired manager affiliates to meet our goals or expectations, our financial condition, results of operations, cash flow, trading price of our common units and ability to satisfy any debt service obligations and to pay distributions could be adversely affected. Additionally, any acquisitions that we make generally will not be subject to our common unitholders’ consent. These factors increase the risk of investing in our common units.

The failure to consummate announced acquisitions of manager affiliates could have an adverse effect on our operating results and financial condition.

The consummation of acquisitions of manager affiliates, including the manager affiliates of our initial funds, will be generally subject to a number of closing conditions, contingencies and approvals, including, but not limited to, obtaining certain consents of the funds’ clients and agreeing to the terms of certain documents with the selling investment professionals. In the event that an announced transaction is not consummated, we may experience a decline in the price of our common units to the extent that the then-current market price reflects a market assumption that we will complete the announced transaction. In addition, the fact that a transaction did not close after we announced it publicly may negatively affect our ability and prospects to consummate transactions in the future. Finally, we must pay costs related to these transactions, including legal and accounting fees, even if the transactions are not completed, which may have an adverse effect on our results of operations and financial condition.

The purchase agreements relating to our acquisition of the initial manager affiliates give us and the selling investment professionals the right to terminate the purchase agreements under certain limited circumstances at any time prior to the closing of the acquisition, including for

breach of contract or in the event of a material change in the business. Each of the parties to each purchase agreement will be required to update their respective disclosures as to their condition, representations and warranties prior to the closing of each acquisition and will also need to enter into the necessary amendments to the organizational documents for the entity in which we will become the controlling member. There can be no assurances that we or any manager affiliate will not decide to terminate any purchase agreement under the terms that allow for such termination.

Key investment professionals may compete with our funds.

We intend to admit the current investment professionals of our initial funds and their investment firms as operating members of the manager affiliates in order to continue to conduct day-to-day operations of the respective funds they have historically managed. These investment professionals have no obligation to continue working for us but will be subject to non-competition provisions, limiting their ability to manage funds employing the same investment strategy as our fund they will manage. Under the terms of these arrangements, with limited exceptions, the selling investment professionals with respect to a particular manager affiliate, and generally certain affiliates of such selling investment professionals, are not permitted to compete with the business of the manager affiliate or to solicit employees of the manager affiliate, unless and until (i) the relevant fund has AUM at least equal to a fund capacity benchmark (ranging from $450 million to $1 billion), which is equal to or greater than the benchmark above which we do not receive fees, or (ii) we terminate the selling investment professionals as operating members of or advisers to our manager affiliate, in most cases without cause. Most of the non-competition arrangements contain provisions that limit the ability of the selling investment professionals to admit investors into competing funds after the benchmark is reached if it could have the effect of reducing the AUM of our funds below the applicable fund capacity benchmark. The non-competition provisions will not prohibit their management of certain types of separately managed accounts or of funds or accounts that employ different investment strategies, even if such funds or accounts overlap with the strategies of our other funds. Upon the liquidation or closing of a fund as a result of a decision by the selling investment professionals to retire or cease to be actively engaged in managing the fund, the selling investment professionals have agreed that if, within five years of the fund’s closing, they subsequently engage in managing another fund or investment vehicle of the same investment style as our fund, we will be granted the same voting, economic and other rights associated with such other fund as if it were our fund. See “Certain relationships and related person transactions—Non-competition and non-solicitation agreements” for a description of the selling investment professionals’ non-competition provisions.

As a result, the key investment professionals and their investment firms could compete with our funds in the future by: (1) creating or managing funds that employ a different strategy than our funds they will manage for us in their role at Aveon that may draw investors away from our fund they manage or our other funds that employ such strategies; (2) managing certain types of separately managed accounts that employ the same strategy as our funds they will manage but that each have an AUM above the threshold specified in the non-compete provisions; (3) creating or managing funds that employ the same strategy as our funds they will manage for us if we terminate them as operating members of or advisors to our manager affiliates, in some cases even if we terminate them for cause; or (4) following their departure from management of the applicable funds, creating or managing funds that employ the same strategy as our funds they will manage, after five years after the non-competition provisions have expired. Moreover, the key investment professionals will often have regular direct contact with the investors in the funds

they manage, which can lead to strong client relationships based on the investors’ trust in particular individuals. These relationships could lead to investors redeeming their investments from our funds and investing in competing funds that the investment professionals may manage in the future.

The due diligence process that we undertake in connection with the acquisitions of manager affiliates and investments by our initial funds may not reveal all facts that may be relevant in connection with an investment.

In connection with the acquisitions of our manager affiliates, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to each manager affiliate and expect to use our resources and oversight to enhance the risk management functions and diligence of the initial funds and their investments going forward. When conducting due diligence, we have been required and will be required to evaluate important and complex business, financial, tax, accounting and legal issues. Outside consultants, legal advisors, accountants and investment banks may be involved in the due diligence process in the future in varying degrees depending on the type of investment. When conducting due diligence and making an assessment regarding an acquisition or investment, we have and will continue to rely on the resources available to us, including information provided by the target of the acquisition or investment and, in some circumstances, third-party investigations. The due diligence investigations that we have carried out or will carry out with respect to any acquisition or investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such acquisition or investment opportunity. Moreover, such investigations will not necessarily result in the acquisition or investment being successful.

The historical financial data with respect to our manager affiliates and our initial funds and the unaudited pro forma consolidated financial information included in this prospectus are not indicative of our future financial results. In accordance with GAAP, a number of our initial funds have historically been consolidated into the financial statements of the manager affiliates of those funds; however, following this offering, our initial funds will not be consolidated in our consolidated financial statements. In addition, the unaudited pro forma consolidated financial information included in this prospectus does not reflect the added costs that we will incur as a public company or the impact of our change in structure. In preparing our unaudited pro forma financial information for the periods prior to this offering, we adjusted the historical consolidated financial information of our manager affiliates for the transactions described in “Formation and structure of our Company—Formation transactions” and, as such, this financial information does not purport to represent the results of any future periods.

We are dependent upon our senior management and other key personnel for our future success and upon our access to our founding investors’ investment professionals and other resources.

Our future success will depend on the continued service of our senior management and other key personnel. We will depend on these individuals’ diligence, skill and network of business contacts. In order to grow, we will also need to attract, hire, train, supervise and manage new employees. The loss of key personnel or our inability to attract, retain and motivate sufficient numbers of our qualified personnel would adversely affect our business. The market for investment professionals is extremely competitive and is increasingly characterized by frequent movement by

investment professionals among different firms. Although we plan to use a combination of economic incentives and, in some instances, employment agreements as a means of seeking to retain our key management personnel, there can be no assurance that our key management personnel will remain with us or with each of our funds.

We will also depend on our access to the investment professionals and other resources of our founding investors and the information and deal flow generated by those investment professionals in the course of their investment and portfolio management activities. We cannot assure you that we will have adequate access to the investment professionals or other resources of our founding investors or their information and deal flow.

Certain of our officers and directors and members of our investment committee serve, or may serve, as officers, directors or principals of our founding investors or their affiliates. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in our best interests or those of our common unitholders, or that may require them to devote time to services for other entities, which could interfere with the time available to provide services to us. For example, Jeff Landle (our Chief Investment Officer) and John J. Hassett (our President and Chief Executive Officer) are and, following this offering, will continue to be, founding members of different affiliates of our founding investors. While Mr. Landle and Mr. Hassett will be full time employees of our general partner, they will remain principals of those affiliates of our founding investors. Certain of our founding investors’ affiliates will continue to manage their clients’ capital which could give rise to conflicts of interest.

We are dependent upon our operating members to conduct the day-to-day operation of our funds.

The operating members of our manager affiliates will conduct the day-to-day operations of our funds. While we will have voting control and oversight authority over our manager affiliates and certain other protections, the client relations, client serving, investment reporting and analytics, risk management and the other aspects of day-to-day operation of the funds will be managed by the operating members of our manager affiliates. In particular, an operating member’s inability to effectively implement the applicable investment strategy of such fund and achieve attractive returns may cause such fund’s assets under management to significantly decline in value, and could result in reduced management fees and reduced or no performance-based distributions being paid to us. If we disagree with the investment decisions of our operating members, in most cases our only remedy will be to dismiss them, which could result in redemptions and significantly damage our business. Any failure by the operating members to achieve successful returns on assets under management may adversely affect our business, reputation, financial condition and results of operations. Such failures could also lead to redemptions, further reducing AUM and our corresponding revenues from management fees and incentive income.

Some of the operating members we admit to our manager affiliates may have shorter investment advisory track records, shorter operating histories, fewer staff resources and less access to institutional investors than other managers with larger funds under management, which tend to make them more vulnerable to market conditions. They typically depend on the investment and management talents and efforts of a small group of individuals and have limited financial resources and may be unable to meet their working capital needs. Operating members with smaller teams often lack operational, compliance and marketing resources to grow or operate effectively. In particular, these teams may often lack sufficient personnel to build and maintain the compliance programs required by the SEC under the Advisers Act. Compliance or other

deficiencies found as a result of an SEC examination or otherwise could cause an operating member to shut down or otherwise subject an operating member to penalties, which could adversely affect our AUM and results of operations.

The structure of the acquisitions of the manager affiliates of our initial funds has been designed to permit our operating members and investment professionals to maintain day-to-day operational autonomy. It will be difficult, and likely impossible, for us to protect ourselves completely from the risk of fraud, misrepresentation or material strategy alteration by our investment professionals. If an investment professional acts inconsistently with applicable laws and regulations, such actions may adversely affect us and may also damage our reputation, which may negatively impact our ability to complete future acquisitions of manager affiliates and our ability to realize our objectives.

Furthermore, the key investment professionals of our operating members will often have regular direct contact with our funds’ investors, which can lead to strong customer relationships based on the investors’ trust in particular individuals. The loss of key investment professionals could jeopardize our funds’ relationships with their investors and lead to the loss of client accounts at our funds. Losses of such accounts could have a material adverse effect on our results of operations and financial condition.

Employee misconduct or bad judgment could harm us by impairing our ability to attract and retain our funds’ investors, complete future acquisitions of manager affiliates and realize our investment objectives and by subjecting us to significant legal liability and reputational harm.

There is a risk that the employees of our general partner or our operating members could engage in misconduct that adversely affects our business. We are subject to a number of obligations and standards arising from our business and our authority over the assets we manage. The violation of these obligations and standards by any of our employees would adversely affect our funds’ investors and us. Our business often requires that we deal with confidential matters of great significance to companies in which our funds may invest. If our employees were to improperly use or disclose confidential information, we could suffer serious harm to our reputation, financial position and current and future business relationships, as well as face potentially significant litigation and/or prosecution. It is not always possible to detect or deter employee misconduct, and the extensive precautions we take to detect and prevent this activity may not be effective in all cases. If any of the employees of our general partner or our operating members were to engage in misconduct or were to be accused of such misconduct, our business and our reputation could be adversely affected.

We could lose all or part of any capital that we contribute to our funds.

We intend to contribute capital to our funds. However, our capital interests in our funds may decline in value. Accordingly, we may not be able to realize gains from our capital interests in our funds, and any gains that we do realize on the disposition of any such investments may not be sufficient to offset any other losses we experience. While we will generally have the right to redeem our capital interests investment at any time, subject to certain performance and other covenants and minimum commitment requirements, the investment losses of our funds may by substantial, occur too rapidly for a timely redemption and potentially result in a partial or complete loss of our investments with respect to one or more funds. In addition, if we were to be required to liquidate all or a portion of our capital interests in a fund quickly, we may realize significantly less than the value at which the interest was previously recorded, which could result in a decrease in our net asset value.

Poor performance of our funds would cause a decline in our revenue, income and cash flow and could adversely affect our ability to raise capital for future investment funds.

If any of our funds were to perform poorly, our revenue, income and cash flow would decline because the value of our AUM would decrease, which would result in a reduction in management fees, and our investment returns would decrease, resulting in a reduction in the incentive fees and allocations we earn. Moreover, we could experience losses on our investments of our own capital as a result of poor investment performance by our funds. Poor performance of our funds could make it more difficult for us to raise new capital. Investors in funds might decline to invest in our future funds and investors in our funds might withdraw their investments as a result of poor performance of the funds in which they are invested. Investors and potential investors in our funds continually assess our funds’ performance, and our ability to raise capital for existing and future funds and avoid excessive redemption levels will depend on our funds’ continued satisfactory performance.

The historical returns attributable to our funds should not be considered as indicative of our or our funds future results or of any returns expected on an investment in our common units.

We have presented in this prospectus under “Business—Initial funds” the annualized net investment returns relating to the historical performance of the initial funds. The historical and potential future returns of the initial funds are not, however, directly linked to returns on our common units. Therefore, you should not conclude that continued positive performance of our initial funds will necessarily result in positive returns on an investment in common units. Poor performance of our initial funds will cause a decline in our incentive fees and allocations from such funds and may lead to losses in assets under management leading to a decrease in management fees from such funds and would therefore have a negative effect on our performance and the returns on an investment in our common units. Moreover, with respect to the historical returns of the initial funds:

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the initial funds’ returns should not be considered indicative of the future results that should be expected from such funds or from any future funds we may acquire or raise; and

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the initial funds’ returns have benefited from investment opportunities and general market conditions that may not repeat themselves, and there can be no assurance that our current or future funds will be able to avail themselves of profitable investment opportunities.

Our business will be concentrated initially in a limited number of funds, subjecting our business to concentrated operating and performance risk associated with less diversification.

We will initially acquire controlling interests in the manager affiliates of only eight investment funds. As a consequence, our results may be significantly adversely affected if even one of our initial funds performs poorly, fails for operating reasons, faces large redemptions from investors or if we need to write down the value of any interest in the manager affiliates of our funds for any reason.

While the historical performance of our initial funds indicates a low correlation among them, including during the recent financial crisis, past performance is no basis to predict future performance. If our funds become correlated as a group to each other, a single market or an event that results in a common loss of value, we could suffer a significant loss in value, revenues and income.

Investors in our initial funds may redeem their investments on short notice. This would lead to a decrease in our revenues, which could be substantial.

Investors in our initial funds may also generally redeem their investments on an annual, semi-annual or quarterly basis following the expiration of a specified period of time when capital may not be withdrawn (typically between one and three years), subject to the applicable fund’s specific redemption provisions, which in some cases require only 30 days notice. In a declining market, the pace of redemptions and consequent reduction in our assets under management could accelerate. The decrease in revenues that would result from significant redemptions in certain of our funds could have a material adverse effect on our business, revenues, net income and cash flows.

We cannot be certain that the existing investors of the funds, or future investors, including traditional fund-of-funds, which may consider our investable multi-fund composites as competitive to their offerings, will continue to invest in our initial funds, particularly if the investment return in the fund is poor or the capital markets result in the general need for liquidity by investors. Any net reduction in client investments in our initial funds will result in a reduction in our revenues and profits.

Third-party investors in our initial funds have the right to accelerate the liquidation date of the investment fund without cause by a simple majority vote. This would lead to a decrease in our revenues, which could be substantial.

The governing agreements of all of our initial funds provide that, subject to certain conditions, third-party investors in those funds have the right to accelerate the liquidation date of the investment fund without cause by a simple majority vote, resulting in a reduction in management fees we would earn from such investment funds and a significant reduction in the amounts of total incentive fees and allocations from those funds. Incentive fees and allocations could be significantly reduced as a result of our inability to maximize the value of investments by an investment fund during the liquidation process. Finally, upon completion of the liquidation, the applicable funds would cease to exist. In addition to having a significant negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any of our initial funds would likely result in significant reputational damage to us.

The management agreements of our manager affiliates could be terminated upon a change of control.

Under the Advisers Act, the management agreements of our manager affiliates would typically be terminated upon an “assignment,” without investor consent, of these agreements, which may be deemed to occur in the event these manager affiliates were to experience a change of control. We cannot be certain that the required consents will be obtained if a change of control occurs. Termination of these agreements would cause us to lose the fees we earn from such manager affiliates.

New legislation has been enacted that will require advisers to hedge funds and other private funds to register with the SEC, which will subject those advisers to additional requirements and likely increase costs associated with those funds.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. Included in Title IV of the Act is the Private Fund Investment Advisers Registration Act of 2010, which eliminates the “private adviser exemption” from SEC registration currently contained in Section 203(b)(3) of the Advisers Act for investment advisers who do not

hold themselves out to the public as investment advisers and have fewer than 15 clients. As a result, many investment advisers to private funds (with some exceptions) will be required to register with the SEC. Registered advisers will be subject to substantial regulatory reporting and recordkeeping requirements regarding the private funds they advise. Title IV becomes effective one year after the date of enactment, during which time the SEC is required to adopt rules and regulations providing procedures for registration and reporting. Investment advisers to private funds may voluntarily register with the SEC during this one-year period. We expect that we will voluntarily register with the SEC as an investment adviser, through one or more of our subsidiaries, prior to the consummation of this offering. Current and future regulatory requirements associated with such registration could increase our costs in the future.

If we incur indebtedness or issue senior equity securities we will be exposed to additional risks, including the typical risks associated with leverage.

We may borrow funds or issue senior equity securities to make additional acquisitions. In order to make investments in additional manager affiliates, we may enter into a senior credit facility or other financing arrangements after consummation of this offering. We currently have no commitments or understandings with respect to such a credit facility. The amount of leverage that we employ will depend on our general partner’s board of directors’ assessment of market and other factors at the time of any proposed borrowing. Our funds may also use leverage to make certain investments. There is no assurance that a leveraging strategy will be successful. Leverage involves risks and special considerations that include the following:

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there is a likelihood of greater volatility of net asset value of our funds and market price of our common units than a comparable business without leverage;

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we will be exposed to increased risk of loss if we incur debt or issue senior equity securities to finance acquisitions or investments because a decrease in the value of our funds’ investments would have a greater negative impact on our returns and therefore the value of our common units than if we did not use leverage;

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it is likely that such debt or equity securities will be governed by instruments containing covenants restricting our operating flexibility. These covenants may impose asset coverage or investment composition requirements that are more stringent than those of our business plan and could require our funds to liquidate investments at an inopportune time;

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we, and indirectly our funds’ investors, will bear the cost of leverage, including issuance and servicing costs; and

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any preferred, convertible or exchangeable securities that we issue may have rights, preferences and privileges more favorable than those of our common units.

Any requirement that we or our funds sell assets at a loss to redeem or pay interest on any leverage or for other reasons would reduce our funds’ net asset value and also make it difficult for our funds’ net asset value to recover. Our general partner’s board of directors in its best judgment nevertheless may determine to use leverage if it expects that the benefits to our unitholders of maintaining the leveraged position will outweigh the risks.

General interest rate fluctuations may have a substantial negative impact on our funds’ investments and investment opportunities. In addition, an increase in interest rates would make it more expensive for our funds to use debt to finance their investments.

Future financings could adversely affect us and our common unitholders.

Our acquisitions of our manager affiliates will require substantial capital investments. Although we believe that the proceeds from this offering and future cash flow from operations will be sufficient to meet our working capital needs for normal operations pursuant to our business plan, these sources of capital are not expected to be sufficient to fund additional acquisitions in accordance with our growth strategy. In order to complete such further acquisitions, we intend to raise additional capital through the incurrence of long-term or short-term indebtedness or the issuance of additional equity securities in private or public transactions. This could result in dilution of existing common unitholders’ equity positions, increased interest expense and decreased net income. In addition, significant capital requirements associated with such investments may impair our ability to make distributions to our common unitholders. There can be no assurance that acceptable financing for future investments can be obtained on suitable terms, if at all.

Valuation methodologies for certain assets in our funds can be subject to significant subjectivity and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our funds.

There are no readily ascertainable market prices for the illiquid investments of our funds. The value of the investments of our funds will be determined periodically by us based on the fair value of such investments, which is determined using a number of methodologies described in the funds’ valuation policies. These policies are based on a number of factors, including the nature of the investment, the expected cash flows from the investment, bid or ask prices provided by third parties for the investment, the length of time the investment has been held, the trading price of securities (in the case of publicly traded securities), restrictions on transfer and other recognized valuation methodologies.

The methodologies our funds will use in valuing individual investments are based on a variety of estimates and assumptions specific to the particular investments, and actual results related to the investment therefore often vary materially as a result of the inaccuracy of such assumptions or estimates. In addition, because many of the illiquid investments held by our funds are in sectors which are unstable or in distress, such investments are subject to rapid changes in value caused by sudden industry-wide developments.

Because there is significant uncertainty in the valuation of illiquid investments, the fair values of such investments as reflected in a fund’s net asset value do not necessarily reflect the prices that would actually be obtained when such investments are sold. Realizations at values significantly lower than the values at which investments have been reflected in fund net asset values would result in losses for the applicable fund, a decline in asset management fees and the loss of potential incentive income. Also, a situation where asset values turn out to be materially different from values reflected in fund net asset values could cause investors to lose confidence in us and our manager affiliates, which may, in turn, result in redemptions from our funds or difficulties in raising additional capital.

Risk management activities may adversely affect the return on our funds’ investments.

When managing our funds’ exposure to market risks, our operating members may use hedging strategies or certain forms of derivative instruments to limit our funds’ exposure to changes in the relative values of investments that may result from market developments, including changes in prevailing interest rates, currency exchange rates and commodity prices. The scope of risk

management activities our operating members will undertake will vary based on the level and volatility of interest rates, prevailing foreign currency exchange rates, the types of investments that are made and other changing market conditions. The use of hedging transactions and other derivative instruments to reduce the effects of a decline in the value of a position does not eliminate the possibility of fluctuations in the value of the position or prevent losses if the value of the position declines. Such transactions may also limit the opportunity for gain if the value of a position increases. Moreover, it may not be possible to limit the exposure to a market development that is so generally anticipated that a hedging or other derivative transaction cannot be entered into at an acceptable price.

The success of any hedging or other derivative transactions that our operating members enter into generally will depend on their ability to correctly predict market changes. As a result, while our operating members may enter into such transactions in order to reduce their exposure to market risks, unanticipated market changes may result in poorer overall investment performance than if the hedging or other derivative transaction had not been executed. For a variety of reasons, our operating members may not seek or be successful in establishing a perfect correlation between the instruments used in a hedging or other derivative transactions and the position being hedged. In addition, the degree of correlation between price movements of the instruments used in connection with hedging activities and price movements in a position being hedged may vary. An imperfect correlation could prevent our operating members from achieving the intended result and could give rise to a loss. It will not be possible to fully or perfectly limit our exposure against all changes in the value of our investments, because the value of investments is likely to fluctuate as a result of a number of factors, some of which will be beyond our or our operating members’ control or ability to hedge.

We will operate in a highly competitive market.

We will compete with many other firms in all aspects of our business, including seeking investment opportunities in hedge fund asset classes, acquiring manager affiliates, raising funds and hiring and retaining professionals, and we expect our industry will continue to be highly competitive in these regards. We will face competitors that are larger than us and have greater financial, technical and marketing resources. Some of these competitors continue to raise additional amounts of capital to pursue investment strategies that may be similar to ours. Some of these competitors may also have access to funding sources that are not available to us, which may pose challenges for us with respect to investment opportunities. In addition, some of these competitors may have higher risk tolerances or make different risk assessments than we do, allowing them to consider a wider variety of investments and establish a broader network of business relationships.

Our funds may lose investment opportunities if they do not match their competitors’ pricing, terms and structure. If our funds match their competitors’ pricing, terms and structure, they may experience decreased net investment income and decreased equity interest distribution. As a result of operating in such a competitive environment, our funds may not be able to take advantage of attractive investment opportunities from time to time, and we cannot assure you that they will be able to identify and make acquisitions that meet their investment objective, or our funds may make investments that are on less favorable terms to our funds than what they may have originally anticipated, which may impact their return on such investments.

In addition, we expect to compete for the acquisition targets that we seek to execute our business plan based on pricing, terms and structure. We believe our primary competitors for

acquisitions of manager affiliates that pursue single strategy investments will include public and private funds and fund complexes, commercial and investment banks, commercial financing companies and “seed” or “incubator” type fund-of-funds, most of which have longer established operating histories and significantly greater resources. There can be no assurance that we will be able to compete effectively with such competitors, that additional competitors will not enter the market, or that such competition will not make it more difficult or impracticable for us to make future acquisitions. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations.

Our business is highly regulated.

Our business is subject to extensive regulation. While none of our initial funds is currently required to register as an investment company under the Investment Company Act, our initial funds are what are known as 3(c)7 funds under the Investment Company Act. This means that investors in our funds must meet certain income and asset tests. None of our manager affiliates is presently registered with the SEC as an investment adviser under the Advisers Act. Currently, we are not required to register under the Advisers Act as a result of the “private adviser exemption” contained in Section 203(b)(3) thereof, which exempts from registration any investment advisers who do not hold themselves out to the public as investment advisers and have fewer than 15 clients. However, with the recent enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the private adviser exemption has been eliminated, effective one year after enactment of the Act, and as a result, we expect that we will be required in the future to register with the SEC under the Advisers Act. We expect that we will voluntarily register with the SEC under the Advisers Act, through one or more subsidiaries, prior to the consummation of this offering, and at the time of such registration, we will become subject to the various restrictions and other requirements thereunder. The Advisers Act and its related regulations require that registered investment advisers comply with numerous disclosure and other obligations, including the implementation of compliance and operational programs and controls. Registered investment advisers are also subject to periodic examinations by the SEC staff.

We may also be subject to the laws of non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies. The failure by us to comply with applicable laws or regulations could result in fines, suspensions of individual employees or other sanctions. Even if an investigation or proceeding did not result in a fine or sanction or the fine or sanction imposed against us or our employees by a regulator was small in monetary amount, the adverse publicity relating to an investigation, proceeding or imposition of these fines or sanctions could harm our reputation and cause our funds to lose existing investors or fail to attract new investors. We are also subject to regulation under the securities laws and fiduciary laws of certain states. In addition, we may be subject to the Employee Retirement Income Security Act of 1974, as amended, which we refer to as ERISA, and to regulations promulgated thereunder. ERISA and the applicable provisions of the Internal Revenue Code impose certain duties on persons who are fiduciaries under ERISA and prohibit certain transactions involving the assets of each ERISA plan which is a client of an investment manager, as well as certain transactions by the fiduciaries (and certain other related parties) to such plans.

The market environment in which we operate is subject to further regulation. We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. and non-U.S. governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. We also may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self regulatory organizations. It is impossible to determine the extent of the impact of any new

laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law. Compliance with any new laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business.

Operational risks may disrupt our businesses, result in losses or limit our growth.

We will rely heavily on our financial, accounting and other data processing systems. If any of these systems does not operate properly or is disabled, we could suffer financial loss, a disruption of our businesses, liability to our funds, regulatory intervention or reputational damage. Our information systems and technology may not continue to be able to accommodate our growth, and the cost of maintaining such systems may increase from its current level. Such a failure to accommodate growth, or an increase in costs related to such information systems, could have a material adverse effect on us.

A disaster or a disruption in the infrastructure that supports our businesses, including a disruption involving electronic communications or other services used by us or third parties, with whom we conduct business, or directly affecting our headquarters, could have a material adverse impact on our ability to continue to operate our business without interruption. Our disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.

We will also rely on third-party service providers for certain aspects of our business, including for certain information systems and technology and administration services. Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair the quality of our or our funds’ operations and could impact our reputation and adversely affect our business and results of operations.

The requirements of being a public entity and sustaining our growth may strain our resources.

As a public entity, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting, which are discussed below. In order to maintain and improve the effectiveness of our disclosure controls and procedures, significant resources and management oversight will be required. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. In addition, sustaining our growth will also require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We expect to incur significant additional annual expenses related to these steps including, among other things, director and officer liability insurance fees, director fees, transfer agent fees, accounting, consulting, legal and administrative fees and similar expenses.

Our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and common unit price.

Our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that we will eventually be required to meet. We are in the process of addressing our internal controls over financial reporting and are establishing formal policies, processes and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and activities within our organization.

Additionally, we have not yet begun the process of documenting our internal control procedures to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. Because we do not currently have comprehensive documentation of our internal controls and have not yet tested our internal controls in accordance with Section 404, we cannot conclude in accordance with Section 404 that we do not have a material weakness in our internal controls or a combination of significant deficiencies that could result in the conclusion that we have a material weakness in our internal controls. As a public entity, we will be required to complete our initial assessment in a timely manner. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the adequacy of our internal controls over financial reporting. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules, and result in a breach of the covenants under any credit facility we may enter into. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements could also suffer if our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting. This could materially adversely affect us and lead to a decline in our common unit price.

We are subject to third-party litigation risk that could result in significant liabilities and reputational harm, which could materially adversely affect our results of operations, financial condition and liquidity.

In general, we will be exposed to risk of litigation by our common unitholders or the investors in our funds if our involvement with any of our funds is alleged to constitute gross negligence or willful misconduct. Common unitholders could sue us to recover amounts lost by our funds due to our alleged misconduct, up to the entire amount of loss. Further, our funds may be subject to litigation arising from investor dissatisfaction with the performance of our funds or from allegations that we improperly exercised control or influence over companies in which our funds have large investments. In addition, we are exposed to risks of litigation or investigation relating to transactions which present conflicts of interest that were not properly addressed. In such actions, we may be obligated to bear legal, settlement and other costs (which may be in excess of available insurance coverage). If we are required to incur all or a portion of the costs arising out

of litigation or investigations as a result of inadequate insurance proceeds or failure to obtain indemnification from our funds, our results of operations, financial condition and liquidity could be materially adversely affected.

We may be exposed to the risk of litigation if our funds suffer catastrophic losses due to the failure of a particular investment strategy or due to the trading activity of an employee who has violated market rules and regulations. Any litigation arising in such circumstances is likely to be protracted, expensive and surrounded by circumstances which are materially damaging to our reputation and our business.

Also, as a public company, we are subject to the risk of investigation or litigation by regulators or our common unitholders arising from an array of possible claims, claims that we have mismanaged our investment businesses, claims that we failed to comply in a timely manner with our disclosure obligations under the securities laws, allegations of misconduct by our officers and directors or claims that we have inappropriately dealt with conflicts of interest or investment allocations. While we will maintain insurance to cover such matters, there can be no assurance that our insurance will prove to be adequate. If we are required to incur all or a portion of the costs arising out of litigation or investigations, our results of operations could be materially adversely affected. Furthermore, any such litigation or investigation could be protracted, expensive and highly damaging to our reputation, even if the underlying claims are without merit. In addition, we may participate in transactions that involve litigation (including the enforcement of property rights) from time to time, and such transactions may expose us to reputational risk and increased risk from countersuits.

If any lawsuits were brought against us and resulted in a finding of substantial legal liability, it could materially adversely affect our business, financial condition or results of operations or cause significant reputational harm to us, which could seriously harm our business. We will depend to a large extent on our business relationships and our reputation for integrity and high-caliber professional services to attract and retain investors and to pursue investment opportunities. As a result, allegations of improper conduct by private litigants or regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our funds’ investment activities or the hedge fund industry in general, whether or not valid, may harm our reputation, which may be more damaging to our business than to other types of businesses.

We are subject to risks in using prime brokers, custodians, administrators and other agents.

Our funds generally depend on the services of prime brokers, custodians, administrators and other agents to carry out securities transactions. For example, in the event of the insolvency of a prime broker and/or custodian, our funds might not be able to recover equivalent assets in full as they will rank among the prime broker’s and custodian’s unsecured creditors in relation to assets which the prime broker or custodian borrows, lends or otherwise uses. In addition, our funds’ cash held with a prime broker or custodian will not be segregated from the prime broker’s or custodian’s own cash, and our funds will therefore rank as unsecured creditors in relation thereto.

Some of our funds may make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companies that are based in the United States.

Some of our funds generally invest a portion of their assets in the equity, debt, loans or other securities of issuers located outside the United States. Investments in non-U.S. securities involve certain factors not typically associated with investing in U.S. securities, including risks relating to:

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currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another;

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less developed or efficient financial markets than in the United States, which may lead to potential price volatility and relative illiquidity;

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the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements and less government supervision and regulation;

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differences in the legal and regulatory environment;

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less publicly available information in respect of companies in non-U.S. markets;

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certain economic and political risks, including potential exchange control regulations and restrictions on our non-U.S. investments and repatriation of profits on investments or of capital invested, the risks of political, economic or social instability, the possibility of expropriation or confiscatory taxation and adverse economic and political developments; and

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the possible imposition of non-U.S. taxes or withholding on income and gains recognized with respect to such securities.

There can be no assurance that adverse developments with respect to such risks will not adversely affect our funds’ assets that are held in certain countries or the returns from these assets.

Risks related to our organizational structure

Our common unitholders do not elect our general partner or vote on our general partner’s directors and will have limited ability to influence decisions regarding our business.

Our general partner, Aveon Management L.L.C., which is owned by our founding investors, will manage all of our operations and activities. The limited liability company agreement of Aveon Management L.L.C. establishes a board of directors that will be responsible for the oversight of our business and operations. Our general partner’s board of directors will be elected by our founding investors in accordance with its limited liability company agreement.

Our common unitholders will not elect our general partner’s board of directors unless our founding investors and their affiliates collectively cease to own at least 4% of the voting power of our outstanding voting units (whether through common units or special voting units) and, unlike the holders of common stock in a corporation, will have only limited voting rights on matters affecting our business. Furthermore, if our common unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. Our general partner may not be removed unless that removal is approved by the vote of the holders of not less than 66²/₃% of the voting power of our outstanding common units and special voting units (including common units and special voting units held by the general partner

and its affiliates) and we receive an opinion of counsel regarding limited liability and tax matters. As discussed below, immediately following this offering, our founding investors will collectively have % of the voting power of The Aveon Group L.P. limited partners, or % if the underwriters exercise in full their option to purchase additional common units. Therefore, they will have the power to significantly influence the outcome of any proposal to remove our general partner.

Our founding investors will be able to significantly influence the outcome of those few matters that may be submitted for a vote of the limited partners.

Immediately following this offering, our founding investors will beneficially own % of the equity in our business, or % if the underwriters exercise in full their option to purchase additional common units. Our founding investors will hold special voting units in The Aveon Group L.P. that provide them with a number of votes on any matter that may be submitted for a vote of our common unitholders that is equal to the number of Aveon Holdings partnership units that they hold on the relevant record date and entitle them to participate in the vote on the same basis as our common unitholders. Accordingly, immediately following this offering, our founding investors will generally have sufficient voting power to significantly influence the outcome of those few matters that may be submitted for a vote of the limited partners of The Aveon Group L.P., including any attempt to remove our general partner.

Our common unitholders’ voting rights are further restricted by the provision in our partnership agreement stating that any common units held by a person that beneficially owns 20% or more of any class of The Aveon Group L.P. common units then outstanding (other than our general partner and its affiliates, including our founding investors, or a direct or subsequently approved transferee of our general partner or its affiliates) cannot be voted on any matter. In addition, our partnership agreement contains provisions limiting the ability of our common unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the ability of our common unitholders to influence the manner or direction of our management. Our partnership agreement also does not restrict our general partner’s ability to take actions that may result in our being treated as an entity taxable as a corporation for U.S. federal (and applicable state) income tax purposes. Furthermore, the common unitholders are not entitled to dissenters’ rights of appraisal under our partnership agreement or applicable Delaware law in the event of a merger or consolidation, a sale of substantially all of our assets or any other transaction or event.

As a result of these matters and the provisions referred to under “—Our common unitholders do not elect our general partner or vote on our general partner’s directors and will have limited ability to influence decisions regarding our business,” our common unitholders may be deprived of an opportunity to receive a premium for their common units in the future through a sale of The Aveon Group L.P., and the trading prices of our common units may be adversely affected by the absence or reduction of a takeover premium in the trading price.

Our general partner is permitted to repurchase all of the outstanding common units under certain circumstances, and this repurchase may occur at an undesirable time or price.

Our general partner has the right to acquire all of our then-outstanding common units at the then-current trading price if either (i) our general partner and its affiliates own 90% or more of our common units or (ii) our general partner determines that we are required to register as an investment company under the Investment Company Act. As a result of our general partner’s right to purchase outstanding common units, holders of common units may have their common units purchased at an undesirable time or price.

We are a limited partnership and as a result will qualify for and intend to rely on exceptions from certain corporate governance and other requirements under the rules of the New York Stock Exchange.

We are a limited partnership and will qualify for exceptions from certain corporate governance and other requirements of the rules of the New York Stock Exchange. Pursuant to these exceptions, limited partnerships may elect not to comply with certain corporate governance requirements of the NYSE, including the requirements to have a board of directors that is composed of a majority of independent directors, a nominating/corporate governance committee that is composed entirely of independent directors, and a compensation committee that is composed entirely of independent directors. We will also be exempt from the requirement to obtain unitholder approval for (a) new issuances of units that equal or exceed 20% of the outstanding common units or voting power, (b) certain issuances to insiders and approval of employee equity compensation plans or (c) a change of control transaction. In addition, we will not be required to hold annual meetings of our common unitholders.

Following this offering, we intend to avail ourselves of certain of these exceptions, although we expect that our general partner will have a board consisting of a majority of independent directors and will establish a fully independent conflicts committee in addition to a fully independent audit committee. We will not have a nominating/corporate governance committee or a compensation committee and will not be required to obtain unitholder approval for certain issuances of units. We do not expect to hold annual meetings of our common unitholders and we do not expect that our common unitholders will have the right to vote on non-binding resolutions in respect of our executive compensation program, often referred to as “say-on-pay,” which will become a requirement for most public companies as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act. We could decide to avail ourselves of other exceptions in the future. Accordingly, you will not have the same protections afforded to equityholders of entities that are subject to all of the corporate governance requirements of the NYSE.

Potential conflicts of interest may arise among our general partner, its affiliates and us. Our general partner and its affiliates have limited duties to us and our common unitholders, which may permit them to favor their own interests to the detriment of us and our common unitholders.

Conflicts of interest may arise among our general partner and its affiliates, on the one hand, and us and our common unitholders, on the other hand. As a result of these conflicts, our general partner may favor its own interests and the interests of its affiliates over the interests of our common unitholders. These conflicts include, among others, the following:

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actions taken by our general partner may affect the amount of cash that is available for distributions to us;

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we will reimburse our general partner and its affiliates for expenses and our general partner will determine the expenses that are allocable to us;

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our general partner intends to limit its liability regarding our obligations;

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common unitholders will have no right to enforce obligations of our general partner and its affiliates under agreements with us;

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contracts between us, on the one hand, and our general partner and its affiliates, on the other, will not be the result of arm’s length negotiations;

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common units are subject to our general partner’s limited call right;

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our general partner may not choose to retain separate counsel for itself or for the holders of our common units;

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our general partner’s affiliates may compete with us;

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certain of our subsidiaries have obligations to investors in our investment funds and may have obligations to other third parties that may conflict with the interests of our unitholders; and

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U.S. federal income tax considerations of our founding investors may conflict with your interests.

See “Conflicts of interest and fiduciary responsibilities” and “Certain relationships and related person transactions.”

Our partnership agreement will contain provisions that reduce or eliminate certain duties of our general partner and limit remedies available to common unitholders for actions that might otherwise constitute a breach of duty. It will be difficult for a common unitholder to successfully challenge a resolution of a conflict of interest by our general partner or by its conflicts committee.

Our partnership agreement will contain provisions that require our common unitholders to waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our partnership agreement will provide that when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any duties or obligations to us or our common unitholders to the fullest extent permitted by law.

Unless our general partner breaches its obligations pursuant to our partnership agreement, we and our common unitholders will not have any recourse against our general partner. Furthermore, even if there has been a breach of the obligations set forth in our partnership agreement, our partnership agreement provides that our general partner and its officers and directors will not be liable to us or our common unitholders for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that the general partner or its officers and directors acted in bad faith or engaged in fraud or willful misconduct. These provisions of our partnership agreement could be detrimental to the common unitholders.

Whenever a potential conflict of interest exists between us and our general partner, our general partner may resolve such conflict of interest. If our general partner determines that its resolution of the conflict of interest is on terms no less favorable to us than those generally being provided to or available from unrelated third parties or is fair and reasonable to us, taking into account the totality of the relationships between us and our general partner, then it will be presumed that in making this determination, our general partner acted in good faith. A common unitholder seeking to challenge this resolution of the conflict of interest would bear the burden of overcoming such presumption. This is different from the standards that apply to Delaware corporations, where a conflict resolution by an interested party would be presumed to be unfair and the interested party would have the burden of demonstrating that the resolution was fair.

Also, if our general partner obtains the approval of the conflicts committee of our general partner, the resolution will be conclusively deemed to be fair and reasonable to us and not a

breach by our general partner of any duties it may owe to us or our common unitholders. This is different from the standards that apply to Delaware corporations, where a conflict resolution by a committee consisting solely of independent directors may, in certain circumstances, merely shift the burden of demonstrating unfairness to the plaintiff. If you choose to purchase our common units, you will be treated as having consented to the provisions set forth in the partnership agreement, including provisions regarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of duties under applicable state law. As a result, common unitholders will, as a practical matter, not be able to successfully challenge an informed decision by the conflicts committee. See “Conflicts of interest and fiduciary responsibilities.”

The control of our general partner may be transferred to a third party without common unitholder consent.

Our general partner may transfer its general partner interest to a third party in a merger or consolidation without the consent of our common unitholders. Furthermore, at any time, the members of our general partner may sell or transfer all or part of their limited liability company interests in our general partner to an affiliate prior to December 31, 2020 and to any party on or after December 31, 2020 without prior limited partner approval of the common unitholders. Accordingly, our business, our results of operations and our financial condition could materially suffer if control of our general partner is transferred to a party that is not successful in managing our business and such a transfer may also breach our agreements with the funds we manage or other third parties.

Our ability to make distributions to our common unitholders may be limited by our holding partnership structure, applicable provisions of Delaware law and contractual restrictions.

The Aveon Group L.P. will be a holding partnership and will have no material assets other than the ownership of the partnership units in Aveon Holdings held through wholly-owned subsidiaries. The Aveon Group L.P. has no independent means of generating revenue. Accordingly, we intend to cause Aveon Holdings to make distributions to its partners, including The Aveon Group L.P.’s wholly-owned subsidiaries, to fund any distributions The Aveon Group L.P. may declare on the common units. If Aveon Holdings makes such distributions, the limited partners of Aveon Holdings will be entitled to receive equivalent distributions pro rata based on their vested partnership interests in Aveon Holdings.

The declaration and payment of any future distributions will be at the sole discretion of our general partner, which may change our distribution policy at any time. Our general partner will take into account general economic and business conditions, our strategic plans and prospects, our business and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, including payment obligations pursuant to the tax receivable agreement and restrictions pursuant to any financing agreements, legal, tax and regulatory restrictions, restrictions or other implications on the payment of distributions by us to our common unitholders or by our subsidiaries to us and such other factors as our general partner may deem relevant. Under the Delaware Limited Partnership Act, we may not make a distribution to a partner if after the distribution all our liabilities, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of our assets. If we were to make such an impermissible distribution, any limited partner who received a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Limited

Partnership Act would be liable to us for the amount of the distribution for three years. We anticipate entering into a credit facility following this offering and expect that this facility will contain provisions that may constrain our ability to make distributions to our common unitholders. In addition, amounts available for distribution by Aveon Holdings may be insufficient to enable it to make required minimum tax distributions to its partners, in which case Aveon Holdings may have to borrow funds or sell assets, and thus our liquidity and financial condition could be materially adversely affected.

Furthermore, by paying cash distributions rather than investing that cash in our businesses, we risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.

We will be required to pay our existing owners for most of the tax benefits we realize from any additional tax depreciation or amortization deductions we may claim as a result of the tax basis step-ups we receive in connection with subsequent exchanges of Aveon Holdings partnership units.

Holders of partnership units in Aveon Holdings (other than The Aveon Group L.P.’s wholly-owned subsidiaries) may, subject to the terms of the exchange agreement, exchange their Aveon Holdings partnership units for The Aveon Group L.P. common units on a one-for-one basis. An Aveon Holdings limited partner must exchange one partnership unit in each of the three Aveon Holdings partnerships to effect an exchange for a common unit. These exchanges are expected to result in increases in Aveon Holdings I GP Inc.’s share of the tax basis of the tangible and intangible assets of Aveon Holdings I L.P., primarily attributable to a portion of the goodwill inherent in our business, that otherwise would not have been available. These increases in tax basis may increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that Aveon Holdings I GP Inc., which we refer to as the “corporate taxpayer,” would otherwise be required to pay in the future. These increases in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. The IRS may challenge all or part of that tax basis increase, and a court could sustain such a challenge.

The corporate taxpayer will enter into a tax receivable agreement with our existing owners that will provide for the payment by the corporate taxpayer to our existing owners (or their transferees of Aveon Holdings partnership units) of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that the corporate taxpayer actually realizes (or is deemed to realize in the case of an early termination payment by the corporate taxpayer or a change in control, as discussed below) as a result of (i) these increases in tax basis resulting from (a) exchanges of partnership units by our existing owners (or their transferees) for common units or other consideration or (b) payments under the tax receivable agreement and (ii) tax benefits related to imputed interest deemed to be paid by the corporate taxpayer as a result of the tax receivable agreement. This payment obligation is an obligation of the corporate taxpayer and not of Aveon Holdings. While the actual increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of our common units at the time of the exchange, the extent to which such exchanges are taxable, the amount and timing of our income and the portion of our payments under the tax receivable agreement constituting imputed interest or amortizable basis, we expect that the payments that we may make under the tax receivable agreement will be substantial. The payments under the tax receivable agreement are not conditioned upon our existing owners’ continued ownership of us. We may need to incur debt to finance payments under

the tax receivable agreement to the extent our cash resources are insufficient to meet our obligations under the tax receivable agreement as a result of timing discrepancies or otherwise.

Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, our existing owners (or their transferees) will not reimburse us for any payments previously made under the tax receivable agreement if such tax basis increase is successfully challenged by the IRS. As a result, in certain circumstances payments under the tax receivable agreement could be in excess of the corporate taxpayer’s cash tax savings. The corporate taxpayer’s ability to achieve benefits from any tax basis increase, and the payments to be made under the tax receivable agreement, will depend upon a number of factors, as discussed above, including the timing and amount of our future income. In the event that The Aveon Group L.P. or any of its wholly-owned subsidiaries in addition to Aveon Holdings I GP Inc. becomes taxable as a corporation for U.S. federal income tax purposes, such entities will become subject to substantially similar obligations.

Rights to receive payments under the tax receivable agreement may be terminated if as a result of an actual or proposed change in law, the existence of the agreements would cause recognition of ordinary income (instead of capital gain) in connection with future exchanges of Aveon Holdings partnership units for our common units or would otherwise have material adverse tax consequences to our existing owners (or their transferees). There are legislative proposals pending in Congress that, if enacted in their present form, may result in such ordinary income recognition. Further, in the event of such a termination, the existing owners (or their transferees) would have the right, subject to the delivery of an appropriate tax opinion, to require the corporate taxpayer to determine a lump sum amount in lieu of the payments otherwise provided under the agreement. That lump sum amount would be calculated by increasing the portion of the tax savings retained by the corporate taxpayer to 30% (from 15%) and by calculating a present value for the total amount that would otherwise be payable under the agreements, using a discount rate equal to the lesser of LIBOR plus 100 basis points and 6.5% per annum and assumptions as to income tax rates and as to our ability to utilize the tax benefits (including the assumption that the corporate taxpayer will have sufficient taxable income). If the assumptions used in this calculation turn out not to be true, the corporate taxpayer may pay more or less than the specified percentage of its actual cash tax savings. This lump sum amount may be paid in cash or by a subordinated note with a seven-year maturity and an interest rate equal to the lesser of LIBOR plus 200 basis points and 6% per annum. Any such acceleration can occur only if our existing owners have terminated a substantial portion of the corporate taxpayer’s obligations under the tax receivable agreement with respect to exchanges of Aveon Holdings partnership units. In view of the foregoing changes in the calculation of our obligations, we do not expect that the net impact of any such acceleration upon our overall financial condition would be materially adverse as compared to our obligations if laws do not change and the obligations are not accelerated. It is further possible that the net impact of such acceleration would be beneficial to our overall financial condition. The ultimate impact of a decision to accelerate will depend on what the ongoing payments would have been under the tax receivable agreement absent acceleration, which will in turn depend on the various factors mentioned above.

In addition, the tax receivable agreement provides that, upon certain mergers, asset sales, or other forms of business combination or certain other changes of control, our or our successor’s obligations with respect to tax benefits would be based on certain assumptions, including that the corporate taxpayer or its successor would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits covered by

the tax receivable agreement. As a result, upon a change of control, the corporate taxpayer could be required to make payments under the tax receivable agreement that are greater than or less than the specified percentage of the corporate taxpayer’s actual cash tax savings.

We expect to record net losses for a number of years following this offering as a result of the amortization of finite-lived intangible assets and equity-based compensation.

As part of the formation transactions we will acquire interests in the manager affiliates of the initial funds. We will account for the acquisition of these interests using the purchase method of accounting, and preliminarily expect to reflect the excess of the purchase price over the fair value of the tangible assets acquired and liabilities assumed as goodwill and other intangible assets on our balance sheet. We preliminarily estimate that we will record in excess of $ million of finite-lived intangible assets (in addition to approximately $ of goodwill). We anticipate amortizing these finite-lived intangibles over their estimated useful lives, which are expected to range between ten and 15 years, using the straight-line method. In addition, we have awarded or intend to award to our executive officers and other employees and directors of our general partner restricted common units, all of which will be unvested at the time of this offering. The grant date fair value of the restricted common units will be charged to expense over the assumed service periods on a straight-line basis. The amortization of these finite-lived intangible assets and of this equity-based compensation will increase our expenses substantially during the relevant periods and, as a result, we expect to record net losses for a number of years following this offering.

If The Aveon Group L.P. were deemed to be an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

A person will generally be deemed to be an “investment company” for purposes of the Investment Company Act if:

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it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or

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it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

We believe that we are engaged primarily in the business of providing investment management services and not in the business of investing, reinvesting or trading in securities. We hold ourselves out as an investment manager and do not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, we do not believe that The Aveon Group L.P. is, or following this offering will be, an “orthodox” investment company as defined in section 3(a)(1)(A) of the Investment Company Act and described in the first bullet point above. Further, following this offering, The Aveon Group L.P. will have no material assets other than its equity interests in certain wholly-owned subsidiaries, which in turn will have no material assets (other than intercompany debt) other than general partner interests in the Aveon Holdings partnerships. These wholly-owned subsidiaries will be the sole general partners of the Aveon Holdings partnerships and will be vested with all voting and management control over the Aveon Holdings partnerships. We do not believe the equity interests of The Aveon Group L.P. in its wholly-owned subsidiaries or the general partner interests of these wholly-owned subsidiaries in the Aveon Holdings partnerships are investment securities. Moreover, because we believe that the interests of the manager affiliates of our funds in

their respective funds are neither securities nor investment securities, we believe that less than 40% of The Aveon Group L.P.’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis after this offering will be comprised of assets that could be considered investment securities. Accordingly, we do not believe The Aveon Group L.P. is, or following this offering will be, an “inadvertent” investment company by virtue of the 40% test in section 3(a)(1)(C) of the Investment Company Act as described in the second bullet point above. In addition, we believe The Aveon Group L.P. is not an investment company under section 3(b)(1) of the Investment Company Act because it is primarily engaged in a non-investment company business.

The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operation of investment companies. Among other things, the Investment Company Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements. We intend to conduct our operations so that The Aveon Group L.P. will not be deemed to be an investment company under the Investment Company Act. If for any reason The Aveon Group L.P. were deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on our capital structure, ability to transact business with affiliates and ability to compensate key employees, could make it impractical for us to continue our business as currently conducted, impair the agreements and arrangements between and among The Aveon Group L.P., Aveon Holdings, our founding investors and the selling investment professionals, or any combination thereof, and materially adversely affect our business, financial condition and results of operations.

In order to avoid being deemed as an investment company under the Investment Company Act, we may be required to limit the amount of investments that we make as a principal or otherwise conduct our business in a manner that does not subject us to the registration and other requirements of the Investment Company Act.

Our organizational documents do not limit our ability to enter into new lines of businesses, and we may enter into new businesses, make future strategic investments or acquisitions or enter into joint ventures, each of which may result in additional risks and uncertainties in our business.

We intend, to the extent that market conditions warrant, to grow our business by increasing assets under management in existing funds, acquiring new manager affiliates and creating new investment products. Our organizational documents, however, do not limit us to the investment management business. Accordingly, we may pursue growth through strategic investments, acquisitions or joint ventures, which may include entering into new lines of business, such as insurance, broker-dealer or financial advisory businesses. In addition, we expect opportunities will arise to acquire other alternative or traditional asset managers. To the extent we make strategic investments or acquisitions, enter into joint ventures, or enter into a new line of business, we will face numerous risks and uncertainties, including risks associated with (i) the required investment of capital and other resources, (ii) the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, and (iii) combining or integrating operational and management systems and controls. Entry into certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk. If a new business generates insufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected. In the case

of joint ventures, we are subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to, systems, controls and personnel that are not under our control.

Risks related to our common units and this offering

There may not be an active trading market for our common units, which may cause our common units to trade at a discount from the initial offering price and make it difficult to sell the common units you purchase.

Prior to this offering, there has not been a public trading market for our common units. It is possible that after this offering an active trading market will not develop or continue, which would make it difficult for you to sell your common units at an attractive price or at all. The initial public offering price per common unit will be determined by agreement among us and the representatives of the underwriters, and may not be indicative of the price at which our common units will trade in the public market after this offering.

Our common unit price may decline due to the large number of common units eligible for future sale and for exchange.

The market price of our common units could decline as a result of sales of a large number of common units in the market after the offering or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell common units in the future at a time and at a price that we deem appropriate. Upon completion of this offering we will have a total of of our common units outstanding, or common units if the underwriters exercise in full their option to purchase additional common units, of which will have been sold in this offering (or if the underwriters exercise in full their option to purchase additional common units) and will be freely tradable without restriction or further registration under the Securities Act by persons other than our “affiliates.” See “Common units eligible for future sale.” Subject to the lock-up restrictions described in “Common units eligible for future sale—Lock-up arrangements,” we may issue and sell in the future additional common units.

In addition, upon completion of this offering, our existing owners will own an aggregate of Aveon Holdings partnership units. Prior to this offering, we will enter into an exchange agreement with limited partners of the Aveon Holdings partnerships so that these holders may (subject to the terms of the exchange agreement and the vesting requirements and transfer restrictions in the Aveon Holdings partnership agreements) exchange their Aveon Holdings partnership units for The Aveon Group L.P. common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. An Aveon Holdings limited partner must exchange one partnership unit in each of the three Aveon Holdings partnerships to effect an exchange for a common unit. The Aveon Holdings partnership units generally will not be exchangeable for common units of The Aveon Group L.P. pursuant to the exchange agreement until the first anniversary of the consummation of this offering. The common units we issue upon such exchanges will be “restricted securities,” as defined in Rule 144 under the Securities Act, unless we register such common units. However, we will enter into a registration rights agreement with our existing owners that will require us to register these common units under the Securities Act upon request. See “Common units eligible for future sale—Registration rights” and “Certain relationships and related person transactions—Registration rights agreement.”

Further, prior to this offering we granted restricted common units to our executive officers and other employees under our Equity Incentive Plan (of which none will be vested at the time of this offering). The unvested restricted common units will generally vest only if the Company achieves Economic Income of $55 million over any four consecutive quarters prior to , 2017. The common units underlying the restricted common units will be delivered upon vesting. See “Management—Initial Equity Award.” We intend to file one or more registration statements on Form S-8 under the Securities Act to register common units covered by our Equity Incentive Plan. Any such Form S-8 registration statement will automatically become effective upon filing. Accordingly, common units registered under such registration statement will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover common units.

In addition, our partnership agreement authorizes us to issue an unlimited number of additional partnership securities and options, rights, warrants and appreciation rights relating to partnership securities for the consideration and on the terms and conditions established by our general partner in its sole discretion without the approval of any limited partners. In accordance with the Delaware Limited Partnership Act and the provisions of our partnership agreement, we may also issue additional partnership interests that have certain designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to common units. Similarly, the Aveon Holdings partnership agreements authorize the wholly-owned subsidiaries of The Aveon Group L.P. which are the general partners of those partnerships to issue an unlimited number of additional partnership securities of the Aveon Holdings partnerships with such designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to the Aveon Holdings partnerships units, and which may be exchangeable for our common units.

The market price of our common units may be volatile, which could cause the value of your investment to decline.

Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of common units in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly operating results or distributions to unitholders, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, and in response the market price of our common units could decrease significantly. You may be unable to resell your common units at or above the initial public offering price.

Investors in this offering will suffer immediate and substantial dilution.

The initial public offering price per common unit will be substantially higher than our pro forma net tangible book value per common unit immediately after this offering. As a result, you will pay a price per common unit that substantially exceeds our pro forma tangible book value per common unit. At an offering price of $ , you will incur immediate and substantial dilution in an amount of $ per common unit.

Risks related to United States taxation

If we were treated as a corporation for U.S. federal income tax or state tax purposes, then our distributions to you would be substantially reduced and the value of our common units could be adversely affected.

The value of your investment in us depends in part on our being treated as a partnership for U.S. federal income tax purposes, which requires that 90% or more of our gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the Internal Revenue Code (referred to as the “Qualifying Income Exception”) and that our partnership not be registered under the Investment Company Act. Qualifying income generally includes dividends, interest, capital gains from the sale or other disposition of stocks and securities and certain other forms of investment income. We may not meet these requirements or current law may change so as to cause, in either event, us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to U.S. federal income tax. We have not requested, and do not plan to request, a ruling from the IRS on this or any other matter affecting us.

If we were treated as a corporation for U.S. federal income tax purposes, we would pay U.S. federal, state and local income tax on our taxable income at the applicable tax rates. Distributions to you would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would otherwise flow through to you. Because a tax would be imposed upon us as a corporation, our distributions to you could be substantially reduced which would cause a reduction in the value of our common units.

Current law may change, causing us to be treated as a corporation for U.S. federal or state income tax purposes or otherwise subjecting us to entity level taxation. See “—The U.S. House of Representatives has passed legislation that, if enacted, (i) would, for taxable years beginning ten years after the date of enactment, preclude us from qualifying as a partnership or require us to hold carried interest through taxable subsidiary corporations and (ii) would tax certain income and gains at increased rates for taxable years ending after December 31, 2010. If this or any similar legislation were to be enacted and apply to us, the after tax income and gain related to our business, as well as the market price of our units, could be reduced.” Because of widespread state budget deficits, several states are evaluating ways to subject partnerships to entity level taxation through the imposition of state income, franchise or other forms of taxation. If any state were to impose a tax upon us as an entity, our distributions to you would be reduced.

You may be subject to U.S. federal income tax on your share of our taxable income, regardless of whether you receive any cash distributions from us.

As long as 90% of our gross income for each taxable year constitutes qualifying income as defined in Section 7704 of the Internal Revenue Code and we are not required to register as an investment company under the Investment Company Act on a continuing basis, and assuming there is no change in law (see “—The U.S. House of Representatives has passed legislation that, if enacted, (i) would, for taxable years beginning ten years after the date of enactment, preclude us from qualifying as a partnership or require us to hold carried interest through taxable subsidiary corporations and (ii) would tax certain income and gains at increased rates for taxable years ending after December 31, 2010. If this or any similar legislation were to be enacted and apply to us, the after tax income and gain related to our business, as well as the market price of our units, could be reduced”) we will be treated, for U.S. federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. As a result, a U.S.

common unitholder will be subject to U.S. federal, state, local and possibly, in some cases, foreign income taxation on an allocable share of our items of income, gain, loss, deduction and credit (including our allocable share of those items of any entity in which we invest that is treated as a partnership or is otherwise subject to tax on a flow through basis) for each of our taxable years ending with or within such common unitholder’s taxable year, regardless of whether or when such unitholder receives cash distributions from us. See “Material U.S. federal tax considerations.”

You may not receive cash distributions equal to your allocable share of our net taxable income or even the tax liability that results from that income. In addition, certain of our holdings, including holdings, if any, in a Controlled Foreign Corporation, or “CFC,” and a Passive Foreign Investment Company, or “PFIC,” may produce taxable income prior to the receipt of cash relating to such income, and common unitholders that are U.S. taxpayers will be required to take such income into account in determining their taxable income. In the event of an inadvertent termination of our partnership status for which the IRS has granted limited relief, each holder of our common units may be obligated to make such adjustments as the IRS may require to maintain our status as a partnership. Such adjustments may require persons holding our common units to recognize additional amounts in income during the years in which they hold such units. In addition, because of our methods of allocating income and gain among our common unitholders, you may be taxed on amounts that accrued economically before you became a common unitholder.

The Aveon Group L.P.’s interest in certain of our businesses will be held through Aveon Holdings I GP Inc., which will be treated as a corporation for U.S. federal income tax purposes; such corporation may be liable for significant taxes and may create other adverse tax consequences, which could potentially adversely affect the value of your investment.

In light of the publicly traded partnership rules under U.S. federal income tax law and other requirements, we will hold our interests in certain of our businesses through Aveon Holdings I GP Inc., which will be treated as a corporation for U.S. federal income tax purposes. Such corporation could be liable for significant U.S. federal income taxes and applicable state, local and other taxes that would not otherwise be incurred, which could adversely affect the value of your investment and would reduce the amount of distributions available to be made on our common units. Those additional taxes will not apply to our founding investors following this offering to the extent they own equity interests directly or indirectly in the Aveon Holdings partnerships.

Complying with certain tax-related requirements may cause us to invest through foreign or domestic corporations subject to corporate income tax or enter into acquisitions, borrowings, financings or arrangements we may not have otherwise entered into.

In order for us to be treated as a partnership for U.S. federal income tax purposes and not as an association or publicly traded partnership taxable as a corporation, we must meet the Qualifying Income Exception discussed below on a continuing basis and we must not be required to register as an investment company under the Investment Company Act. In order to effect such treatment, we (or our subsidiaries) may be required to invest through foreign or domestic corporations subject to corporate income tax, or enter into acquisitions, borrowings, financings or other transactions we may not have otherwise entered into. This may adversely affect our ability to operate solely to maximize our cash flow.

Tax gain or loss on disposition of our common units could be more or less than expected.

If you sell your common units, you will recognize a gain or loss equal to the difference between the amount realized and the adjusted tax basis in those common units. Prior distributions to you

in excess of the total net taxable income allocated to you, which decreases the tax basis in your common units, will in effect become taxable income to you if the common units are sold at a price greater than your tax basis in those common units, even if the price is less than the original cost. A portion of the amount realized, whether or not representing gain, may be ordinary income to you.

Common unitholders may be allocated taxable gain on the disposition of certain assets, even if they did not share in the economic appreciation inherent in such assets.

We will be allocated taxable gains and losses recognized by Aveon Holdings based upon our percentage ownership in each Aveon Holdings partnership. Our share of such taxable gains and losses generally will be allocated pro rata to our common unitholders. In some circumstances, under the U.S. federal income tax rules affecting partners and partnerships, the taxable gain or loss allocated to a unitholder may not correspond to that unitholder’s share of the economic appreciation or depreciation in the particular asset. This is primarily an issue of the timing of the payment of tax, rather than a net increase in tax liability, because the gain or loss allocation would generally be expected to be offset as a unitholder sold units.

If we were not to make, or cause to be made, an otherwise available election under Section 754 of the Internal Revenue Code to adjust our asset basis or the asset basis of certain of the Aveon Holdings partnerships, a holder of common units could be allocated more taxable income in respect of those common units prior to disposition than if such an election were made.

We currently do not intend to make, or cause to be made, an election to adjust asset basis under Section 754 of the Internal Revenue Code with respect to us, Aveon Holdings II L.P. or Aveon Holdings III L.P. If no such election is made, there will generally be no adjustment to the basis of the assets of Aveon Holdings II L.P. or Aveon Holdings III L.P. upon our acquisition of interests in Aveon Holdings II L.P. or Aveon Holdings III L.P. in connection with this offering, or to our assets or to the assets of Aveon Holdings II L.P. or Aveon Holdings III L.P. upon a subsequent transferee’s acquisition of common units from a prior holder of such common units, even if the purchase price for those interests or units, as applicable, is greater than the share of the aggregate tax basis of our assets or the assets of Aveon Holdings II L.P. or Aveon Holdings III L.P. attributable to those interests or units immediately prior to the acquisition. Consequently, upon a sale of an asset by us, Aveon Holdings II L.P. or Aveon Holdings III L.P., gain allocable to a holder of common units could include built-in gain in the asset existing at the time we acquired those interests, or such holder acquired such units, which built-in gain would otherwise generally be eliminated if a Section 754 election had been made. See “Material U.S. federal tax considerations—Consequences to U.S. holders of common units—Section 754 election.”

We may hold or acquire certain investments through an entity classified as a PFIC or CFC for U.S. federal income tax purposes.

Certain of the Aveon funds’ investments may be in foreign corporations or may be acquired through a foreign subsidiary that would be classified as a corporation for U.S. federal income tax purposes. Such an entity may be a PFIC or a CFC for U.S. federal income tax purposes. Common unitholders indirectly owning an interest in a PFIC or a CFC may experience adverse U.S. tax consequences. See “Material U.S. federal tax considerations—Consequences to U.S. holders of common units—Passive foreign investment companies” and “—Controlled foreign corporations.”

Non-U.S. persons face unique U.S. tax issues from owning our common units that may result in adverse tax consequences to them.

In light of our intended investment activities, we may be, or may become, engaged in a U.S. trade or business for U.S. federal income tax purposes, including by reason of investments in U.S. real property holding corporations, in which case some portion of our income would be treated as effectively connected income, or “ECI,” with respect to non-U.S. holders. To the extent our income is treated as ECI, non-U.S. unitholders generally would be subject to withholding tax on their allocable shares of such income, would be required to file a U.S. federal income tax return for such year reporting their allocable shares of income effectively connected with such trade or business and any other income treated as ECI, and would be subject to U.S. federal income tax at regular U.S. tax rates on any such income (state and local income taxes and filings may also apply in that event). Non-U.S. unitholders that are corporations may also be subject to a branch profits tax on their allocable shares of such income, at a rate of 30% unless reduced or eliminated by an applicable tax treaty. In addition, certain income from U.S. sources that is not ECI which is allocable to non-U.S. unitholders will be reduced by 30% withholding tax, unless an exemption from or a reduced rate of such withholding applies and certain tax status information is provided.

Tax-exempt entities face unique tax issues from owning common units that may result in adverse tax consequences to them.

In light of our intended acquisitions and business activities, we may derive income that constitutes “unrelated business taxable income,” or “UBTI.” Consequently, a holder of common units that is a tax-exempt organization may be subject to “unrelated business income tax” to the extent that its allocable share of our income consists of UBTI. A tax-exempt partner of a partnership could be treated as earning UBTI if the partnership regularly engages in a trade or business that is unrelated to the exempt function of the tax-exempt partner, if the partnership derives income from debt-financed property or if the partnership interest itself is debt-financed. In addition, a tax-exempt investor may be subject to unrelated business income tax on a sale of their common units.

We cannot match transferors and transferees of common units, and we will therefore adopt certain income tax accounting conventions that may not conform with all aspects of applicable tax requirements. The IRS may challenge this treatment, which could adversely affect the value of our common units.

Because we cannot match transferors and transferees of common units, we will adopt depreciation, amortization and other tax accounting positions that may not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our common unitholders. It also could affect the timing of these tax benefits or the amount of gain on the sale of common units and could have a negative impact on the value of our common units or result in audits of and adjustments to our common unitholders’ tax returns.

In addition, our taxable income and losses will be determined and apportioned among investors using conventions we regard as consistent with applicable law. As a result, if you transfer your common units, you may be allocated income, gain, loss and deduction realized by us after the date of transfer. Similarly, a transferee may be allocated income, gain, loss and deduction realized by us prior to the date of the transferee’s acquisition of our common units. A transferee may also bear the cost of withholding tax imposed with respect to income allocated to a transferor through a reduction in the cash distributed to the transferee.

The sale or exchange of 50% or more of our capital and profit interests will result in the termination of our partnership for U.S. federal income tax purposes.

We will be considered to have been terminated for U.S. federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a 12-month period. A termination of our partnership would, among other things, result in the closing of our taxable year for all common unitholders and could result in a deferral of depreciation deductions allowable in computing our taxable income. See “Material U.S. federal tax considerations” for a description of the consequences of our termination for U.S. federal income tax purposes.

Common unitholders may be subject to state and local taxes and return filing requirements as a result of investing in our common units.

In addition to U.S. federal income taxes, our common unitholders may be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property now or in the future, even if our common unitholders do not reside in any of those jurisdictions. Our common unitholders may be required to file state and local income tax returns and pay state and local income taxes in some or all of these jurisdictions. Further, common unitholders may be subject to penalties for failure to comply with those requirements. It is the responsibility of each common unitholder to file all U.S. federal, state and local tax returns that may be required of such common unitholder. Our counsel has not rendered an opinion on the state or local tax consequences of an investment in our common units.

Our delivery of required tax information for a taxable year may be subject to delay, which may require a Class A shareholder to request an extension of the due date for their income tax return.

We have agreed to use reasonable efforts to furnish to you tax information (including Schedule K-1) which describes your allocable share of our income, gains, losses and deductions for our preceding taxable year. Delivery of this information by us will be subject to delay in the event of, among other reasons, the late receipt of any necessary tax information from lower-tier entities. It is therefore possible that, in any taxable year, our shareholders will need to apply for extensions of time to file their tax returns. See “Material U.S. federal tax considerations—Administrative matters—Information returns.”

Our structure involves complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. Our structure also is subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.

The U.S. federal income tax treatment of common unitholders depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. You should be aware that the U.S. federal income tax rules are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. No assurance can be given as to whether, or in what form, any proposals affecting us or our common unitholders will be enacted. The IRS pays close attention to the proper application of tax laws to partnerships. The present U.S. federal income tax treatment of an investment in our common units may be modified by administrative, legislative or judicial

interpretation at any time, and any such action may affect investments and commitments previously made. Changes to the U.S. federal income tax laws and interpretations thereof could make it more difficult or impossible to meet the Qualifying Income Exception for us to be treated as a partnership for U.S. federal income tax purposes that is not taxable as a corporation, affect or cause us to change our investments and commitments, affect the tax considerations of an investment in us, change the character or treatment of portions of our income (including, for instance, the treatment of carried interest as ordinary income rather than capital gain) and adversely affect an investment in our common units. See the discussion below under “—The U.S. House of Representatives has passed legislation that, if enacted, (i) would, for taxable years beginning ten years after the date of enactment, preclude us from qualifying as a partnership or require us to hold carried interest through taxable subsidiary corporations and (ii) would tax certain income and gains at increased rates for taxable years ending after December 31, 2010. If this or any similar legislation were to be enacted and apply to us, the after tax income and gain related to our business, as well as the market price of our units, could be reduced.”

Our organizational documents and agreements permit our general partner to modify our amended and restated limited partnership agreement from time to time, without the consent of the common unitholders, to address certain changes in U.S. federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a material adverse impact on some or all common unitholders. For instance, the Managing Partner could elect at some point to treat us as an association taxable as a corporation for U.S. federal (and applicable state) income tax purposes. If the Managing Partner were to do this, the U.S. federal income tax consequences of owning our common units would be materially different. Moreover, we will apply certain assumptions and conventions in an attempt to comply with applicable rules and to report income, gain, deduction, loss and credit to common unitholders in a manner that reflects such common unitholders’ beneficial ownership of partnership items, taking into account variation in ownership interests during each taxable year because of trading activity. However, those assumptions and conventions may not be in compliance with all aspects of applicable tax requirements. It is possible that the IRS will assert successfully that the conventions and assumptions used by us do not satisfy the technical requirements of the Internal Revenue Code and/or Treasury regulations and could require that items of income, gain, deductions, loss or credit, including interest deductions, be adjusted, reallocated or disallowed in a manner that adversely affects common unitholders.

The U.S. House of Representatives has passed legislation that, if enacted, (i) would, for taxable years beginning ten years after the date of enactment, preclude us from qualifying as a partnership or require us to hold carried interest through taxable subsidiary corporations and (ii) would tax certain income and gains at increased rates for taxable years ending after December 31, 2010. If this or any similar legislation were to be enacted and apply to us, the after tax income and gain related to our business, as well as the market price of our units, could be reduced.

On May 28, 2010, the U.S. House of Representatives passed legislation that would, in general, treat income and gains, including gain on sale, attributable to an interest in an investment services partnership interest, or “ISPI”, as income subject to a new blended tax rate that is higher than the applicable tax rate under current law, except to the extent such ISPI is considered under the legislation to be a qualified capital interest. Your interest in us, our interest in Aveon Holdings II GP L.P. and the interests that Aveon Holdings II GP L.P. holds in entities that are entitled to receive carried interest may be classified as ISPIs for purposes of this legislation. The

U.S. Senate considered but did not pass legislation that is generally similar to the legislation passed by the U.S. House of Representatives. It is unclear when or whether the U.S. Senate will act on such legislation or what provisions will be included in any final legislation, if enacted.

The House bill provides that, for taxable years beginning ten years after the date of enactment, income derived with respect to an ISPI that is not a qualified capital interest and that is treated as ordinary income under the rules discussed above will not be qualifying income for purposes of the Qualifying Income Exception under the publicly traded partnership rules. Therefore, if this or similar legislation is enacted, following such ten-year period, we would be precluded from qualifying as a partnership for U.S. federal income tax purposes or be required to hold all such ISPIs through corporations, possibly U.S. corporations. If we were taxed as a U.S. corporation or required to hold all ISPIs through corporations, our effective tax rate would increase significantly. The federal statutory rate for corporations is currently 35%. In addition, we could be subject to increased state and local taxes. Furthermore, you could be subject to tax on our conversion into a corporation or any restructuring required in order for us to hold our ISPIs through a corporation.

Under the House bill, if you are an individual, 75% of the income and gains attributable to an interest in an ISPI would be taxed at ordinary income tax rates (50% during a two-year transition period). A version considered in the Senate would eliminate the transition period but would reduce the portion of income and gains attributable to an ISPI that are taxed at ordinary income tax rates to 50% for income and gains attributable to assets held by the partnership for more than five years. The deductibility of any losses attributable to any ISPI that is not a qualified capital interest would be subject to limitations. In addition, any dividends that are attributable to an ISPI directly or indirectly held by us would not be considered qualified dividends and, therefore, would not be entitled to reduced rates of taxation. You also may be subject to additional state and local tax as a result of the legislation. While the legislation does not specifically address whether income or gains that is attributable to an interest in an ISPI is treated as effectively connected income with a U.S. trade or business, or ECI, or as unrelated business taxable income, or UBTI, the technical explanation accompanying the legislation indicates that, under regulations to be promulgated following enactment, such income or gains should only be treated as ECI or UBTI to the extent it would be treated as such under current law. Our existing owners and other professionals may face additional adverse tax consequences under the legislation, which may thereby adversely affect our ability to offer attractive incentive opportunities for key personnel.

The Obama administration has indicated it supports the adoption of the May 28, 2010 legislation or legislation that similarly changes the treatment of carried interest for U.S. federal income tax purposes. In its published revenue proposals for both 2010 and 2011 the Obama administration proposed that the current law regarding the treatment of carried interest be changed to subject such income to ordinary income tax.

Over the past several years, a number of similar legislative proposals have been introduced and, in certain cases, have been passed by the United States House of Representatives. In 2007, legislation was introduced in the U.S. Congress that would tax as corporations publicly traded partnerships that directly or indirectly derive income from investment advisor or asset management services. In 2008, the U.S. House of Representatives passed a bill that would generally (i) treat carried interest as non-qualifying income for purposes of the Qualifying Income Exception, which could preclude us from qualifying as a partnership for U.S. federal income tax purposes, and (ii) tax carried interest as ordinary income for U.S. federal income taxes, rather than in accordance with the character of income derived by the underlying fund. In

December 2009, the U.S. House of Representatives passed substantially similar legislation. Such legislation would tax carried interest as ordinary income starting in the year of enactment. The legislation passed in December 2009 and certain other versions of the proposed legislation contain a transition rule that may delay the applicability of certain aspects of the legislation for a partnership that is a publicly traded partnership on the date of enactment of the legislation.

States and other jurisdictions have also considered legislation to increase taxes with respect to carried interest. For example, New York is currently considering legislation under which you could be subject to New York state income tax on income in respect of our common units as a result of certain activities of our affiliates in New York. This legislation would be retroactive to January 1, 2010. It is unclear when or whether this legislation will be enacted.

Forward looking statements

This prospectus contains forward looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Risk factors.” These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. We undertake no obligation to publicly update or review any forward looking statement, whether as a result of new information, future developments or otherwise.

Presentation of financial information

This prospectus contains (i) the audited consolidated financial statements of The Aveon Group L.P. as of March 31, 2010 and December 31, 2009 and for the period from January 1, 2010 through March 31, 2010, the period from May 1, 2009 (inception) through December 31, 2009 and the period from May 1, 2009 (inception) through March 31, 2010; (ii) the audited consolidated statement of assets and liabilities of Aveon Management L.L.C., our general partner, as of March 31, 2010 and (iii) the audited financial statements of Aveon Holdings I L.P., our predecessor for accounting purposes, as of December 31, 2009 and for the period from May 1, 2009 (inception) through December 31, 2009 and the unaudited financial statements of Aveon Holdings I L.P. as of March 31, 2010 and December 31, 2009 and for the period from January 1, 2010 through March 31, 2010 and the period from May 1, 2009 (inception) through March 31, 2010.

This prospectus also contains the following financial statements of our initial manager affiliates:

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Banyan’s (i) audited general partner consolidated financial statements as of and for the years ended December 31, 2009, 2008 and 2007, and the unaudited general partner consolidated financial statements as of March 31, 2010 and for the three months ended March 31, 2010 and 2009; and (ii) audited special purpose statements of the Banyan Group (schedule of management fees and incentive fees of Banyan funds) as of and for the years ended December 31, 2009, 2008, and 2007, and the unaudited schedule of management fees and incentive fees of the Banyan Group as of March 31, 2010 and for the three months ended March 31, 2010 and 2009.

•

Chesapeake’s audited carve-out financial statements of the Chesapeake funds fees for the years ended December 31, 2009, 2008, and 2007, and the unaudited carve-out financial statements of the Chesapeake funds fees as of March 31, 2010 and for the three months ended March 31, 2010 and 2009.

•

Cura’s (i) audited general partner consolidated financial statements as of and for the years ended December 31, 2009, 2008 and 2007, and the unaudited general partner consolidated financial statements as of March 31, 2010 and for the three months ended March 31, 2010 and 2009; and (ii) audited special purpose statements of the Cura Group (schedule of management

fees and incentive fees of Cura funds) as of and for the years ended December 31, 2009, 2008, and 2007, and the unaudited schedule of management fees and incentive fees of the Cura Group as of March 31, 2010 and for the three months ended March 31, 2010 and 2009.

•

Glenrock’s audited general partner consolidated financial statements as of and for the years ended December 31, 2009, 2008 and 2007, and the unaudited general partner consolidated financial statements as of March 31, 2010 and for the three months ended March 31, 2010 and 2009.

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Viridian’s (i) audited general partner consolidated financial statements as of and for the years ended December 31, 2009, 2008 and 2007, and the unaudited general partner consolidated financial statements as of March 31, 2010 and for the three months ended March 31, 2010; and (ii) audited schedule of combined management fees and incentive fees for the years ended December 31, 2009, 2008, and 2007, and the unaudited schedule of combined management fees and incentive fees for the three months ended March 31, 2010 and 2009.

•

Welton’s audited combined carve-out financial statements of the Welton funds’ fees for the years ended December 31, 2009, 2008, and 2007, and the unaudited combined carve-out financial statements of the Welton funds’ fees as of March 31, 2010 and for the three months ended March 31, 2010 and 2009.

The general partner financial statements are included for those manager affiliates whose entities we are directly acquiring, which are the Banyan, Cura, Viridian and Glenrock general partners reflecting the consolidation of their respective onshore limited partner funds. The Chesapeake and Welton funds do not have a separate managing member entity so our acquisitions will each occur through a newly created managing member; therefore, the carve-out financial statements are included to reflect the line of business we are acquiring. Special purpose financial statements or schedule of combined management fees and incentive fees are included for Banyan, Cura, and Viridian in order to reflect the full line of business, inclusive of the offshore funds, that we are acquiring. We do not include a special purpose financial statements or a schedule of combined management and incentive fees for Glenrock because the acquisition of our full line of business is reflected in the general partner consolidated financial statements. See “Index to financial statements.”

In addition, this prospectus contains unaudited pro forma financial information that has been derived from the financial statements described above and gives effect to the following adjustments: (i) this offering of common units and the application of a portion of the net proceeds from this offering to acquire our six initial manager affiliates, (ii) the acquisition of our interests in the manager affiliates of our initial funds, (iii) the deconsolidation of the general partner or managing member of each of our initial funds and (iv) certain other adjustments described under “Unaudited pro forma financial information.”

Aveon Holdings I L.P. is deemed to be our predecessor for accounting purposes. Unless otherwise indicated, all of the historical financial information included in this prospectus, including our historical financial data contained under the headings “Capitalization,” “Selected financial data” and “Management’s discussion and analysis of financial condition and results of operations,” has been derived from the financial statements of Aveon Holdings I L.P. included elsewhere in this prospectus.

Market and industry data

This prospectus includes market and industry data and forecasts that we have derived from independent consultant reports, publicly available information, various industry publications, other published industry sources and our internal data and estimates. Independent consultant reports, industry publications and other published industry sources generally indicate that the information contained therein was obtained from sources believed to be reliable.

Our internal data and estimates are based upon information obtained from investors in our funds, trade and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions. Although we believe that such information is reliable, we have not had this information verified by any independent sources.

Formation and structure of our Company

The Aveon Group L.P. and Aveon Holdings

The Aveon Group L.P. was formed as a Delaware limited partnership on January 27, 2010. The Aveon Group L.P. has not engaged in any business or other activities except in connection with the formation transactions. The Aveon Group L.P. is managed and operated by our general partner, Aveon Management L.L.C., which is in turn wholly-owned by our founding investors.

Following the formation transactions and this offering, The Aveon Group L.P. will be a holding partnership and will, through its wholly-owned subsidiaries—Aveon Holdings I GP Inc. (a Delaware corporation), Aveon Holdings II GP L.P. (a Delaware limited partnership) and Aveon Holdings III GP L.P. (a Québec société en commandite)—serve as the sole general partner of each of the Aveon Holdings partnerships. Aveon Holdings I GP Inc. is a domestic corporation for U.S. federal income tax purposes; Aveon Holdings II GP L.P. is a disregarded entity and not an association taxable as a corporation for U.S. federal income tax purposes; and Aveon Holdings III GP L.P. is a foreign corporation for U.S. federal income tax purposes. See “Material U.S. federal tax considerations—Taxation of our partnership and the Aveon Holdings partnerships” for more information about the tax treatment of The Aveon Group L.P. and Aveon Holdings. We refer to Aveon Holdings I GP Inc., Aveon Holdings II GP L.P. and Aveon Holdings III GP L.P. collectively as the “Aveon Holdings General Partners.”

In addition to owning and controlling our general partner, our founding investors are limited partners of the Aveon Holdings partnerships and own an aggregate of Aveon Holdings partnership units. As described in greater detail below, immediately following the completion of this offering, we will acquire controlling interests in the six manager affiliates of our eight initial funds from the investment professionals or other entities who currently own the manager affiliates and who we refer to as the “selling investment professionals.” Certain of these selling investment professionals will, as part of these formation transactions, receive an aggregate of Aveon Holdings partnership units, which will be subject to vesting requirements. We refer to such selling investment professionals, together with our founding investors, as our “existing owners.” We use the terms “Aveon Holdings partnership unit” or “partnership unit in/of Aveon Holdings” to refer, collectively, to a partnership unit in each of the three Aveon Holdings partnerships.

Formation transactions

Offering transactions

The Aveon Group L.P. is offering for sale common units in this offering. We estimate that our net proceeds from this offering, at an assumed initial public offering price of $ per common unit and after deducting estimated underwriting discounts and offering expenses, will be approximately $ million, or $ if the underwriters exercise in full their option to purchase additional common units.

Upon the consummation of this offering, The Aveon Group L.P. will contribute the net proceeds from this offering to its wholly-owned subsidiaries, the Aveon Holdings General Partners.

The Aveon Holdings General Partners will then use all of these proceeds to purchase a number of newly-issued Aveon Holdings partnership units that is equal to the number of common units that we sell in this offering. Accordingly, The Aveon Group L.P. will hold, through the Aveon Holdings

General Partners, a number of Aveon Holdings partnership units equal to the number of common units that The Aveon Group L.P. has issued in connection with this offering.

Aveon Holdings will use approximately $ million of these proceeds to acquire the manager affiliates of our initial funds from the selling investment professionals and will use approximately $ million of these proceeds to acquire general partner or managing member interests in our initial funds. See “Formation transactions—Acquisitions of manager affiliates of initial funds” and “Business—Initial funds.”

Aveon Holdings will use the remaining proceeds, or approximately $ million, or approximately $ if the underwriters exercise in full their option to purchase additional common units, for general corporate purposes, including, together with proceeds from future debt or equity financings, carrying out future acquisitions and acquiring general partner or managing member interest in future funds.

Our founding investors will not receive any of the proceeds from this offering.

See “Use of proceeds.”

Acquisitions of manager affiliates of initial funds

We do not currently own any interests in the manager affiliates of our initial funds. Immediately following the completion of this offering, Aveon Holdings will use an aggregate of $ million of the proceeds from this offering to make cash payments to the selling investment professionals who currently own the manager affiliates of each of the initial funds described in greater detail in “Business—Initial funds” in exchange for controlling interests in these manager affiliates, whereupon such entities will become our consolidated subsidiaries.

Certain of the selling investment professionals will also receive an aggregate of Aveon Holdings partnership units in addition to the cash payments described above. These Aveon Holdings partnership units will be subject to vesting requirements and transfer and other restrictions.

Each selling investment professional will generally be required to invest a significant portion of the after-tax proceeds it receives from these transactions in our funds managed by the manager affiliate for which it serves as operating member. We will generally not receive fees on the investments into our funds made by each of our selling investment professionals.

Our manager affiliates will be entitled to all management fees and incentive fees or allocations earned from managing and overseeing our initial funds and all returns on general partner or managing member interests of our manager affiliates in our funds.

Our manager affiliates will allocate approximately 70% of the management fees and any incentive fees or allocations earned from the total assets under management in most of our funds to the operating members who conduct the operations of our funds on a day-to-day basis until the fund reaches a specified level of AUM, generally $600 million, above which all incremental fees and allocations earned will be allocated to our operating member of the manager affiliate of that fund. In the case of Viridian, and possibly with respect to other funds we may acquire in the future, we will have the right to retain approximately 30% of the gross fees associated with only a portion of the fund’s total current AUM, initially $450 million for Viridian. Any net fund inflows primarily attributable to Aveon and its affiliates and certain other net fund inflows attributable to the Viridian operating member will increase the portion of AUM

on which we retain fees until the AUM in which we participate equals $650 million, above which we will allocate all incremental fees and allocations earned to the operating member and its principals. Any net fund outflows below the fund’s current AUM will not decrease the portion of AUM on which we retain fees unless and until the fund’s total AUM decreases below $450 million. The Viridian operating member will also receive all fees attributable to the portion of the Viridian fund’s AUM on which we will not receive fees. See “Business—Initial funds—Viridian fund—Relative global commodities.”

Deconsolidation of initial funds

Following the completion of this offering, the manager affiliate of each initial fund that is consolidated into the financial statements of such fund manager affiliate will endeavor to take the necessary steps to grant rights to the third-party investors in that fund to provide that a simple majority of the fund’s investors will have the right, without cause, to accelerate the liquidation date of that fund in accordance with certain procedures. The granting of these rights will result in such investment funds no longer being consolidated in our consolidated financial statements.

Because the interests of the investors in our initial funds will also be eliminated in connection with the deconsolidation of these investment funds from the financial statements of the relevant manager affiliates, our partners’ equity in and net income from the manager affiliates will not be altered by the deconsolidation of these investment funds. See “Unaudited pro forma financial information” for a more detailed description of the deconsolidation of the initial funds from the relevant manager affiliates’ financial statements.

Exchange agreement

Prior to this offering, we will enter into an exchange agreement with the existing owners, who will be limited partners of the Aveon Holdings partnerships, so that they may, up to four times each year, subject to the terms of the exchange agreement and the vesting requirements and transfer restrictions set forth in the Aveon Holdings partnership agreements, exchange their Aveon Holdings partnership units for The Aveon Group L.P. common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. An Aveon Holdings limited partner must exchange one partnership unit in each of the three Aveon Holdings partnerships to effect an exchange for a common unit. If and when an Aveon Holdings limited partner exchanges Aveon Holdings partnership units for common units of The Aveon Group L.P., the relative equity ownership positions of the exchanging holder and the other equity owners of Aveon (whether held at The Aveon Group L.P. or at Aveon Holdings) will not change. See “Certain relationships and related person transactions—Exchange agreement.”

Our structure following the formation transactions

We refer to the above described transactions, collectively, as the “formation transactions.”

As a result, immediately following the formation transactions:

•

The Aveon Group L.P., through its wholly-owned subsidiaries, will hold partnership units in Aveon Holdings (or partnership units in Aveon Holdings if the underwriters exercise in full their option to purchase additional common units) and will, through its wholly-owned subsidiaries, be the sole general partner of each of the Aveon Holdings partnerships and, through Aveon Holdings and its subsidiaries, operate our business;

•

our existing owners will hold an aggregate of partnership units in Aveon Holdings;

•

our executive officers and other employees and directors of our general partner will hold an aggregate of restricted common units; and

•

investors in this offering will hold common units (or common units if the underwriters exercise in full their option to purchase additional common units).

The Aveon Holdings partnership units that will be held by The Aveon Group L.P.’s wholly-owned subsidiaries will be economically identical in all respects to the Aveon Holdings partnership units that will be held by our existing owners.

The Aveon Group L.P. common unitholders will have only limited voting rights and, unless our founding investors and their affiliates collectively cease to own at least 4% of the voting power of our outstanding voting units (whether through common units or special voting units), will have no right to elect our general partner’s directors. In addition, our founding investors will hold special voting units in The Aveon Group L.P. that provide them with a number of votes on any matter that may be submitted for a vote of our common unitholders that is equal to the number of Aveon Holdings partnership units that they hold on the relevant record date and entitle them to participate in the vote on the same basis as our common unitholders. Accordingly, immediately following this offering, on those few matters that may be submitted for a vote of the limited partners of The Aveon Group L.P., investors in this offering will collectively have % of the voting power of The Aveon Group L.P. limited partners, or % if the underwriters exercise in full their option to purchase additional common units, and our founding investors will collectively have % of the voting power of The Aveon Group L.P. limited partners, or % if the underwriters exercise in full their option to purchase additional common units.

The diagram below depicts our organizational structure immediately following this offering.

LOGO

(1)

Holding partnership structure

The Aveon Group L.P. will be a holding partnership and, through wholly-owned subsidiaries, the sole general partner of each of the three Aveon Holdings partnerships. The Aveon Group L.P. will operate and control all of the business and affairs of Aveon Holdings. The Aveon Group L.P. will consolidate the financial results of Aveon Holdings and its consolidated subsidiaries, and the ownership interests of the limited partners of Aveon Holdings will be reflected as non-controlling interests in The Aveon Group L.P.’s consolidated financial statements.

The Aveon Group L.P. intends to conduct all of its material business activities through Aveon Holdings. Each of the Aveon Holdings partnerships was formed to hold our interests in different

operating subsidiaries. While our operating subsidiaries will initially all be held by Aveon Holdings I L.P., we expect over time that our U.S. fee-generating subsidiaries will be held by Aveon Holdings I L.P., that a variety of assets will be held by Aveon Holdings II L.P. and that our non-U.S. fee-generating subsidiaries will be held by Aveon Holdings III L.P.

Following the offering:

•

The Aveon Group L.P. will be a holding partnership;

•

through wholly-owned subsidiaries, The Aveon Group L.P. will hold equity interests in, and be the sole general partner of, each of the Aveon Holdings partnerships;

•

each of the Aveon Holdings partnerships will have an identical number of partnership units outstanding;

•

The Aveon Group L.P. will hold, through wholly-owned subsidiaries, a number of Aveon Holdings partnership units equal to the number of common units that The Aveon Group L.P. has issued; and

•

the Aveon Holdings partnership units that will be held by The Aveon Group L.P.’s wholly-owned subsidiaries will be economically identical in all respects to the Aveon Holdings partnership units that will be held by the existing owners.

The Aveon Group L.P. intends to conduct all of its material business activities through the Aveon Holdings partnerships.

Accordingly:

•

our business will be conducted through second tier partnerships of which The Aveon Group L.P., indirectly through wholly-owned subsidiaries, is the sole general partner;

•

our existing owners will hold equity interests in these second tier partnerships which are exchangeable for the publicly traded common units of The Aveon Group L.P.; and

•

if and when an Aveon Holdings limited partner exchanges an Aveon Holdings partnership unit for a common unit of The Aveon Group L.P., the relative equity ownership positions of the exchanging limited partner and of the other equity owners of Aveon (whether held at The Aveon Group L.P. or at Aveon Holdings) will not change.

As discussed in “Material U.S. federal tax considerations,” we believe that The Aveon Group L.P. will be treated as a partnership and not as a corporation for U.S. federal income tax purposes. An entity that is treated as a partnership for U.S. federal income tax purposes is not a taxable entity and incurs no U.S. federal income tax liability. Instead, each partner is required to take into account its allocable share of items of income, gain, loss and deduction of the partnership in computing its U.S. federal income tax liability, regardless of whether or not cash distributions are then made. Investors in this offering will become partners in The Aveon Group L.P. Distributions of cash by a partnership to a partner are generally not taxable unless the amount of cash distributed to a partner is in excess of the partner’s adjusted basis in its partnership interest. However, our partnership agreement does not restrict our ability to take actions that may result in our being treated as an entity taxable as a corporation for U.S. federal (and applicable state) income tax purposes. See “Material U.S. federal tax considerations” for a summary discussing certain United States federal income tax considerations related to the purchase, ownership and disposition of our common units as of the date of this prospectus.

We believe that the Aveon Holdings partnerships will also be treated as partnerships and not as corporations for U.S. federal income tax purposes. Accordingly, the holders of partnership units in Aveon Holdings, including The Aveon Group L.P.’s wholly-owned subsidiaries, will incur U.S. federal, state and local income taxes on their proportionate share of any net taxable income of Aveon Holdings. Net profits and net losses of Aveon Holdings will generally be allocated to its partners (including The Aveon Group L.P.’s wholly-owned subsidiaries) pro rata in accordance with the percentages of their respective partnership interests. Because The Aveon Group L.P. initially will indirectly own % of the total partnership units in Aveon Holdings (or % if the underwriters exercise in full their option to purchase additional common units), The Aveon Group L.P. initially will indirectly be allocated % of the net profits and net losses of Aveon Holdings (or % if the underwriters exercise in full their option to purchase additional common units). The remaining net profits and net losses will be allocated to the limited partners of Aveon Holdings. These percentages are subject to change, including upon an exchange of Aveon Holdings partnership units for The Aveon Group L.P. common units and upon issuance of additional The Aveon Group L.P. common units to the public.

After this offering, we intend to cause Aveon Holdings to make distributions to its partners, including The Aveon Group L.P.’s wholly-owned subsidiaries, in order to fund any distributions The Aveon Group L.P. may declare on the common units. If Aveon Holdings makes such distributions, the limited partners of Aveon Holdings will be entitled to receive equivalent distributions pro rata based on their vested partnership interests in Aveon Holdings. Limited partners of Aveon Holdings or The Aveon Group L.P. holding unvested partnership interests at the time of any distribution will be entitled to a catch-up distribution at the time of subsequent distributions, in respect of partnership interests that have since vested, to provide such limited partners with a cumulative amount of distributions equal to the amount such limited partners would have received if such limited partners’ partnership interests had been vested at the time of all prior distributions.

The partnership agreements of the Aveon Holdings partnerships will provide for cash distributions, which we refer to as “tax distributions,” to the partners of such partnerships if the wholly-owned subsidiaries of The Aveon Group L.P. which are the general partners of the Aveon Holdings partnerships determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses and the character of our income). If we had effected the formation transactions by December 31, 2009, the assumed effective tax rate for 2009 would have been approximately 25%. The Aveon Holdings partnerships will make tax distributions only to the extent that distributions from such partnerships for the relevant year were otherwise insufficient to cover such tax liabilities.

Use of proceeds

We intend to use all of the net proceeds from this offering to purchase a number of newly-issued Aveon Holdings partnership units that is equal to the number of common units that we sell in this offering.

Pending specific application of such remaining proceeds, we expect to invest the proceeds primarily in government securities and cash and cash equivalents.

Our founding investors will not receive any of the proceeds from this offering.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per common unit would increase (decrease) the amount of proceeds to us from this offering available to purchase Aveon Holdings partnership units by approximately $ million and, as a result, the amount of proceeds available to Aveon Holdings for general corporate purposes by approximately $ million, assuming the number of common units offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and estimated offering expenses payable by us.

Cash distribution policy

We currently intend to make quarterly distributions to our common unitholders. Our quarterly distributions, if any, will be determined by our general partner.

Because The Aveon Group L.P. will be a holding partnership and will have no material assets other than its ownership of partnership units in Aveon Holdings held through wholly-owned subsidiaries, we will fund distributions by The Aveon Group L.P., if any, in three steps:

•

first, we will cause Aveon Holdings to make distributions to its partners, including the Aveon Holdings General Partners. If Aveon Holdings makes such distributions, the limited partners of Aveon Holdings will be entitled to receive equivalent distributions pro rata based on their vested partnership interests in Aveon Holdings. Limited partners of Aveon Holdings holding unvested partnership interests at the time of any distribution will be entitled to a catch-up distribution at the time of subsequent distributions, in respect of partnership interests that have since vested, to provide such limited partners with a cumulative amount of distributions equal to the amount such limited partners would have received if their partnership interests had been vested at the time of all prior distributions;

•

second, we will cause the Aveon Holdings General Partners to distribute to The Aveon Group L.P. their share of such distributions, net of the taxes and amounts payable under the tax receivable agreement by such wholly-owned subsidiaries; and

•

third, The Aveon Group L.P. will distribute its net share of such distributions to our common unitholders pro rata based on their partnership interests in The Aveon Group L.P., provided that distributions to limited partners in respect of any unvested units (other than any tax distributions as may be authorized by our general partner in its sole discretion to cover tax liabilities of such limited partners) will not be paid to such limited partners until such units vest.

In addition, the partnership agreements of the Aveon Holdings partnerships will provide for cash distributions, which we refer to as “tax distributions,” to the partners of such partnerships if the Aveon Holdings General Partners determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses and the character of our income). The Aveon Holdings partnerships will make tax distributions only to the extent distributions from such partnerships for the relevant year were otherwise insufficient to cover such tax liabilities.

The declaration and payment of any distributions will be at the sole discretion of our general partner, which may change our distribution policy at any time. Our general partner will take into account:

•

general economic and business conditions;

•

our strategic plans and prospects;

•

our business and investment opportunities;

•

our financial condition and operating results, including our cash position, our net income and our realizations on investments made by our funds;

•

working capital requirements and anticipated cash needs;

•

contractual restrictions and obligations, including payment obligations pursuant to the tax receivable agreement and restrictions pursuant to our financing agreements;

•

legal, tax and regulatory restrictions;

•

restrictions on the payment of distributions by us to our common unitholders or by our subsidiaries to us; and

•

such other factors as our general partner may deem relevant.

Under the Delaware Limited Partnership Act, we may not make a distribution to a partner if after the distribution all our liabilities, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of our assets. If we were to make such an impermissible distribution, any limited partner who received a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Limited Partnership Act would be liable to us for the amount of the distribution for three years.

We anticipate entering into a credit facility following this offering and expect that this facility will contain provisions that may constrain our ability to make distributions to our common unitholders.

In addition, Aveon Holdings’ cash flow from operations may be insufficient to enable it to make required minimum tax distributions to its partners, in which case Aveon Holdings may have to borrow funds or sell assets, and thus our liquidity and financial condition could be materially adversely affected. Furthermore, by paying cash distributions rather than investing that cash in our businesses, we might risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.

Capitalization

The following table sets forth our capitalization as of March 31, 2010:

•

on a historical basis for Aveon Holdings I L.P., our predecessor for accounting purposes; and

•

on a pro forma basis for The Aveon Group L.P. after giving effect to the formation transactions described in “Formation and structure of our Company” and the adjustments described under “Unaudited pro forma financial information,” including adjustments to give effect to: (i) this offering of common units and the application of a portion of the net proceeds from this offering to acquire our six initial manager affiliates, (ii) the acquisition of our interests in the manager affiliates of our initial funds, (iii) the deconsolidation of the general partner or managing member of each of our initial funds and (iv) certain other adjustments described under “Unaudited pro forma financial information.”

You should read this table together with the information contained in this prospectus, including “Formation and structure of our Company,” “Use of proceeds,” “Unaudited pro forma financial information,” “Management’s discussion and analysis of financial condition and results of operations” and the historical financial statements and related notes included elsewhere in this prospectus.


	As of March 31, 2010
(Dollars in millions)	Aveon Holdings I L.P. (predecessor) actual			Deconsolidated acquisitions pro forma	Offering adjustments pro forma	The Aveon Group L.P. (successor) pro forma(1)

Cash and cash equivalents	$	0.0		$	$	$

Non-controlling interests in consolidated entities		0.0
Partners’ capital ( units)		0.0
Additional paid-in capital		0.9
Retained deficit		(0.4	)

Total partners’ capital		0.4

Total capitalization	$	0.4		$	$	$

(1)

A $1.00 increase (decrease) in the assumed initial public offering price of $ per common unit, would increase (decrease) each of cash and cash equivalents, partners’ capital and total capitalization by approximately $ , assuming the number of common units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Dilution

If you invest in our common units, your interest will be diluted to the extent of the difference between the initial public offering price per common unit and the pro forma net tangible book value per common unit of our common units after this offering. Dilution results from the fact that the per common unit offering price of the common units is substantially in excess of the pro forma net tangible book value per common unit attributable to existing owners.

Our pro forma net tangible book value as of March 31, 2010 was approximately $ , or $ per common unit. Pro forma net tangible book value represents the amount of total tangible assets less total liabilities, and pro forma net tangible book value per common unit represents pro forma net tangible book value divided by the number of common units outstanding, after giving effect to the formation transactions and assuming that all of the holders of partnership units in Aveon Holdings (other than the Aveon Holdings General Partners) exchanged their units for newly-issued common units on a one-for-one basis.

After giving effect to the formation transactions and the application of the proceeds from this offering as described in “Use of proceeds,” our pro forma net tangible book value as of March 31, 2010 would have been $ , or $ per common unit. This represents an immediate increase in net tangible book value of $ per common unit to our existing owners and an immediate dilution in net tangible book value of $ per common unit to investors in this offering.

The following table illustrates this dilution on a per common unit basis assuming the underwriters do not exercise their option to purchase additional common units:


Assumed initial public offering price per common unit		$
Pro forma net tangible book value per common unit as of March 31, 2010	$
Increase in pro forma net tangible book value per common unit attributable to investors in this offering	$

Pro forma net tangible book value per common unit after the offering		$

Dilution in pro forma net tangible book value per common unit to investors in this offering		$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per common unit, would increase (decrease) our pro forma net tangible book value after this offering by approximately $ and the dilution per common unit to investors in this offering by approximately $ , in each case assuming the number of common units offered, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and estimated offering expenses payable by us.

The following table summarizes, on the same pro forma basis as of March 31, 2010, the total number of common units purchased from us, the total cash consideration paid to us and the average price per common unit paid by our existing owners and by new investors purchasing common units in this offering, assuming that all of the holders of partnership units in Aveon Holdings (other than the Aveon Holdings General Partners) exchanged their Aveon Holdings partnership units for our common units on a one-for-one basis.

Common units
purchased

Total
consideration

Average
price per

common unit

(in millions)

Number

Percent

Amount

Percent

Existing owners

Investors in this offering

Total

Unaudited pro forma financial information

The following unaudited pro forma statement of financial condition as of March 31, 2010 and the unaudited pro forma statements of operations for the three months ended March 31, 2010 and for the year ended December 31, 2009 present our consolidated results of operations and financial position to reflect the following adjustments, as described below, to give effect to: (i) this offering of common units and the application of a portion of the net proceeds from this offering to acquire our six initial manager affiliates, (ii) our acquisition of our equity interests in the manager affiliates of our initial funds, (iii) the deconsolidation of the general partner or managing member of each of our initial funds and (iv) certain other adjustments described below. The unaudited consolidated pro forma statement of financial condition information as of March 31, 2010 has been prepared as if the transactions described under “Formation and structure of our Company” had been completed as of March 31, 2010; the unaudited pro forma statements of operations information for the three months ended March 31, 2010 and for the year ended December 31, 2009 have been prepared as if such transactions had been completed as of January 1, 2009.

The column labeled Consolidated Acquisitions reflects our acquisition of controlling interests in the manager affiliates of our initial funds. Immediately following the completion of this offering, Aveon Holdings will use an aggregate of $ million of the proceeds from this offering to make cash payments to the selling investment professionals in exchange for controlling interests in the manager affiliates of the initial funds, whereupon these entities will become our consolidated subsidiaries. Aveon Holdings will then use an additional aggregate of $ million of the proceeds from this offering to capitalize the manager affiliates of our initial funds, which will in turn be used by these manager affiliates to acquire additional general partner or managing member interests in their respective funds. The remaining offering proceeds will primarily be used to carry out additional acquisitions and acquire additional general partner or managing member interests in future funds.

The column labeled Deconsolidated Acquisitions reflects the combined deconsolidation of the manager affiliates that will be acquired, as of the dates specified above. The manager affiliates are organized as general partners or managing members. Following the completion of this offering, the manager affiliate of each initial fund that is consolidated into the financial statements of such manager affiliate will endeavor to take the necessary steps to grant rights to the third-party investors in that fund to provide that a simple majority of the fund’s investors will have the right, without cause, to accelerate the liquidation date of that fund in accordance with certain procedures. The granting of these rights will result in such investment funds no longer being consolidated in our consolidated financial statements. The fund investors will not pay for the grant of these rights.

The pro forma adjustments in the column labeled Offering Adjustments principally give effect to:

•

the application of the net proceeds from this offering; and

•

the acquisition transactions relating to the purchase of controlling interests in the manager affiliates of our initial funds.

The pro forma adjustments are based upon available information and methodologies that management believes are reasonable. The adjustments are described in the notes to the unaudited pro forma statement of financial condition and the unaudited pro forma statements of operations.

The unaudited pro forma financial information should be read together with “Formation and structure of our Company,” “Management’s discussion and analysis of financial condition and results of operations” and the historical financial statements and related notes included elsewhere in this prospectus.

The unaudited pro forma financial information is presented for illustrative and informational purposes only and is not necessarily indicative of what our actual operations or financial position would have been had this offering and related transactions taken place as of the dates specified, or that may be expected to occur in the future.

We have not made any pro forma adjustments relating to reporting, compliance and investor relation costs that we will incur as a public company because estimates of such expenses are not currently determinable.

The Aveon Group L.P.

Unaudited pro forma statement of financial condition information

As of March 31, 2010


	Aveon Holdings I L.P. (1)			Consolidated Acquisitions(a) (2)		Deconsolidation Adjustments(b) (3)			Deconsolidated Acquisitions(b) (4)=(2)+(3)		Aveon Holdings Combined Pro Forma (5)=(1)+(4)			Offering Adjustments(d) (6)			Other Pro Forma Adjustments (7)			Aveon Group Consolidated Pro Forma (8)=(5)+(6)+(7)


Assets
Cash and cash equivalents	$	26,481		$	25,964,139	$	(25,848,398	)	$	115,741	$	142,222		$	81,150,000	(e)	$	—		$	81,292,222
Investments in funds, at fair value		—			217,921,404		(175,466,944	)		42,454,460		42,454,460			20,000,000	(e)		—			62,454,460
Investments in securities and derivatives, at fair value					397,745,926		(397,745,926	)		—		—						—			—
Unrealized gains on commodity futures and foreign currency forward positions		—			8,772,650		(8,772,650	)		—		—						—			—
Management and incentive fee receivables		—			326,274		(159,232	)		167,042		167,042						—			167,042
Receivables from investments sold					3,850,231		(3,850,231	)		—		—						—			—
Interest and dividends receivable		—			45,338		(45,338	)		—		—						—			—
Due from broker		—			269,731,435		(269,731,435	)		—		—						—			—
Due from related party		—			4,332,273		(4,332,273	)		—		—						—			—
Customer based intangibles		—			—		—			—		—			288,333,333	(e)		—			288,333,333
Deferred offering costs		795,000			—		—			—		795,000			(795,000	)(f)		—			—
Other assets		—			149,512		(99,512	)		50,000		50,000						—			50,000

Total assets	$	821,481		$	928,839,182	$	(886,051,939	)	$	42,787,243	$	43,608,724		$	388,688,333		$	—		$	432,297,057


Liabilities and Partners’ Capital
Securities and derivatives sold short, at fair value	$	—		$	266,595,213	$	(266,595,213	)	$	—	$	—		$			$	—		$	—
Unrealized losses on commodity futures and foreign currency forward positions		—			664,815		(664,815	)		—		—						—			—
Payables for investments purchased		—			4,882,907		(4,882,907	)		—		—						—			—
Dividend and interest payable		—			8,838		(8,838	)		—		—						—			—
Accounts payable and accrued expenses		385,000			540,473		(490,473	)		50,000		435,000						20,000			455,000
Contributions received in advance		—			1,800,000		(1,800,000	)		—		—						—			—
Redemptions payable					7,350,149		(7,350,149	)		—		—						—			—
Management fees payable		—			34,085		(34,085	)		—		—						—			—

Total liabilities		385,000			281,876,480		(281,826,480	)		50,000		435,000						20,000			455,000

Members’ equity		—			50,294,698		(7,557,455	)		42,737,243		42,737,243			—			(42,737,243	)		—
Non-controlling interest—Other		—			596,668,004		(596,668,004	)		—		—			201,833,333	(e)		43,173,724	(g)		245,007,057
Capital contributions		856,833			—		—			—		856,833			186,855,000	(e)(f)		(856,833	)(g)		186,855,000
Retained deficit		(420,352	)		—		—			—		(420,352	)					400,352	(g)		(20,000	)

Total partners’ capital		436,481			646,962,702		(604,225,459	)		42,737,243		43,173,724			388,688,333			(20,000	)		431,842,057
Total liabilities and partners’ capital	$	821,481		$	928,839,182	$	(886,051,939	)	$	42,787,243	$	43,608,724		$	388,688,333		$	—		$	432,297,057

See notes to the unaudited pro forma financial information.

The Aveon Group L.P.

Unaudited pro forma statement of operations information

For the three months ended March 31, 2010


	Aveon Holdings I L.P. (1)		Consolidated Acquisitions(a) (2)		Deconsolidation Adjustments(b) (3)		Deconsolidated Acquisitions(b) (4)=(2)+(3)		Pro Forma Adjustments (5)			Aveon Holdings Combined Pro Forma (6)=(1)+(4)+(5)		Offering Adjustments(d) (7)			Other Pro Forma Adjustments (8)			Aveon Group Consolidated Pro Forma (9)=(6)+(7)+(8)

Revenues
Management fees	$	—	$	322,900	$	(322,900)	$	—	$	6,537,916	(c)	$	6,537,916	$			$	—		$	6,537,916
Incentive income		—		226,333		117,740		344,073		2,290,088	(c)		2,634,161					—			2,634,161
Aveon funds income:																					—
Interest and dividend income		—		511,855		(470,904)		40,951		—			40,951					—			40,951
Other		—		41,082		(40,903)		179		—			179					—			179

Total revenues		—		1,102,170		(716,967)		385,203		8,828,004			9,213,207					—			9,213,207

Expenses
Compensation and benefits		131,250		—		—		—		—			131,250					—			131,250
General partner expense allocation		—		—		—		—		1,166,500	(h)		1,166,500					—			1,166,500
General, administrative and other		23,269		—		—		—		527,750	(i)		551,019					—			551,019
Amortization		—		—		—		—		—			—		14,416,667	(j)		—			14,416,667
Aveon funds expenses:
Interest expense		—		676,622		(649,093)		27,529		—			27,529					—			27,529
Dividend expense		—		438,617		(434,672)		3,945		—			3,945					—			3,945
Management fee		—		1,338,250		(1,338,250)		—		—			—					—			—
Administrative expense		—		139,603		(132,326)		7,277		—			7,277					—			7,277
Professional fees and other		—		654,966		(638,392)		16,574		—			16,574					—			16,574

Total expenses		154,519		3,248,058		(3,192,733)		55,325		1,694,250			1,904,094					—			16,320,761

Other income
Aveon funds net gains (losses):
Net realized gains (losses) on investments		—		8,471,157		(7,875,932)		595,225		—			595,225					—			595,225
Net unrealized gains (losses) on investments		—		(1,598,481)		1,410,462		(188,019)		—			(188,019)					—			(188,019)

Total other income		—		6,872,676		(6,465,470)		407,206		—			407,206					—			407,206

Income (loss) before taxes and non-controlling interests in operations of subsidiaries		(154,519)		4,726,788		(3,989,704)		737,084		7,133,754			7,716,319					—			(6,700,348)
Income tax expense		—		—		—		—		—			—					—	(k)		—
Non-controlling interests—related to performance of certain responsibilities		—						—		—			—					6,544,492	(l)		6,544,492
Non-controlling interests—Other		—		3,807,855		(3,807,855)		—		—			—					(11,107,822)	(m)		(11,107,822)

Net income (loss)	$	(154,519)	$	918,933	$	(181,849)	$	737,084	$	7,133,754		$	7,716,319	$			$	4,563,329			$(2,137,018)

Net income (loss) per
Common Unit:																			(n)
Basic																				$	—

Diluted																				$	—

Weighted Average
Common Units:																			(n)
Basic																					—

Diluted																					—

See notes to the unaudited pro forma financial information.

The Aveon Group L.P.

Unaudited pro forma statement of operations information

For the year ended December 31, 2009


	Aveon Holdings I L.P. (1)			Consolidated Acquisitions(a) (2)		Deconsolidation Adjustments(b) (3)			Deconsolidated Acquisitions(b) (4)=(2)+(3)		Pro Forma Adjustments (5)			Aveon Holdings Combined Pro Forma (6)=(1)+(4)+(5)		Offering Adjustments(d) (7)			Other Pro Forma Adjustments (8)			Aveon Group Consolidated Pro Forma (9)=(6)+(7)+(8)


Revenues
Management fees	$	—		$	1,386,318	$	(1,386,318	)	$	—	$	30,429,507	(c)	$	30,429,507	$			$	—		$	30,429,507
Incentive income		—			10,410		11,679,257			11,689,667		15,271,397	(c)		26,961,064					—			26,961,064
Aveon funds income:
Interest and dividend income		—			11,351,824		(11,093,552	)		258,272		—			258,272					—			258,272
Other		—			185,276		(179,991	)		5,285		—			5,285					—			5,285

Total revenues		—			12,933,828		(980,604	)		11,953,224		45,700,904			57,654,128					—			57,654,128


Expenses
Compensation and benefits		245,833			—		—			—		—			245,833					—			245,833
General partner expense allocation		—			—		—			—		4,945,167	(h)		4,945,167					—			4,945,167
General, administrative and other		20,000			—		—			—		2,111,000	(i)		2,131,000					—			2,131,000
Amortization		—			—		—			—		—			—		57,666,667	(i)		—			57,666,667
Aveon funds expenses:
Interest expense		—			7,171,526		(6,991,434	)		180,092		—			180,092					—			180,092
Dividend expense		—			3,417,939		(3,416,545	)		1,394		—			1,394					—			1,394
Management fee		—			5,476,472		(5,476,472	)		—		—			—					—			—
Administrative expense		—			520,978		(504,111	)		16,867		—			16,867					—			16,867
Professional fees and other		—			2,710,855		(2,660,635	)		50,220		—			50,220					—			50,220

Total expenses		265,833			19,297,770		(19,049,197	)		248,573		7,056,167			7,570,573					—			65,237,240


Other income
Aveon funds net gains (losses):
Net realized gains (losses) on investments		—			17,526,667		(15,125,896	)		2,400,771		—			2,400,771					—			2,400,771
Net unrealized gains (losses) on investments		—			28,528,011		(28,353,036	)		174,975		—			174,975					—			174,975

Total other income		—			46,054,678		(43,478,932	)		2,575,746		—			2,575,746					—			2,575,746

Income (loss) before taxes and non-controlling interest in operations of subsidiaries		(265,833	)		39,690,736		(25,410,339	)		14,280,397		38,644,737			52,659,301								(5,007,366	)
Income tax expense		—			—		—			—		—			—					—	(k)		—
Non-controlling interest—related to performance of certain responsibilities		—								—		—			—					41,436,661	(l)		41,436,661
Non-controlling interest—Other		—			35,922,415		(35,922,415	)		—		—			—					(41,235,173	)(m)		(41,235,173	)

Net income (loss)	$	(265,833	)	$	3,768,321	$	10,512,076		$	14,280,397	$	38,644,737		$	52,659,301	$			$	(201,488	)	$	(5,208,854	)

Net income (loss) per Common Unit:																					(n)
Basic																						$	—

Diluted																						$	—

Weighted Average Common Units:																					(n)
Basic																							—

Diluted																							—

See notes to the unaudited pro forma financial information.

Notes to unaudited pro forma financial information

Consolidated acquisitions

In accordance with U.S. generally accepted accounting principles (“GAAP”), our initial funds have historically been consolidated into the financial statements of the manager affiliates of those funds. As a result, the historical combined financial statements of such manager affiliates reflect the assets, liabilities, revenues and expenses of these investment funds on a gross basis rather than reflecting only the value of the manager affiliate’s principal investments in such investment funds.

The following financial statements of the manager affiliates of our initial funds have been combined to reflect the combined statements of assets and liabilities and combined statements of operations of the “Consolidated Acquisitions” for the purposes of the pro forma financial information as of March 31, 2010.

Consolidated acquisitions

Combined statements of financial condition

(Unaudited)

As of March 31, 2010


	Banyan(1)		Chesapeake(2)		Cura(3)		Glenrock(4)		Viridian(5)		Welton(6)		Consolidated acquisitions


Assets
Cash and cash equivalents	$	1,800,000	$	—	$	—	$	15,472,132	$	984,959	$	7,707,048	$	25,964,139
Investments in funds, at fair value		173,837,538		—		8,104,154		—		35,979,712		—		217,921,404
Investments in securities and derivatives		—		—		—		397,745,926		—		—		397,745,926
Unrealized gains on commodity futures and foreign currency forward positions		—		—		—		8,772,650		—		—		8,772,650
Management and incentive fee receivables		—		27,710		—		—		167,042		131,522		326,274
Receivables from investments sold		—		—		—		2,777,725		1,072,506		—		3,850,231
Interest and dividends receivable		—		—		—		45,338		—		—		45,338
Due from broker		—		—		—		269,731,435		—		—		269,731,435
Due from related party		4,332,273		—		—		—		—		—		4,332,273
Other assets		—		—		16		99,496		50,000		—		149,512

Total assets	$	179,969,811	$	27,710	$	8,104,170	$	694,644,702	$	38,254,219	$	7,838,570	$	928,839,182


Liabilities and members’ Equity
Securities and derivatives sold short	$	—	$	—	$	—	$	266,595,213	$	—	$	—	$	266,595,213
Unrealized losses on commodity futures and foreign currency forward positions		—		—		—		664,815		—		—		664,815
Payables for investments purchased		—		—		—		4,882,907		—		—		4,882,907
Dividend and interest payable		—		—		—		8,838		—		—		8,838
Accounts payable and accrued expenses		19,080		27,710		—		390,921		57,300		45,462		540,473
Contributions received in advance		1,800,000		—		—		—		—		—		1,800,000
Redemptions payable		4,332,273		—		—		997,002		2,020,874		—		7,350,149
Management fees payable		—		—		—		32,418		1,667		—		34,085

Total liabilities		6,151,353		27,710		—		273,572,114		2,079,841		45,462		281,876,480

Members’ equity		35,845,176		—		735,503		4,857,075		1,063,906		7,793,108		50,294,768
Non-controlling interests		137,973,282		—		7,368,667		416,215,583		35,110,472		—		596,668,004

Total liabilities and members’ equity	$	179,969,811	$	27,710	$	8,104,170	$	694,644,702	$	38,254,219	$	7,838,570	$	928,839,182

(1)

Represents the unaudited financials statements of Banyan Capital Partners, LLC.

(2)

Represents the unaudited carved out financial statements of the Chesapeake Funds Fees.

(3)

Represents the unaudited financials statements of Cura Capital (GP), LLC.

(4)

Represents the unaudited financials statements of Glenrock Asset Management Associates, LP.

(5)

Represents the unaudited financials statements of Viridian Partners, LLC.

(6)

Represents the unaudited combined carved out financial statements of the Welton Funds’ Fees.

Consolidated acquisitions

Combined statements of operations

(Unaudited)

For the three months ended March 31, 2010


	Banyan(1)			Chesapeake(2)		Cura(3)			Glenrock(4)			Viridian(5)			Welton(6)			Consolidated acquisitions


Income
Management fees	$	—		$	52,650	$	—		$	—		$	—		$	270,250		$	322,900
Incentive income		—			—		—			—			191,993			34,340			226,333
Interest and dividends and other		72,778			—		299,323			147,983			32,853			—			552,937

Total income		72,778			52,650		299,323			147,983			224,846			304,590			1,102,170


Expenses
Interest and dividends		48,707			—		150,773			903,152			12,607			—			1,115,239
Management fee		344,195			—		34,724			819,353			139,978			—			1,338,250
Administrative expense		28,815			—		12,490			89,603			8,695			—			139,603
Professional fees and other		26,101			46,291		7,977			240,668			356,909			(22,980	)		654,965

Total expenses		447,818			46,291		205,964			2,052,776			518,189			(22,980	)		3,248,057


Net gains from Aveon funds
Realized gains (losses)		3,501,011			—		(590,277	)		(130,687	)		5,691,110			—			8,471,157
Unrealized gains (losses)		( 745,997	)		—		516,941			3,249,900			(4,619,325	)		—			(1,598,481	)

Total net gains (losses) from Funds		2,755,014			—		(73,336	)		3,119,213			1,071,785			—			6,872,676

Income (loss) before non-controlling interest		2,379,974			6,359		20,023			1,214,420			778,442			327,570			4,726,789

Non-controlling interests		2,020,669			—		15,042			1,204,060			568,084			—			3,807,856

Net income (loss)	$	359,305		$	6,359	$	4,981		$	10,360		$	210,358		$	327,570		$	918,933

(1)

Represents the unaudited financials statements of Banyan Capital Partners, LLC.

(2)

Represents the unaudited carved out financial statements of the Chesapeake Funds Fees.

(3)

Represents the unaudited financials statements of Cura Capital (GP), LLC.

(4)

Represents the unaudited financials statements of Glenrock Asset Management Associates, LP.

(5)

Represents the unaudited financials statements of Viridian Partners, LLC.

(6)

Represents the unaudited combined carved out financial statements of the Welton Funds’ Fees.

Consolidated acquisitions

Combined audited statements of operations

For the year ended December 31, 2009


	Banyan(1)		Chesapeake(2)		Cura(3)			Glenrock(4)			Viridian(5)			Welton(6)		Consolidated acquisitions


Income
Management fees	$	—	$	233,070	$	—		$	—		$	—		$	1,153,248	$	1,386,318
Incentive income		—		1,557		—			—			326			8,527		10,410
Interest and dividends and other		1,033,796		—		5,951,457			4,479,423			72,424			—		11,537,100

Total income		1,033,796		234,627		5,951,457			4,479,423			72,750			1,161,775		12,933,828


Expenses
Interest and dividends		304,562		—		5,128,284			5,156,619			—			—		10,589,465
Management fee		1,581,536		—		305,664			2,817,667			771,605			—		5,476,472
Administrative expense		122,000		—		60,900			338,078			—			—		520,978
Professional fees and other		164,734		150,696		41,254			628,958			1,656,772			68,441		2,647,060

Total expenses		2,172,832		150,696		5,536,102			8,941,322			2,428,377			68,441		19,233,975


Net gains from Aveon funds
Realized gains (losses)		28,607,997		—		(1,885,599	)		(876,132	)		(8,319,599	)		—		17,526,667
Unrealized gains (losses)		1,958,036		—		3,251,938			18,062,610			5,255,427			—		28,528,011

Total net gains (losses) from Funds		30,566,033		—		1,366,339			17,186,478			(3,064,172	)		—		46,054,678

Income (loss) before non-controlling interest		29,426,997		83,931		1,781,694			12,724,579			(5,419,799	)		1,093,334		39,690,736

Non-controlling interests		26,946,940		—		1,695,321			12,586,624			(5,306,470	)		—		35,922,415

Net income (loss)	$	2,480,057	$	83,931	$	86,373		$	137,955		$	(113,329	)	$	1,093,334	$	3,768,321

(1)

Represents the audited financials statements of Banyan Capital Partners, LLC.

(2)

Represents the audited carved out financial statements of the Chesapeake Funds Fees.

(3)

Represents the audited financials statements of Cura Capital (GP), LLC.

(4)

Represents the audited financials statements of Glenrock Asset Management Associates, LP.

(5)

Represents the audited financials statements of Viridian Partners, LLC.

(6)

Represents the audited combined carved out financial statements of the Welton Funds’ Fees.

Deconsolidation of the general partners or managing members of the initial funds

Following the completion of this offering, the general partner or managing member of each initial fund that is consolidated into the financial statements of such manager affiliate will endeavor to take the necessary steps to grant rights to the investors in that fund to provide that a simple majority of each fund’s investors will have the right, without cause, to accelerate the liquidation date of that fund in accordance with certain procedures. The granting of these rights will result in such investment funds no longer being consolidated in our consolidated financial statements. Because the interests of the investors in the initial funds will also be eliminated in connection with the deconsolidation of these investment funds from the financial statements of the relevant manager affiliates, our partners’ equity in and net income from the manager affiliates will not be altered by the deconsolidation of these investment funds. The following describes the major effects the deconsolidation will have on the consolidated financial statements of The Aveon Group L.P. following the completion of this offering and the formation transactions:

•

We will not record on our balance sheet and income statement the gross assets, liabilities, revenues, expenses and other income of the deconsolidated manager affiliates of the initial funds, along with the related minority interests of the fund investors in the equity and income of these funds.

•

We will include the management fees and incentive fee income earned from our initial funds on our statement of operations rather than eliminating the revenue in consolidation.

•

We will remove the cash flow activities of the deconsolidated funds from our statement of cash flows and replace them with our cash contributions to and distributions from the deconsolidated funds, which previously were eliminated in consolidation. This would not have any effect on our overall net change in cash for the period; however, it would result in significant changes to our operating and financing cash flow categories.

•

We will continue to provide information regarding our management agreements with, and fees earned from, these funds.

•

We will evaluate each period whether we need to provide separate financial statements for investments in companies accounted for using the equity method. Based on our unaudited pro forma financial information for the three months ended March 31, 2010, and the year ended December 31, 2009, we would not have needed to provide separate financial statements for any of the deconsolidated funds.

We believe the deconsolidation of these manager affiliates of the initial funds will result in our financial statements reflecting our alternative asset management business, including our management fees and incentive income, in a manner that reflects both how our management evaluates our business and the risks of the assets and liabilities of our company and that will provide investors with an enhanced understanding of our business.

Reflects management fees and incentive income earned by the manager affiliates for the periods ended March 31, 2010 and December 31, 2009. The following table presents the management fees earned and incentive income accrued and crystallized (crystallized incentive income is income realized as a result of partial or whole redemptions of investor capital accounts during the calendar year) by each manager affiliate for the three months ended March 31, 2010 and the year ended December 31, 2009:


	For the three months ended March 31, 2010
	Banyan		Chesapeake		Cura		Glenrock		Viridian		Welton		Total

Revenue
Management fees	$	1,138,628	$	52,650	$	635,030	$	1,498,167	$	2,943,191	$	270,250	$	6,537,916
Incentive fees		2,263,484		—		75,587		68,757		191,993		34,340		2,634,161

Total revenue	$	3,402,112	$	52,650	$	710,617	$	1,566,924	$	3,135,184	$	304,590	$	9,172,077


Assets under management
(US$ millions)
Beginning, January 1, 2010	$	407	$	26	$	248	$	421	$	612	$	65	$	1,778
Ending, March 31, 2010	$	501	$	26	$	227	$	422	$	645	$	70	$	1,891



	For the year ended December 31, 2009
	Banyan		Chesapeake		Cura		Glenrock		Viridian		Welton		Total

Revenue
Management fees	$	3,885,514	$	233,070	$	3,797,018	$	5,625,616	$	15,735,041	$	1,153,248	$	30,429,507
Incentive fees		21,314,355		1,557		3,623,732		2,012,567		326		8,527		26,961,064

Total revenue	$	25,199,869	$	234,627	$	7,420,750	$	7,638,183	$	15,735,367	$	1,161,775	$	57,390,571


Assets under management
(US$ millions)
Beginning, January 1, 2009	$	361	$	27	$	410	$	418	$	1,077	$	83	$	2,376
Ending, December 31, 2009	$	407	$	26	$	248	$	421	$	571	$	65	$	1,737

Offering adjustments

Immediately following the completion of this offering, Aveon Holdings will use an aggregate of $ million of the proceeds from this offering to make cash payments to the selling investment professionals, whereupon the manager affiliates of each of our initial funds will become our consolidated subsidiaries. Aveon Holdings will then use an additional aggregate of $ million of the proceeds from this offering to capitalize the manager affiliates of our initial funds, which will be used by these manager affiliates to acquire additional general partner or managing member interests in their respective funds. The pro forma statements do not include any revenues, expenses and other income attributable to the portion of the offering proceeds that will be used to capitalize the manager affiliate funds and do not include any interest income that would be earned on cash and cash equivalents.

The selling investment professionals will generally be required to invest a significant portion of the after-tax proceeds they receive from these transactions in our fund that is managed by the manager affiliate previously owned by such selling professional.

Our manager affiliates will be entitled to all management fees and incentive fees and allocations earned from managing and overseeing our initial funds and all returns on general partner or managing member interests of our manager affiliates in our funds. In certain cases the management fees payable by a fund may be paid to a different Aveon Holdings subsidiary.

We will allocate approximately 70% of the management fees and any incentive fees and allocations that we earn from managing and overseeing our funds to the operating members who conduct the operations of our funds on a day-to-day basis until the fund or our level of participation reaches a specified level of AUM, generally $600 million, above which all incremental management fees and incentive fees and allocations that we earn from that fund are paid or allocated to the operating member of the manager affiliate of that fund.

Reflects the recognition of the estimated proceeds of the offering of approximately $ million, less estimated underwriting and other costs of approximately $ million, based on an initial offering price of $ per share and assuming no exercise of the underwriters’ over-allotment option.

We will use approximately $ million of the proceeds from the offering to make cash payments to the selling investment professionals, whereupon the general partner or managing member of each of our initial funds will become our manager affiliate and a consolidated subsidiary. Aveon Holdings will then use an additional aggregate of $ million of the proceeds from this offering to capitalize the manager affiliates of the initial funds, which will in turn be used by these manager affiliates to acquire additional general partner or managing member interests in their respective funds. See “Use of proceeds.”

The following is a preliminary estimate of the allocation of the purchase price as described above. We are gathering data and performing an analysis and evaluation of the excess of the cost over the net tangible assets acquired and liabilities assumed. For purposes of these unaudited pro forma consolidated financial statements, based upon preliminary information and analyses, we have made an allocation between finite-lived intangible assets and goodwill. This allocation is subject to change as valuation analyses are finalized and remaining information on the fair value of assets and liabilities is received.

The estimated useful lives of the finite-lived intangibles are expected to average five years. We will amortize these finite-lived intangibles over their estimated useful lives using the straight-line method.

Following the formation transactions and this offering, The Aveon Group L.P. will be a holding partnership and, through wholly-owned subsidiaries, hold equity interests in the Aveon Holdings partnerships. Through wholly-owned subsidiaries, The Aveon Group L.P. will be the sole general partner of each of the Aveon Holdings partnerships. Accordingly, The Aveon Group L.P. will operate and control all of the business and affairs of Aveon Holdings and will consolidate the financial results of Aveon Holdings and its consolidated subsidiaries. This adjustment reflects the consolidation of its subsidiaries.

Reflects the reimbursement of deferred offering costs representing legal fees incurred by the founding investors.

Represents the elimination of the selling professionals’ equity in the manager affiliates and the reclassification of Aveon Holdings I L.P.’s equity as set forth in the following table:


	As of March 31, 2010


Elimination of deconsolidated manager affiliate assets and liabilities:
Cash	$	115,741
Investments in funds, at fair value		42,454,460
Management and incentive fee receivables		167,042
Other assets		50,000
Accounts payable and accrued expenses		(50,000	)
Reclass of capital contributions—Aveon Holdings I L.P.		856,833
Reclass of retained deficit—Aveon Holdings I L.P.		(420,352	)

Total noncontrolling interest—other	$	43,173,724

Reflects our general partner expense allocation which represents the operating expenses of our general partner. The allocation is composed of the base cash compensation and benefits paid to our general partner’s employees and certain other operating expenses of our general partner, such as travel and entertainment expenses and selling, general and administrative expenses, and is initially capped at a fixed amount of $6 million. With respect to our general partner’s employees, these expenses include base salary and all related employee benefits and taxes.

Represents other expenses consisting primarily of administrative and other expenses relating to our operations, including professional services, insurance, occupancy and equipment costs, business development expenses, information processing and communications, and interest expense that we may incur because of borrowings from time to time.

We anticipate acquiring finite-lived customer-based intangible assets in conjunction with the acquisitions following this offering. Accordingly, we have reflected $14.4 million for the quarter ended March 31, 2010, and $57.7 million for the year ended December 31, 2009 related to these acquired intangible assets. The estimated useful lives of the finite-lived intangibles are expected to average five years. We will amortize the finite-lived intangibles over their estimated useful lives using the straight-line method.

Aveon and certain of its subsidiaries expect to be taxed as partnerships for U.S. federal income tax purposes. As a result, certain income is not subject to U.S. federal and state income taxes. Accordingly, the tax liability related to income earned by these entities represents obligations of the individual partners and members. In addition, certain of the wholly-owned subsidiaries of Aveon are subject to corporate federal, state and local income taxes that are reflected in our consolidated financial statements.

Represents the allocation to the operating members of our manager affiliates of approximately 70% of the gross management fees and incentive fees earned from our funds up to a specified level of AUM, generally $600 million, and 100% gross management fee revenue and incentive income earned from our funds on AUM exceeding the applicable AUM level. The following table presents the management fees and incentive income allocated for the three months ended March 31, 2010 and for the year ended December 31, 2009:


	Three months ended March 31, 2010		Year ended December 31, 2009

Management fees	$	4,701,197	$	22,932,562
Incentive fees		1,843,295		18,504,099

Total noncontrolling interest—related to performance of certain responsibilities	$	6,544,492	$	41,436,661

Reflects the elimination of the non-controlling interest in our consolidated subsidiaries and the gains and losses of the selling professionals’ capital accounts in the manager affiliates as set forth in the following table:


	Three months ended March 31, 2010			Year ended December 31, 2009

Pro-rata share of revenues in consolidated subsidiaries	$	1,051,034		$	6,381,564
Pro-rata share of expenses in consolidates subsidiaries		(730,200	)		(2,920,800	)
Pro-rata share of amortization of customer based intangibles		(11,821,667	)		(47,286,667	)
Gains (losses) attributable to manager affiliate’s capital account		393,011			2,590,730

Total noncontrolling interest—other	$	(11,107,822	)	$	(41,235,173	)

For the purposes of the pro forma net income per common unit calculation, The Aveon Group L.P. common units outstanding are calculated as follows:


	Pro forma common units outstanding
	Three months ended March 31, 2010	Year ended December 31, 2009


Units from which proceeds will be used to purchase general partner interests

Units from which proceeds will be used to pay costs associated with the offering

The Aveon Group L.P. restricted common units


Total pro forma units outstanding

For the purposes of the pro forma earnings per unit, the weighted average units outstanding and the pro forma net income available to common unit holders on a basic and diluted basis are calculated as follows:


	Three months ended March 31, 2010	Year ended December 31, 2009
	Basic and diluted	Basic and diluted


The Aveon Group L.P. common units outstanding

The Aveon Group L.P. common unit equivalents


Weighted Average common units outstanding

Selected financial data

The following table presents selected financial data as of December 31, 2009 and for the period from May 1, 2009 (inception) to December 31, 2009, which have been derived from the financial statements of Aveon Holdings I L.P. (our predecessor) audited by KPMG LLP, an independent registered public accounting firm, whose report with respect thereto is included elsewhere in this prospectus.

The following table also presents selected financial data as of and for the three month period ended March 31, 2010, which have been derived from the unaudited financial statements of Aveon Holdings I L.P. included elsewhere in this prospectus. The unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the financial position and results of operations in these periods, and the results of the interim period are not necessarily indicative of the results that may be expected for the full year or any future period.

Since we have not had any significant operations to date, the information below is not indicative of results to be expected for future periods. In addition, since this information is only a summary and does not provide all of the information contained in Aveon Holdings I L.P.’s historical financial statements, including the related notes, you should read it in conjunction with “Capitalization,” “Management’s discussion and analysis of financial condition and results of operations” and Aveon Holdings I L.P.’s historical financial statements, including the related notes, included elsewhere in this prospectus.


	Three months ended March 31, 2010 (unaudited)			May 1, 2009 through December 31, 2009

*Operating Information*
Expenses
Compensation	$	131,250		$	245,833
Professional fees		23,269			20,000
Net income (loss)		(154,519	)		(265,833	)


	As of March 31, 2010 (unaudited)		As of December 31, 2009

*Balance Sheet Information*
Deferred offering costs	$	795,000	$	600,000
Cash		26,481		—

Total assets	$	821,481	$	600,000
Liabilities		385,000		380,000
Partners’ capital		436,481		220,000

Management’s discussion and analysis

of financial condition and results of operations

The following discussion and analysis should be read in conjunction with the financial statements and the related notes included elsewhere in this prospectus. The historical financial data discussed below reflect the historical results of operations and financial position of Aveon Holdings I L.P., which is considered our predecessor for accounting purposes. The financial statements of Aveon Holdings I L.P. will be our historical financial statements following this offering. This historical financial data does not give effect to the formation transactions or to the completion of this offering. The pro forma financial data discussed below reflect the adjustments described under “Unaudited pro forma financial information,” including adjustments to give effect to: (i) this offering of common units and the application of a portion of the net proceeds from this offering to acquire our six initial manager affiliates, (ii) our acquisition of our controlling interests in the manager affiliates of our initial funds, (iii) the deconsolidation of the general partner or managing member of each of our initial funds and (iv) certain other adjustments described under “Unaudited pro forma financial Information.” See “Formation and structure of our Company” and “Unaudited pro forma financial information” included elsewhere in this prospectus.

Overview

We are a newly formed investment management firm focused on acquiring controlling interests in the general partners or managing members of a diversified group of hedge funds, which we refer to as our “manager affiliates.” At the time of the acquisition of each of our manager affiliates, we will admit as limited partners or members of the manager affiliate the investment professionals and investment firm that have historically led the day-to-day investment and operational activities of its fund. We refer to each investment firm, together with such firm’s investment advisory team, as our “operating member.” Our acquisition structure allows our operating members to retain a significant equity and economic interest in their respective manager affiliates, providing them with the opportunity to cover operational costs, realize future value and be rewarded for growth in assets under management and investment performance. Under our oversight, our operating members will maintain day-to-day operational and investment authority over their respective funds that we manage, thereby preserving the independence and entrepreneurial culture that contributed to the past performance of our funds. We have sought and intend to seek to enter into acquisition transactions with manager affiliates whose funds have the ability to grow independently. We also believe that the substantial risk oversight, transparency, visibility and industry relationships that we provide, coupled with our expected introduction of new investable multi-fund composite products, will significantly enhance the prospects for increasing assets under management in these funds.

Immediately following the completion of this offering, Aveon Holdings will use an aggregate of approximately $ million of the proceeds from this offering to make cash payments to the selling investment professionals who currently own the manager affiliates of each of the eight initial funds in exchange for controlling interests in these manager affiliates, whereupon these manager affiliates will become our consolidated subsidiaries. Aveon Holdings will then use an additional aggregate of approximately $ million of the proceeds from this offering to acquire additional general partner or managing member interests in our initial funds. The

remaining proceeds from the offering will be used for acquisitions of additional manager affiliates and for acquiring general partner or managing member interests in additional funds.

Following the completion of the formation transactions, our business will be comprised of one reportable operating segment, “Aveon Multi-Strategy Funds,” which will be comprised of the management and advisory services provided to our initial funds. As of March 31, 2010, the manager affiliates of our initial funds had approximately:

•

$1.9 billion of assets under management;

•

101 personnel affiliated with the manager affiliates, with 52 investment professionals managing our initial funds, including 8 partners in the manager affiliates; and

•

530 fund investors.

Each of our manager affiliates seeks to deliver consistently positive risk-adjusted returns throughout all market cycles while concentrating on risk management and capital preservation. Our diversified multi-strategy approach will combine the global investment strategies of our initial funds, which include global long-short equity, fixed income arbitrage, event-driven distressed and global managed futures. All of our initial funds currently have advisors who we believe base their investment decisions on thorough due diligence and detailed research-based analysis in their dedicated strategies. We believe that combining the independent operating members with diverse strategy styles and investment approaches provides opportunities to create long-term value for our unitholders. The average length of investment operations for our eight initial funds is just over five years and, through March 31, 2010, their returns for the first quarter of 2010 and annual returns for 2007, 2008 and 2009 were as follows:

As of March 31, 2010:


Name	Strategy	AUM ($MM)*		Date of inception	Net investment return Q1 2010 (3 months)*	Net investment return 2009	Net investment return 2008	Net investment return 2007
Name	Strategy	AUM ($MM)*		Date of inception	Net investment return Q1 2010 (3 months)*	Net investment return 2009	Net investment return 2008	Net investment return 2007

Banyan fund	Global Macro	$	501	Apr-04	1.0%	11.5%	14.4%	16.5%

Chesapeake funds	Global
Select fund	Managed		10	Mar-94	0.6%	-0.3%	12.2%	4.3%
Preferred fund	Futures, Trend- Following		16	Apr-94	1.8%	3.5%	19.4%	-22.4%

			26


Cura fund	Fixed Income Arbitrage		227	Dec-04	0.1%	8.8%	6.6%	15.5%

Glenrock fund	Global Long-Short		422	Jul-91	-0.3%	2.5%	7.6%	7.9%

Viridian fund	Global Commodities		645	Jun-05	1.6%	-11.2%	26.0%	18.6%

Welton funds	Global
G fund	Managed		58	May-06	-0.4%	-7.2%	22.6%	12.3%
H fund	Futures, Multi-Model		12	Dec-08	-1.1%	-14.9%	N/M	N/A

			70

Total AUM		$	1,891

*S&P 500*					5.4%	26.5%	-37.0%	5.5%

*Greenwich Global Hedge* *Fund Index*					2.6%	19.4%	-15.9%	11.1%

Assets under management as of March 31, 2010 and the quarterly investment returns for the funds for the period January 1, 2010 to March 31, 2010 are unaudited.

As described in more detail in “Business—Initial funds,” fund annualized net investment returns were achieved with lower statistical volatility than the S&P 500 and with low statistical correlation to the S&P 500. Past performance is not indicative of future results. Net investment return is calculated on a total return basis for each fund, net of all fees and expenses.

Our investment and oversight processes are designed to incorporate risk management across the functional areas of our portfolio management, operations and accounting with a layer of oversight provided by our investment committee. Our operating members maintain their decentralized operations, risk management and compliance, with their risk and control infrastructure tailored at the fund level and monitored by dedicated risk managers. Our investment committee will monitor and conduct regular reviews of the portfolio risk profile of each of our funds and review the risk profile of our aggregate fund holdings. In addition to fund level risk management and investment committee oversight, we believe that the systematic selection of our initial funds will successfully diversify the sources of our operating segment income across a broad range of independent fund strategies and mature investment approaches.

Market factors and trends

Our ability to expand our business will be primarily dependent on our ability to attract new capital to our funds and to complete successful acquisitions of additional manager affiliates. Attracting new capital to our funds depends on our operating members’ ability to demonstrate consistent, positive risk-adjusted returns on assets under management, which may be impacted by market factors and trends that are beyond our control. Our ability to complete successful acquisitions of additional manager affiliates will depend on the availability of high quality investment funds with manager affiliates that are willing to join our company. Market factors and trends affecting our business include:

•

The sustainability of the broad recovery in the market environment in 2010. The United States and other governments have taken a number of significant steps to improve economic and market conditions and, since the first quarter of 2009, there have been improvements in liquidity and market conditions. However, in the first quarter of 2010, the deterioration of the fiscal position of Greece and other European countries has triggered the resurgence of sovereign debt risk, has weakened the Euro, and, coupled with concerns over the weakness of the U.S. economic recovery, has caused increased volatility in U.S. and global equity markets and led to a downturn in the global securities market.

•

The sustainability of returning flows of assets under management to the hedge fund industry. Large outflows in assets under management from the hedge fund industry from June 2008 to March 2009 (see “Industry—Hedge funds”) were reversed in the fourth quarter of 2009 with a rebound in investor subscriptions. However, the first quarter of 2010 witnessed net redemptions from hedge funds amounting to just under 1% of hedge fund assets, which we believe was caused by selective investor profit taking and portfolio reallocation decisions concentrated in select hedge fund strategies. We cannot predict the future investor demand for the alternative investment asset class in general.

•

The competitive dynamics of the alternative asset management industry. Demand for alternative asset management will be impacted by the relative performance of our funds compared to funds managed by other investment managers.

•

Market volatility. Volatility within the global equity and fixed income markets will increase both opportunity and risk for our business and affect the performance of our funds and may affect the risk tolerance of our funds’ investors.

•

Fluctuations in interest rates and credit spreads. Interest rates and credit spreads affect the value of our fixed income instruments, income from these instruments and return on excess cash and impact our investment opportunities and the financial markets in general.

•

Competitors in the market for hedge fund acquisitions. We believe we have an advantage in accessing mid-sized manager affiliates for our acquisition growth because of the structure of our business model and our knowledge of the hedge fund industry. However, there are a number of well-established competitors that may return to the market with an approach similar to ours, which may cause us to pay higher prices to acquire interests in attractive manager affiliates or may limit our access to high quality investment funds.

Market trends during which our unaudited pro forma financial statements are presented have provided a favorable environment for us and our funds:

•

Investor demand. Despite the well-publicized failures of certain hedge funds and the broad redemptions associated with the contraction of liquidity described under “Risks factors” and “Industry,” we expect that the long-term resumption of investor demand is likely to continue for the reasons that institutional investors have traditionally allocated to hedge funds: low correlation with traditional assets, desire to increase diversification and the increasing acceptance of hedge funds as an asset class (see “Industry—Institutional demand”).

•

Demand for effective hedging. The turbulent market environment in 2008 tested the ability of hedge funds to manage their portfolio market exposure and limit market-based losses. We believe investors are differentiating between strategies that employ effective hedging techniques and those that do not.

•

Demand for increased transparency. The institutionalization of the alternative asset management industry has encouraged hedge fund managers to develop more robust infrastructures, as large institutional investors require greater transparency and effective risk management systems. The current financial crisis will also allow investors generally to make even greater demands with respect to transparency, requiring disclosure of portfolio risks and the drivers and rationale behind specific investment decisions.

While short term disruptions in the markets with respect to equity prices, interest rates, credit spreads and other factors, including liquidity, have adversely affected the hedge fund industry in the last two years, we believe such disruptions may present significant new opportunities for investment, particularly for investment funds that have outperformed the market and their hedge fund peers in 2008 and 2009, and are willing to provide high levels of transparency. Our initial funds have generally maintained their aggregate level of assets under management during a period of historic redemptions across the hedge fund industry. This was due in large part to their ability to manage risk, mitigate exposure to adverse market conditions, find opportunities for return in the periods prior to and during the general market dislocations of 2008 and 2009, and maintain high levels of investor confidence. We cannot predict whether current market trends will continue or whether our funds will be able to react effectively to future market conditions.

Understanding our results / key financial measures

We believe the following information is key to understanding our financial results. The profitability of our business model is based on increasing revenue over the relatively fixed components of our cost base. The relatively fixed components of our cost base are (i) the general

partner operating expense reimbursement, which includes base salary for our management and other employees, as well as payroll taxes, travel and entertainment expenses, and selling, general and administrative expenses of the general partner, and which is initially capped at $6 million, and (ii) our general and administrative expenses, which include insurance, professional fees, public reporting and other administrative costs, and which are generally less variable with changes in revenues. The allocation to operating members varies with management fee revenue and incentive income revenue but is a fixed percentage of such revenue (approximately 70% prior to reaching specified AUM levels and 100% thereafter). Therefore, our ability to improve segment operating profitability will be largely driven by our revenues, which will be determined principally by the combination of our assets under management and by the investment performance of each of our initial funds (see “Business—Initial funds”).

Revenues

Following the completion of this offering, we will have three primary sources of revenues from each of our initial funds:

•

management fee income earned pursuant to contractual arrangements with our funds;

•

incentive income earned pursuant to contractual arrangements with our funds; and

•

returns on our general partner or managing member interests in our funds.

The amount of revenues earned through these sources will be directly related to the amount of assets under management and the performance of our funds.

In accordance with GAAP, a number of our initial funds have historically been consolidated into the financial statements of the respective manager affiliates of those funds. As a result, the historical combined financial statements of the manager affiliates reflect the revenues of these investment funds on a gross basis rather than reflecting only the value of the manager affiliate’s principal investments in such investment funds. Following the completion of this offering and the acquisition transactions, the manager affiliate of each initial fund will endeavor to take the necessary steps to grant rights to the investors in that fund to provide that a simple majority of the fund’s investors will have the right, without cause, to accelerate the liquidation date of that fund in accordance with certain procedures. The granting of these rights will result in such investment funds no longer being consolidated in our consolidated financial statements. Because the interests of the investors in the initial funds will also be eliminated in connection with the deconsolidation of these investment funds from the financial statements of the relevant manager affiliates, our partners’ equity in and net income from the manager affiliates will not change as a result of the deconsolidation of these investment funds.

The “Unaudited pro forma financial information” presents the pro forma deconsolidation adjustments to the combined statements of The Aveon Group L.P. and contains a more detailed description of the deconsolidation of our initial funds from the manager affiliates’ financial statements.

Management fees. The management fees earned from each of our funds will typically be 1% to 2% of the fund’s assets under management up to a specified level of AUM, generally $600 million, and will be based on the balance of assets under management at the beginning of the relevant period, as adjusted for inflows and redemptions during such period, for which management fees are generally pro-rated. The specified level of applicable AUM up to which management fees are earned in our funds are determined by agreement between us and the operating members of each of the manager affiliates. In all of our initial funds except the

Viridian fund, we participate in fees on the current total AUM of the fund in each relevant period up to the applicable amount of AUM. In the case of Viridian, we earn fees on a portion of the fund’s total current AUM, initially $450 million of the fund’s $645 million of total AUM. Net fund inflows of up to $150 million primarily attributable to Aveon and its affiliates and certain other net fund inflows of up to $50 million attributable to the Viridian operating member will increase our participation up to the applicable AUM amount of $650 million; a decrease below the fund’s current AUM will not decrease our participation below the $450 million level unless and until the fund’s total AUM decreases below $450 million.

Accordingly, our management fee revenues from period to period will be influenced by changes in assets under management resulting from the timing and magnitude of inflows and redemptions, the level of our initial and applicable AUM, and from investment performance and returns during the respective period and from changes in average management fee rates.

Incentive income. Incentive fee income will typically be equal to 20% of the net realized and unrealized profits earned in each of our initial funds, for which all contingencies have been resolved, based on the fair market value of unaffiliated investors’ net assets up to the specified level of AUM, which is the same level as applied to management fees (and described in the preceding section and the following table). The incentive fees will generally be subject to a net loss carry-forward provision, or high-water mark, which means that investor capital accounts must return to their cumulative high-water mark return before any incentive fees are paid in respect of their accounts. Incentive income will be affected by the investment performance of each of our funds.

The following table shows the level of applicable AUM for each of our funds compared to the fund’s level of AUM as of March 31, 2010:

As of March 31, 2010

(Dollars in millions)


Name	Initial AUM		Maximum participating AUM		Fund management fee (1)	Fund incentive fee (1)

Banyan fund	$	501	$	600	1.0%	35%-50% sliding scale

Chesapeake funds		26		300	2.0%	20%

Cura fund		227		600	2.0%	20%

Glenrock fund		422		600	1.5%	20%

Viridian fund (1)		645		650	1.5%-2.5%	20%-25%

Welton funds		70		400	2.0%	20%

Total	$	1,891	$	3,150

(1)

These are the stated management and incentive fees of our funds, which may be reduced in certain circumstances or with respect to certain investors in the funds. For example, during 2009 and the first quarter of 2010, the Chesapeake fund reduced its management fees by one half for all Series A members.

(2)

Initially we will participate in $450 million of the total initial AUM of $645 million in the Viridian fund. The level of participation for the Viridian fund will rise up to $650 million to the extent net fund inflows above the initial $450 million are primarily attributable to Aveon and its affiliates and certain other net fund inflows attributable to the Viridian operating member. See “Business—Initial funds—Viridian fund—Relative value global commodities.”

Returns on general partner or managing member interests. We will participate in 100% of the investment returns associated with capital interests committed by the manager affiliates into two

of our funds; for our other funds, we will participate in 100% of the investment returns associated with our capital interests net of typically 70% of the management fees and incentive fees, which will be paid to the operating members of such funds.

Separately managed accounts. Certain of our current operating members also manage separate client accounts. We will not receive any management fees or incentive fees or allocations from any of such separately managed accounts.

Expenses

General partner expense allocation. General partner expense allocation represents the total base cash compensation for our general partner’s employees and certain other operating expenses of our general partner, including payroll taxes, travel and entertainment expenses and selling, general and administrative expenses, which will initially be limited to a fixed per year amount of $6 million. With respect to our general partner’s employees, these expenses will include base salaries and related employee benefits and taxes. Any other compensation, including discretionary incentive compensation, whether cash-based variable compensation or equity-based compensation, will be designed to align the interests of our general partner’s employees with the interests of our unitholders.

Cash-based variable compensation. Our cash bonus program is designed to align the interests of our general partner’s employees with the interests of our unitholders. The annual payment of bonuses will be a percentage of the base salaries of certain of our executive officers and employees, initially in an aggregate amount of up to $3.4 million, and will be subject to fund performance hurdles as specified by our board of directors.

Equity-based compensation. Prior to this offering, we granted all of our executive officers and certain other employees common units under our Equity Incentive Plan. These equity grants will not vest until the company has achieved Economic Income of $55 million over any four consecutive quarters.

General and administrative and other expenses. General and administrative and other expenses include professional fees, occupancy costs, professional and director liability insurance coverage, information processing and communication expenses, including accounting information system outsourcing costs, reporting and transfer agent costs, custody and registration fees, computer systems, equipment costs and general office expenses, and interest expense that we may incur because of borrowings from time to time.

Amortization of intangible assets. Immediately following the closing of this offering, Aveon Holdings will acquire controlling interests in the manager affiliates of our initial funds. These controlling interests will be acquired, in part, through the payment of cash and, in part, through an issuance of Aveon Holdings partnership units. The total consideration to be paid to selling investment professionals will be $ million in cash and in Aveon Holdings partnership units (with the fair value of based on the initial public offering price of per common unit). The Aveon Holdings partnership units issued to the selling investment professionals will be subject to 100% cliff vesting on the first anniversary of the date of issuance. These consolidated financial statements present the total intangible assets acquired as both the portion of acquired intangible assets and the portion of intangible assets still owned by the non-controlling interests. Accordingly, Aveon has reflected the acquired intangible assets at the fair value of the consideration paid plus the value implied for the remaining non-controlling portion of the manager affiliate.

100

The pro forma customer-based intangible assets of $288.3 million reflect the consolidated value ascribed for the future fee income relating to contractual rights and client or investor relationships for management, advisory and incentive fee arrangements, as well as for those rights and relationships associated with the future incentive income from the funds. The residual amount representing the purchase price in excess of tangible and intangible assets is expected to be $ and will be recorded as goodwill. The identified customer based intangibles will be amortized over their estimated useful lives, estimated to be between five and ten years.

We anticipate acquiring finite-lived customer based intangible assets in conjunction with the acquisitions following this offering. Accordingly, on a pro forma basis, we have reflected $14.4 million of amortization expense for the quarter ended March 31, 2010, and $57.7 million of amortization expense for the year ended December 31, 2009 related to these acquired intangible assets. The estimated useful lives of the finite-lived intangibles are expected to average five years. We will amortize the finite-lived intangibles over their estimated useful lives.

Fund expenses. Expenses related to the manager affiliates’ general partner or managing member interests in our initial funds. Such expenses include, but are not limited to, interest, dividend, administrative and professional fee expenses.

Other income

Other income is realized and unrealized investment gains or losses resulting from our manager affiliates’ general partner or managing member interests in our initial funds, typically as either general partner capital interest or managing member share ownership in a fund. Investment income increases or decreases based on the number, type and size of investments, performance of those investments, and the reinvestment of returns. Dividend income is influenced by the number, type and size of investments in dividend yielding securities. Net realized and unrealized gains from the initial funds are influenced by a number of internal and external factors, primarily due to changes in the fair market value of portfolio investments and the amount of assets under management.

Income taxes

We expect our manager affiliates to be taxed as partnerships for U.S. federal income tax purposes. In addition, certain of our wholly-owned entities are subject to federal, state and local corporate income taxes. We follow GAAP guidance regarding the presentation of non-controlling interests effective January 1, 2009. As a result, we calculate our effective tax rate on Income (loss) before taxes and non-controlling interests in operations of subsidiaries as opposed to the Net income (loss) attributable to us. Our effective tax rates reflect the following: (1) certain wholly-owned subsidiaries were subject to federal, state and local corporate income taxes on income allocated to Aveon, and (2) a portion of the compensation charges are not deductible for tax purposes.

Non-controlling interests

Allocation to non-controlling interests related to performance of certain responsibilities. Due to our organizational structure, compensation to the operating members related to performing their responsibilities of investment management is presented as non-controlling interests in results of operations. Following our acquisition of the initial funds, payments to each of the operating members of our manager affiliates will be equal to approximately 70% of gross management fees and incentive fees and allocations earned from our initial funds until the fund

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or our level of participation reaches a specified AUM, generally $600 million, and 100% of incremental management fees and incentive fees and allocations that we earn from that fund on assets in excess of the specified AUM. The operating members will use such payments to cover operating expenses.

Non-controlling interests—other. This includes the portion of the amortization of intangible assets arising from the consolidation of the portion of the operating affiliates retained by the non-controlling interests, investment results on portfolio investments which belong to the minority partners, and the results of the overall operations allocated to our founding investors.

Assets under management and fund performance

Each of our initial funds is focused on a single alternative hedge fund strategy and will be responsible for its own investment performance. We expect positive performance to generally allow each fund to attract additional assets, while poor performance generally to decrease each fund’s ability to increase, and in some cases may cause the decrease of, assets under management. Assets under management in each fund may also vary due to factors unrelated to performance, such as the liquidity requirements of fund investors due to exogenous economic or sector events. In the case that assets under management increase in one of our funds, the management fee contribution from such fund will increase because we charge management fees based on assets under management (generally at the beginning of each month). As the fund’s assets under management increase, the base on which the fund earns incentive income also increases. Incentive income is directly influenced by the investment performance of the fund, but if assets under management increase while investment performance remains constant, or does not deteriorate sufficiently to offset such an increase, incentive income will also increase. Investment performance of each of our initial funds, in addition to being the main determinant of incentive income, will also be the principal factor driving the long-term success of each of our funds because it will enable the funds to retain profits, attract new investment capital and minimize redemptions from existing investors. With regard to the manager affiliates of our initial funds, we have placed a limit on assets under management for which we receive fees, generally $600 million, and will allocate to such operating members all of the revenues above the respective limit. This creates a linear dilution mechanism that reduces our share of fees as AUM grows above the limit; however, we believe that this limit is important in maintaining a strong incentive for our operating members to grow assets under management.

The aggregate AUM of the eight initial funds as of March 31, 2010, was approximately $1,891 million, up from $1,737 as of December 31, 2009, which was down from $2,376 million as of December 31, 2008.

Over the last two years and the first quarter of 2010, the aggregate balance of assets under management of our eight initial funds managed by the six manager affiliates that we will acquire were as follows:


(US$ millions)	Three months ended March 31, 2010			Year ended December 31, 2009			Year ended December 31, 2008

AUM beginning balance	$	1,737		$	2,376		$	1,597
Subscriptions		255			681			1,578
Redemptions		(119	)		(1,298	)		(1,177	)
Gains from investment performance		18			(22	)		379

AUM ending balance	$	1,891		$	1,737		$	2,376

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Diversification of our revenue sources

The assets under management and fund performance of our initial funds will be aggregated into our consolidated financial results. We have sought to diversify the sources of our incentive fee revenues by acquiring manager affiliates that are strategically diversified and possess low historical investment return cross-correlations. In addition to decreasing the variability in incentive income in different market and economic cycles, we believe diversification across a broad range of strategies will help manage the risk that certain strategies may fall in and out of favor with investors, often independently of manager performance, in certain market cycles. Though we have selected our initial funds in the belief that they will outperform their strategy benchmarks and attract assets in all market conditions, we believe diversification across independent funds will contribute to long-term earnings stability and growth.

Managing our growth

Our initial funds have managed their own growth by successfully staying within their risk parameters and achieving attractive historical performance, often under challenging market conditions. We believe that we will augment our funds’ ability to attract additional capital through our active support and oversight. In addition to the organic growth of our initial funds, we also expect to grow and integrate additional manager affiliate acquisitions. We believe that this dual strategy of organic and acquisition growth will allow us to continue to take advantage of new opportunities for expansion. To achieve this goal, our management team and manager affiliates must successfully manage growth and integrate acquisitions efficiently and effectively.

Results of operations

Formation transactions and Aveon Holdings I L.P.

Immediately following the completion of this offering, we will enter into a series of formation transactions whereby we will, among other things, acquire controlling interests in the manager affiliates of a diversified group of hedge funds that we believe have promising growth potential. As described in “Formation and structure of our Company,” The Aveon Group L.P. will be a holding partnership and, through wholly-owned subsidiaries, the sole general partner of each of the Aveon Holdings partnerships, which are Aveon Holdings I L.P., Aveon Holdings II L.P. and Aveon Holdings III L.P. The Aveon Group L.P. intends to control and conduct all of its material business activities through Aveon Holdings, which was formed to hold our interests in different operating subsidiaries, including our manager affiliates.

Results of Aveon Holdings I L.P. as acquirer of the manager affiliates

Aveon Holdings I L.P. is the predecessor and acquirer for the combination of our six manager affiliates. The results of operations for the three months ended March 31, 2010 and the period from May 1, 2009 (inception) through December 31, 2009 for Aveon Holdings I L.P. were as follows:


	Three months ended March 31, 2010 (unaudited)			May 1, 2009 (inception) through December 31, 2009


Expenses
Compensation	$	131,250		$	245,833
Professional fees		23,269			20,000
Net income (loss)	$	(154,519	)	$	(265,833	)

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Revenues. Aveon Holdings I L.P. has a limited operating history and as such there were no revenues during the quarter ended March 31, 2010 or the period ended December 31, 2009.

Expenses. The expenses reflected in the statement of operations reflect the expenses incurred by the founding investors on behalf of Aveon Holdings I L.P. which were allocated to Aveon Holdings I L.P. as contributed equity capital.

Aveon Holdings I L.P. will hold all six manager affiliates of our eight initial funds because they are all U.S. fee generating subsidiaries. The pro forma combined results of Aveon Holdings I L.P. and the six acquisitions of the manager affiliates are presented in “Unaudited pro forma financial information” and discussed in the following section.

Pro forma results of operations for the three months ended March 31, 2010 and the year ended December 31, 2009

Assets under management and performance of initial funds

The following sets forth the key drivers of our pro forma financial results. See “Business—Initial funds” for a full description of each of our initial funds. The following table presents the assets under management of the eight initial funds managed by our six manager affiliates:


(US$ millions)	As of March 31, 2010		As of December 31, 2009

Banyan fund	$	501	$	407
Chesapeake funds:
Select fund		10		10
Preferred fund		16		16

Total Chesapeake funds		26		26
Cura fund		227		248
Glenrock fund		422		421
Viridian fund		645		571
Welton funds:
G fund		58		53
H fund		12		12

Total Welton funds		70		65

Total AUM	$	1,891	$	1,737

The table below sets forth the net investment performance for funds managed by the manager affiliates:


	Three months ended March 31, 2010	Year ended December 31, 2009

Banyan fund	1.0%	11.5%
Chesapeake Select fund	0.6%	-0.3%
Chesapeake Preferred II fund	1.8%	3.5%
Cura fund	0.1%	8.8%
Glenrock fund	-0.3%	2.5%
Viridian fund	1.6%	-11.2%
Welton G fund	-0.4%	-7.2%
Welton H fund	-1.1%	-14.9%

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The table below sets forth the aggregate changes to our assets under management for the aggregate initial funds:


(US$ millions)	Three months ended March 31, 2010			Year ended December 31, 2009

Balance, beginning of period	$	1,737		$	2,376
Subscriptions		255			681
Redemptions		(119	)		(1,298	)
Investment performance*		18			(22	)

Balance, end of period	$	1,891		$	1,737

Growth from net flows (%)		14.7%			-26.0%
Growth from investment performance (%)		1.0%			-0.9%

Investment performance is net of management fees, incentive income and fund expenses.

The Aveon Group L.P. unaudited consolidated pro forma results of operations


	Three months ended March 31, 2010			Year ended December 31, 2009


Revenues
Management fees	$	6,537,916		$	30,429,507
Incentive income		2,634,161			26,961,064
Interest income		40,951			258,272
Other		179			5,285

Total revenues		9,213,207			57,654,128

Expenses
Compensation and benefits		131,250			245,833
General partner expense allocation		1,166,500			4,945,167
General, administrative and other		551,019			2,131,000
Aveon fund expenses		55,325			248,573
Amortization		14,416,667			57,666,667

Total expenses		16,320,761			65,237,240

Other income
Aveon funds net gains (losses):
Net realized gains (losses) on investments		595,225			2,400,771
Net unrealized gains (losses) on investments		(188,019	)		174,975

Total other income		407,206			2,575,746

Income (loss) before taxes and non-controlling interest in income of subsidiaries		6,700,348			(5,007,366	)
Income taxes		—			—
Non-controlling interests in consolidated entities:
Related to performance of certain responsibilities		6,544,492			41,436,661
Other		(11,107,822	)		(41,235,173	)

Total non-controlling interests		(4,563,329	)		201,488

Net income (loss)	$	(2,137,018	)	$	(5,208,854	)

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Revenues

Management fees. Management fees of our manager affiliates amounted to $6.5 million for the quarter ended March 31, 2010 and $30.4 million for the year ended December 31, 2009. Management fees are calculated on assets under management in the funds at the beginning of each calendar quarter or at the end of each month depending on the individual manager affiliate. For the year ended December 31, 2009, our weighted average management fee as a percentage of AUM was 1.51% and for the quarter ended March 31, 2010, our weighted average management fee as a percentage of AUM was 0.37%.

Incentive income. For the quarter ended March 31, 2010, the incentive income of the manager affiliates amounted to $2.6 million, representing accrued and crystallized incentive income (crystallized incentive income is income realized as a result of partial or whole redemptions of investor capital accounts during the calendar year). Incentive income of the manager affiliates amounted to $27.0 million for the year ended December 31, 2009. Incentive fees are calculated based on investment performance net of management fees and fund expenses for the incentive period, usually the calendar year or as a result of redemption during the calendar year, as limited by high-water marks. In 2009, 100% of our funds received incentive income at a weighted average rate of 1.34% of AUM.

Interest income. The interest income of $40,951 for the quarter ended March 31, 2010 and $258,272 for the year ended December 31, 2009 was related to the investments of the manager affiliates in the various underlying funds. This interest income does not reflect any interest earned on any net proceeds from this offering.

Other revenues. Other income of $179 for the quarter ended March 31, 2010 and $5,285 for the year ended December 31, 2009 reflects miscellaneous revenues items allocated from the onshore feeder funds related to the investment activity of the manager affiliates.

Expenses

General partner expense allocation/compensation and benefits. The pro forma expenses of Aveon Holdings I L.P. of $1.3 million for the quarter ended March 31, 2010 and $5.2 million for the year ended December 31, 2009 reflect the allocation to our general partner to meet operating costs. The allocation includes base cash compensation for our general partner’s employees and certain other operating expenses of our general partner, including payroll taxes, travel and entertainment expenses and selling, general and administrative expenses, and is initially capped at a fixed amount of $6.0 million per year. With respect to our general partner’s employees, these expenses include base salaries and all related employee benefits and taxes.

General, administrative and other expenses. General and administrative and other expenses of $0.6 million for the quarter ended March 31, 2010 and $2.1 million for the year ended December 31, 2009 include professional fees, occupancy costs, professional and director liability insurance coverage, information processing and communication expenses, including accounting information system outsourcing costs, reporting and transfer agent costs, custody and registration fees, computer systems, equipment costs and general office expenses and interest expense that we may incur because of borrowings from time to time.

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Aveon fund expenses. Fund expense of $55,325 for the quarter ended March 31, 2010 and $248,573 for the year ended December 31, 2009 are expenses directly related to the manager affiliates’ capital accounts held in underlying onshore feeder funds.

Amortization of customer based intangibles. We anticipate acquiring finite-lived customer based intangible assets in conjunction with the acquisitions following this offering. Accordingly, we have reflected $14.4 million of amortization expense for the quarter ended March 31, 2010, and $57.7 million of amortization expense for the year ended December 31, 2009 related to these acquired intangible assets. The estimated useful lives of the finite-lived intangibles are expected to average five years. We will amortize the finite-lived intangibles over their estimated useful lives.

Other income

Other income of $407,206 for the quarter ended March 31, 2010 and $2.6 million for the year ended December 31, 2009 reflects the underlying net gains and losses of the manager affiliates investments in their capital accounts of the funds.

Non-controlling interests

Non-controlling interests related to performance of certain responsibilities. Non-controlling interests related to performance of certain responsibilities of $6.5 million for the quarter ended March 31, 2010 and $41.4 million for the year ended December 31, 2009 represent the payments to each of the operating members of our initial funds, which will be equal to approximately 70% of gross management fee revenue and incentive income earned from our funds, or participating AUM, up to a specified level of AUM, generally $600 million, and 100% of gross management fee revenue and incentive income earned from our funds on AUM exceeding the applicable AUM level.

Other non-controlling interests. The non-controlling interests of $11.1 million for the quarter ended March 31, 2010 includes $11.8 million of amortization of customer-based intangible assets relating to the portion of the general partner retained by the non-controlling interests and offset by $393,011 of investment results on portfolio investments belonging to the minority partners and $320,834 representing the results of the overall operations allocated to the founding investors. The non-controlling interests of $41.2 million for the year ended December 31, 2009 includes $47.3 million of amortization of customer-based intangible assets relating to the portion of the general partner retained by the non-controlling interests and offset by $2.6 million of investment results on portfolio investments belonging to the minority partners and $3.5 million representing the results of the overall operations allocated to the founding investors.

Income taxes

The provision for income taxes includes U.S. federal, state and local taxes at an approximate effective tax rate of 25%. The funds were not subject to income taxes prior to the acquisition by Aveon. Certain permanent differences affected the tax position, principally start-up costs incurred prior to the beginning of operations. As a result of the inclusion of a corporate tax-paying entity in the structure of Aveon, a portion of Aveon’s earnings become subject to corporate level income taxes going forward.

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Segment analysis

Aveon Multi-Strategy Funds—Economic Income

We will conduct substantially all of our operations through the Aveon Multi-Strategy Funds segment. “Economic Income” is the financial measure used by our management to evaluate the overall performance and make operating decisions for the Aveon Multi-Strategy Funds segment. We believe that Economic Income is helpful in understanding our business and that investors should review the same supplemental financial measure that management uses to analyze our segment performance. Economic Income supplements and should be considered in addition to, and not in lieu of, the results of operations discussed above that have been prepared in accordance with GAAP. As explained below, Economic Income has certain limitations in that it does not take into account certain items included or excluded under GAAP.

Our management uses Economic Income to measure performance and allocate resources. Economic Income focuses on the core drivers of unitholder value: economic income revenues (management fees, incentive income and investment income) less economic income expenses (compensation, which includes operating member allocation compensation and general partner compensation expense; and non-compensation expenses, which are principally general and administrative expenses).

Management fee and incentive income earned by the Aveon Multi-Strategy Funds segment is highly indicative of the performance of our funds. With regard to compensation of our general partner’s employees, our philosophy is to align the interests of our existing partners and other key personnel with those of our unitholders and the investors in our funds. Allocation payments to our operating members are based directly on a contractual percentage of gross management fees and incentive income earned. Virtually all amounts paid to our general partner’s employees and all assets paid to operating members are based on our performance and growth for the year.

Economic Income:

•

excludes amortization expense and non-controlling interest that arise out of the acquisition of customer-based intangibles and are not related to our performance;

•

excludes interest, depreciation and taxes because we do not take those items into account when evaluating our performance; and

•

in future periods will exclude other non-cash items, such as compensation expense relating to equity-based compensation.

Economic Income may not be comparable to similarly titled measures used by other companies and is not a measure of performance calculated in accordance with GAAP. We use Economic Income as a measure of operating performance, not as a measure of liquidity. Economic Income

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should not be considered in isolation or as a substitute for operating income, net income, operating cash flows, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. The bullet point summary above describes the adjustments which should be applied to our net income determined in accordance with GAAP to derive Economic Income.

Use of Economic Income without consideration of related GAAP measures is not adequate due to the adjustments described above. Management compensates for these limitations by using Economic Income as a supplemental measure to GAAP results to provide a more complete understanding of our performance as management measures it.

Pro forma Economic Income for the three months ended March 31, 2010 and year ended December 31, 2009


	Three months ended March 31, 2010			Year ended December 31, 2009


Economic Income revenues
Management fees	$	6,537,916	71.3%	$	30,429,507	53.0%
Incentive income		2,634,161	28.7%		26,961,064	47.0%

Total Economic Income revenues		9,172,077	100.0%		57,390,571	100.0%


Economic Income expenses
General partner expense allocation		1,297,750	14.1%		5,191,000	9.0%
General, administrative and other		551,019	6.0%		2,131,000	3.7%
Non-controlling interest in consolidated entities		6,544,492	71.4%		41,436,661	72.2%

Total Economic Income expenses		8,393,261	91.5%		48,758,661	85.0%

Economic Income	$	778,816	8.5%	$	8,631,910	15.0%

Below is a reconciliation of The Aveon Group L.P.’s pro forma net income (loss) for the quarter ended March 31, 2010 and the year ended December 31, 2009 to pro forma Economic Income:


	Three months ended March 31, 2010			Year ended December 31, 2009


Net income (loss)	$	(2,137,018	)	$	(5,208,854	)

Add: net adjustments for amortization expense
Total amortization of customer based intangibles		14,416,667			57,666,667
Less non-controlling amortization of customer based intangibles		(11,821,667	)		(47,286,667	)

Net adjustments for amortization		2,595,000			10,380,000

Add: net reveune and expense adjustments for non-controlling interest
Pro-rata share of revenues in consolidated subsidiaries		1,051,034			6,381,564
Less pro-rata share of expenses in consolidated subsidiaries		(730,200	)		(2,920,800	)

Total non-controlling interest		320,834			3,460,764


Economic Income	$	778,816		$	8,631,910

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Economic Income

Economic Income on a pro forma basis would have been $778,816 for the quarter ended March 31, 2010, and $8.6 million for the year ended December 31, 2009, which represents management and incentive income less general partner expense allocation, general and administrative expenses and non-controlling operating member allocation expense.

Economic Income revenues

Management fees. Management fees were $6.5 million for the quarter ended March 31, 2010 based on weighted average AUM for the quarter of $1,879 million and $30.4 million for the year ended December 31, 2009 based on weighted average assets under management for the year of $2,099 million.

Incentive income. Incentive income was $2.6 million for the quarter ended March 31, 2010 based on weighted average assets under management for the quarter of $1,879 million and $27.0 million for the year ended December 31, 2009, based on weighted average assets under management for the year of $2,099 million.

Economic Income expenses

General partner expense allocation. Our general partner expense allocation was $1.3 million for the quarter ended March 31, 2010 and $5.2 million for the year ended December 31, 2009, which represents the allocation to our general partner to meet operating costs.

General and administrative and other. General, administrative and other expenses were $551,019 for the quarter ended March 31, 2010 and $2.1 million for the year ended December 31, 2009. General, administrative and other expenses represent other expenses consisting primarily of administrative and other expenses relating to our operations, including professional services, insurance, occupancy and equipment costs, business development expenses, information processing and communications, and interest expense that we may incur because of borrowings from time to time.

Allocation to non-controlling interests related to performance of certain responsibilities. The amount of $6.5 million for the quarter ended March 31, 2010 and $41.4 million for the year ended December 31, 2009 represent the payments to each of the operating members of our initial funds, which will be equal to approximately 70% of gross management fee revenue and incentive income earned from our funds up to a specified level of AUM, generally $600 million, and 100% of gross management fee revenue and incentive income earned from our funds on AUM exceeding the applicable AUM level.

Liquidity and capital resources

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to pay compensation, make distributions, repay borrowings and satisfy other general business needs. The primary sources of funds for liquidity to meet our long-term liquidity requirements include the capital raised in this offering and cash flows provided by operating activities, primarily the management fees and incentive compensation paid by the funds we manage and oversee and through the issuance of new equity, debt or revolving lines of credit with banks.

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Primary liquidity needs over the next twelve months following the closing of this offering are expected to include funds committed to complete the acquisitions of the manager affiliates, including acquiring additional general partner or managing member interests in future funds, operating expenses, income taxes, non-controlling operating member allocation and distributions to unit holders.

Critical accounting policies

We prepare our consolidated financial statements in accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP requires management to make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective. Actual results may be affected negatively based on changing circumstances. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. The following is a summary of what we believe to be our most critical accounting policies and estimates.

Consolidation criteria

Our policy is to consolidate into our financial statements those entities over which we have control over significant operating, financial or investing decisions of the entity. These include wholly-owned subsidiaries and the manager affiliates over which Aveon has voting control.

Following the completion of this offering, Aveon will have a significant economic interest in each of the manager affiliates of our initial funds, and 100% of the voting interest in the manager affiliates and control of the management of each fund. Accordingly, Aveon has consolidated each of the manager affiliates.

We will grant the investors of the funds managed by the manager affiliates the right to dissolve their respective partnerships. Accordingly, going forward, we will not be required to consolidate the funds. All intercompany account balances and transactions will be eliminated in consolidation. Minority interests in the consolidated manager affiliates are classified as a non-controlling interest in net assets of consolidated subsidiaries on the consolidated balance sheet, and likewise non-controlling interests in the results of operations of those subsidiaries in the consolidated income statement.

Aveon will also own rights to the collection of fees from offshore feeder funds which are considered to be variable interest entities (VIE). Management performs an analysis of the design of each VIE to determine whether it is the primary beneficiary of the VIE. Based upon management’s analyses, Aveon is not deemed to be the primary beneficiary of the majority of the expected losses or of the expected residual returns or both. Management’s evaluation of whether Aveon is the primary beneficiary is subject to judgment.

For operating entities over which we may exercise significant influence but which do not meet the requirements for consolidation, we use the equity method of accounting whereby we record our share of the underlying income or losses of these entities.

Fair value measurements and hierarchy

U.S. GAAP Financial Accounting Standards on Fair Value Measurements (ASC 820, formerly SFAS No. 157), establishes a single definition for fair value and a framework for measuring fair

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value. A fair value measurement represents the price at which a transaction would occur between market participants at the measurement date. In accordance with ASC 820, Aveon has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The categorization is as follows:

•

Level 1: Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that Aveon has the ability to access.

•

Level 2: Financial assets and liabilities whose values are based on models where the inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

•

Level 3: Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category.

Revenue and expense recognition

Our revenue and expense recognition policies are as follows:

Management and Incentive Income. Our management fees and incentive income are comprised of:

•

Base management fees. Base management fees are based upon the contractual terms of investment advisory and related agreements and are recognized as earned over the specified contract period.

•

Incentive fees and allocations. Incentive fees and allocations represent the allocations of profits which are a component of our general partner interests in the Aveon funds. In certain incentive fee arrangements we are entitled to receive incentive fees and allocations, subject to certain net loss carry-forward provisions (known as a “high-water mark”) and, in some cases, when the return on assets under management exceeds certain benchmark returns or other performance targets. In all cases, each fund is considered separately in that regard. Incentive fees and allocations are realized at the end of each fund’s measurement period, as applicable to the incentive fee or allocation.

Other Income. Our manager affiliates acquire general partner or managing member interests in the funds they manage and we account for these general partner or managing member interests under the equity method of accounting. Aveon’s share of income generated by these general

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partner or managing member interests is recorded as a component of Other income. That amount reflects the fair value gains and losses of the associated funds’ underlying investments. These funds generate realized and unrealized gains from underlying investments which reflect a combination of internal and external factors.

Expenses. Our expenses include compensation and benefits expense for our officers and employees, general and administrative expenses, certain portions of which are paid by our general partner and reimbursed by Aveon through an expense allocation by the general partner. Our accounting policies related thereto are as follows:

•

General partner allocation. The general partner allocation expense consists of base cash compensation for our general partner’s employees and certain other operating expenses of our general partner, including payroll taxes, travel and entertainment expenses and selling, general and administrative expenses, which are reimbursed by Aveon Holdings. These expenses are recorded as of the date incurred.

•

Cash-based variable compensation. Our cash bonus program is designed to align the interests of our general partner’s employees with the interests of the investors in the funds. The annual payment of bonuses is a percentage of the base salaries of certain of our executive officers and employees and will be subject to performance hurdles as specified by our board of directors.

•

Certain officers and employees are eligible for equity-based compensation. The cost of employee service received in exchange for an award of equity instruments is generally measured based on the fair value of the grant at the date of the award. Equity based awards that require future service or achievement of certain performance levels are recognized over the related service period. Equity based awards that do not require future service are expensed at the date of the award. Aveon is required to estimate forfeitures for equity-based awards that are not expected to vest.

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General, administrative and other. The balance of our expenses include interest expense, occupancy and equipment expenses, and general, administrative and other expenses, which consist of professional fees, public company costs, travel and related expenses, communications and information services, depreciation and amortization and other operating expenses. Certain portions of these expenses are paid by the general partner and reimbursed through an expense allocation to the general partner.

Accounting for acquisitions. As a result of the acquisitions of our manager affiliates, we will record certain identifiable intangible assets and goodwill. Our identifiable intangible assets consist of the contractual right to future fee income from our advisory contracts and the contractual right to earn future incentive income from certain of our funds. We will amortize our identifiable intangible assets over their estimated useful lives. Identifiable intangible assets are tested for impairment whenever events or changes in circumstances suggest that an asset’s or asset group’s carrying value may not be fully recoverable. An impairment loss, calculated as the difference between the estimated fair value and the carrying value of an asset or asset group, is recognized if the sum of the estimated undiscounted cash flows relating to the asset or asset group is less than the corresponding carrying value.

Goodwill is the cost of acquired business interests in excess of the fair value of the net assets, including identifiable intangible assets, at the acquisition date. We will test the carrying of our goodwill in each of our reporting units for impairment at least annually by comparing the estimated fair value of each manager affiliate with its estimated net book value, after allowing

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or the value of identifiable intangible assets. We derive the fair value of each of our manager affiliates primarily utilizing a discounted cash flow methodology that incorporates manager affiliates’ cash earnings projections.

Income taxes. Aveon and certain of its subsidiaries expect to be taxed as partnerships for U.S. federal income tax purposes. As a result, certain income is not subject to U.S. federal and state income taxes. Accordingly, the tax liability related to income earned by these entities represents obligations of the individual partners and members. In addition, certain of the wholly-owned subsidiaries of Aveon are subject to corporate federal, state and local income taxes that are reflected in our consolidated financial statements. Income taxes are accounted for using the liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using currently enacted tax rates. The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

There remains some uncertainty regarding Aveon’s future taxation levels. The U.S. Congress has recently considered bills relating to the taxation of investment partnerships. Legislation has been introduced into the U.S. Congress this year that would generally (1) treat carried interest as non-qualifying income under the tax rules applicable to publicly traded partnerships, which would require Aveon to hold interests in entities earning such income through taxable subsidiary corporations, and (2) tax carried interest as ordinary income for U.S. federal income tax purposes, rather than in accordance with the character of income derived by the underlying fund, which is in many cases capital gain. Furthermore, legislation has been introduced in the U.S. House of Representatives that would tax as corporations publicly traded partnerships that directly or indirectly derive any income from investment advisor or asset management services. In addition, the Obama administration proposed in its published revenue proposals for both 2010 and 2011 that the current law regarding the treatment of carried interest be changed to subject such income to ordinary income tax. If any such legislation or similar legislation were to be enacted and it applied to us, it could materially increase the amount of taxes payable by Aveon and/or its unitholders.

Non-controlling interests related to performance of certain responsibilities. The non-controlling interest payments relating to the performance of certain responsibilities reflect the allocation made to the operating members of the manager affiliate. The allocations are contracted to be approximately 70% of management fees and incentive income pursuant to investment management agreements between the funds and the manager affiliates on specified levels of assets under management, generally $600 million, and 100% of those fees and incentive compensation on assets under management above such amount.

Non-controlling interests—Other. Other non-controlling interests include the portion of the amortization of intangible assets arising from the consolidation of the portion of the operating affiliates retained by the non-controlling interests, investment results on portfolio investments which belong to the minority partners, and the results of the overall operations allocated to our founding investors.

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Contractual obligations

We had no contractual obligations as of December 31, 2009 or March 31, 2010.

Off-balance sheet arrangements

Aveon Holdings I L.P., which is our predecessor for accounting purposes, had no off-balance sheet arrangements as of December 31, 2009 or March 31, 2010.

Qualitative and quantitative disclosures about market risk

Our predominant exposure to market risk will be related to our ownership of the manager affiliates of our funds and the sensitivities to movements in the fair value of our funds’ investments, which may adversely affect our management fees and incentive fees and allocations.

The fair value of financial assets and liabilities of our funds may fluctuate in response to changes in the value of securities, foreign currency exchange rates, commodity prices and interest rates. The net effect of these fair value changes impacts the realized and unrealized gains and losses from investments in our combined statements of income. However, the majority of these fair value changes, if losses, are absorbed by the non-controlling interest holders of our funds. The effect of gains from investments is allocated according to our funds’ governing agreements, and our manager affiliates will receive an incentive fee or allocation in excess of their stated interest.

Although each of our funds will continue to run its own risk management processes, our operating members will be subject to an additional level of enterprise risk oversight by our general partner’s employees using our systems, which will include the monitoring of limits for gross and net exposures, position concentrations, stress test sensitivities, maintenance of historical investment characteristics and daily profit and loss assessment. We will also use investment and portfolio risk screens to examine the structure of each manager affiliate’s portfolio to ensure that we are appropriately diversified in different economic and capital cycles. In addition, we will require that each of our fund’s administrator and/or prime broker connect directly into our risk systems so that our management can apply daily oversight and reporting on all aspects of each investment program.

We are sensitive to changes in market risk factors that affect our financial results.

Impact on management fees

Our management fees are based on the assets under management of our funds as described in “—Understanding our results / key financial measures—Revenues” and are equal to approximately 30% of the management fees that our manager affiliates earn from our funds until the fund or our level of participation reaches a specified level of AUM, generally $600 million. Management fees will change in proportion to changes in the assets under management in our funds, which are affected by the market value of the investments of our funds and inflows and redemptions from our funds. As of March 31, 2010, a 10% increase in the average AUM of our initial funds would have increased our pro forma management fees by $0.7 million for the three months ended March 31, 2010, and a 10% decrease in the average AUM of our initial funds would have decreased our pro forma management fees by $0.7 million.

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Impact on incentive income

Our incentive income is based on a percentage of profits of our various funds as described in “—Understanding our results / key financial measures—Revenues,” and is equal to approximately 30% of the incentive fees and allocations that we earn from our funds until the fund reaches a specified level of AUM, generally $600 million. Our incentive income is determined by our assets under management and our funds’ performance, which are impacted by market factors. However, major factors that will influence the degree of impact include (i) the performance for each of our funds in relation to how the investments therein are impacted by changes in the market and (ii) fund performance during the period of any loss carry forward or “high-water mark.” Consequently, incentive income cannot be readily predicted or estimated.

Market risk

Investments held by our funds as of any reporting date will include securities owned, securities sold not yet purchased and derivatives, which are reported at fair value. A 10% change in the fair value of the investments held by our initial funds as of March 31, 2010, would have resulted in a change of approximately $189 million in our assets under management, which would proportionately affect our management fee revenues and could significantly affect our incentive income, each as discussed above.

Exchange rate risk

Our funds hold investments that are denominated in non-U.S. dollar currencies that may be affected by movements in the rate of exchange between the U.S. dollar and non-U.S. dollar currencies. We estimate that as of March 31, 2010, a 10% change in the rate of exchange against the U.S. dollar would not have a material effect on our revenues or net income.

Interest rate risk

We currently do not have any financing arrangements. However, our initial funds hold a variety of credit instruments which accrue interest at variable rates and interest rate changes may therefore impact the cash flows and returns of our funds.

Credit risk

Credit risk is the risk that counterparties or debt issuers may fail to fulfill their obligations or that the collateral value may become inadequate to cover our funds’ exposure. Certain of our funds hold derivative instruments or debt securities that contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. We and our operating members manage credit risk by monitoring the credit exposure to and the creditworthiness of counterparties, requiring additional collateral where appropriate, and using master netting agreements whenever possible. We and our operating members do not currently expect any counterparty defaults and therefore do not expect to incur any loss due to counterparty default.

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Industry

Background

Alternative asset management, in contrast to traditional asset management, is based on a variety of investment strategies such as private equity, hedge fund and commodity approaches that have a common objective of absolute performance within specified risk parameters. Management companies that advise alternative asset portfolios typically earn management fees based on the value of the assets they manage and, unlike traditional asset managers, earn incentive fees and allocations on the performance of fund investments. As a result, alternative asset managers generally seek to produce consistent absolute returns—which are less correlated to market indices—by actively hedging market risk and improving the risk-adjusted returns of their portfolios.

Hedge funds are viewed as a subset of alternative asset management and are generally differentiated from private equity by the more liquid characteristics of their underlying assets. Because hedge funds are not subject to the investment restrictions of the Investment Company Act, they invest in a much broader range of asset classes than traditional collective investment vehicles, such as mutual funds. Hedge fund asset management includes, but is not limited to, the following strategy classes: long/short equity hedge, event driven, multi-strategy, global macro, fixed income/convertible arbitrage, equity market neutral and managed futures.

Market environment

The market environment for both traditional and alternative asset managers was generally favorable from 2003 through mid-2008 and was characterized by new fund formations, positive investment returns, and growth in assets under management. In mid-2008 the United States experienced considerable turbulence in the housing and sub-prime mortgage markets, which negatively affected other fixed income markets. The difficult conditions in the fixed income markets prompted lenders to cease committing to new senior loans and other debt, making it extremely difficult to refinance existing debt. As the turbulence continued and its intensity increased, equity market conditions also began to deteriorate in the latter part of 2008, as concerns of an economic slowdown began to affect equity valuations. The resulting reduction in liquidity and increase in volatility caused several commercial and investment banks, hedge funds and other financial institutions to reduce the carrying value of some of their fixed income holdings, further reducing the liquidity of debt and, to a lesser extent, equity instruments.

The material depreciation in asset values, greater volatility, counterparty consolidation and weaker economic conditions around the globe resulted in decreased availability of capital in the global debt and equity markets compared to recent years. In general, these conditions

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contributed to increased redemption requests from investors throughout the asset management industry, including hedge funds, in the last two quarters of 2008 and the first three quarters of 2009. The United States and other governments have taken a number of significant steps to improve market conditions, and there has been a general improvement in liquidity and market conditions since the first quarter of 2009. These improvements have been accompanied by a reversal of the overall outflows in the asset management business in the second, third, and fourth quarters of 2009 and a rebound in investor subscriptions in the fourth quarter of 2009. Despite these broad improvements in 2009, investor concern in the first quarter of 2010 over the weakness of the U.S. economic recovery and the potential deterioration of the fiscal condition of Greece and other European countries, caused increased volatility in equity and financial markets. As these conditions develop, we cannot predict the future stability or liquidity of these markets.

Hedge funds

According to the Lipper TASS Asset Flows report as of March 31, 2010 (“Lipper TASS Report”), global assets under management in hedge funds bottomed at the end of the second quarter of 2009 at approximately $1.1 trillion, representing a 30% decline from the mid-2008 peak of $1.6 trillion. By the end of the first quarter of 2010, the total assets under management had stabilized and rebounded to approximately $1.2 trillion. The composition of broad hedge fund strategies as of March 31, 2010 are segmented as follows:

Types of investment strategies and assets under management (AUM) (as of March 31, 2010):

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Total Assets: $1.25 trillion

Long/Short Equity Hedge ($379 billion AUM): Managers making stock selections and capturing directional moves in the equity markets.

Multi-Strategy ($157 billion AUM): Managers making global markets allocations across multiple strategies: convertible bond arbitrage, fixed income arbitrage, statistical arbitrage, equity relative value, long/short equity, event driven strategies or other specialized arbitrage/hedging strategies.

Global Macro ($173 billion AUM): Managers utilizing macroeconomic forecasts or quantitative models in a variety of global markets, such as equities, fixed income, currencies and commodities.

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Event Driven ($167 billion AUM): Managers exploiting valuation disparities created by corporate transactions: spin-offs, mergers, takeovers, restructurings, liquidations and stock buybacks.

Managed Futures ($122 billion AUM): Managers taking positions on the rising and falling rates of futures contracts (and other derivatives) in stocks, bonds, indexes, currencies or commodities.

Fixed Income ($85 billion AUM): Managers doing (i) fixed income arbitrage, pricing inefficiencies between related fixed income securities and directional moves in interest rates; and (ii) credit long/short, taking positions in the credit sensitive portion of fixed income markets.

Equity Market Neutral ($30 billion AUM): Managers taking positions with long stocks hedged by short stocks within the same related sector, industry or market so that the price arbitrage of the long and short positions are market neutral.

Other ($135 billion AUM): Managers employing convertible arbitrage, emerging markets or dedicated short bias strategies.

Source: Lipper Tass Asset Flows Report—Hedge Funds First Quarter 2010. The Lipper Tass Asset Flows Report does not include fund-of-funds, only assets invested through approximately 4,800 reporting funds globally.

From December 1993 to June 2008, the hedge fund industry as measured by assets under management in the Lipper TASS Report grew at a compound annual rate of 27% to a peak of $1.6 trillion, reflecting general long-term positive investment performance and increased allocations to the asset class. However, beginning in the second half of 2008, the market environment caused hedge funds to retrench with the rest of the financial services industry (see “—Market environment”). Through a combination of redemptions and declining performance, the level of hedge fund assets decreased for three consecutive quarters: by approximately $31 billion in the third quarter of 2008; by the largest asset decline in history of $305 billion in the fourth quarter of 2008; and by the second largest decline in history of $131 billion in the first quarter of 2009.

We believe investors began reducing their capital allocations to hedge funds and other alternative asset investment products beginning in the third quarter of 2008 for three principal reasons:

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reduced returns generated by hedge funds and other alternative asset classes as a result of the challenging market conditions;

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significant declines in investor risk tolerance with a flight to quality investments, including U.S. Treasury securities and money market products; and

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the freeze of available credit prompting many investors to maximize their liquid cash holdings.

Because the terms of many hedge funds allow investors to redeem their capital periodically (as opposed to private equity funds, which restrict an investor’s ability to redeem), investors in an adverse market environment redeemed their hedge fund investments in the second half of 2008 and first quarter of 2009 at significantly higher rates than redemption rates in previous years. Net investor redemptions resulted in approximately 60%, or about $281 billion, of the total estimated decline in the hedge fund industry’s AUM ($468 billion) during the second half of 2008 and first quarter of 2009 with the balance due to performance losses.

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The second, third and fourth quarters of 2009 witnessed a broad improvement in economic conditions, the availability of credit and positive market performance. The Lipper TASS Report estimated that in the second and third quarters of 2009, overall hedge fund assets grew by approximately $92.0 billion or 8.5% from the asset low of the first quarter 2009; however, those gains in total assets were due to approximately $143.9 billion in performance gains offset by net redemptions from investors of approximately $51.9 billion. In the fourth quarter of 2009, investor interest rebounded with approximately $7.5 billion of net subscriptions and, together with performance gains of approximately $38.1 billion, added another approximately $45.6 billion to the asset level of the industry in the quarter. In the first quarter of 2010, the resurgence of sovereign debt risk—triggered by the deterioration of the fiscal position of Greece and other European countries—weakened the Euro and caused a flight to the U.S. dollar and also led to a downturn in the global securities market. We believe that selective investor profit taking and portfolio reallocation decisions caused a mix of subscription and redemption between strategies in the first quarter of 2010, resulting in net hedge fund redemptions of under 1% of hedge fund assets or $11.1 billion, with the bulk of redemptions concentrated in select hedge fund strategies namely equity market neutral, event-driven, managed futures and multi-strategies, while emerging markets, long/short equity and global macro strategies continued to gather assets with subscription inflows of $6.0 billion, $4.6 billion and $0.9 billion, respectively. Despite essentially flat net redemptions in the first quarter of 2010, absolute performance gains of $42.8 billion caused net hedge fund AUM to increase by $31.8 billion in the first quarter of 2010.

Hedge fund quarterly flows and total asset levels

December 1993—March 2010

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While short term disruptions in the markets with respect to equity prices, interest rates, credit spreads, and other factors, including liquidity, may have adversely affected the hedge fund industry in the last two years, we believe such disruptions may present significant new opportunities for investment. Also, in 2009, many institutional investors, pension funds, and endowments refrained from re-allocating their assets or making new investments as they began the process of reviewing their asset allocation and manager selection. Although we cannot predict the outcome of the asset reallocation process or future market conditions, we expect net flows into hedge funds to remain positive in the second quarter of 2010—particularly for managers who have outperformed the market and their hedge fund peers in 2008 and 2009—and should remain so over the coming quarters as institutional investors re-balance portfolios and increasingly look for sources of alpha in hedge funds.

Between 2000 and the end of 2007, hedge fund assets under management grew by approximately $1.2 trillion largely as a result of new investments by institutional investors. Hedge fund-of-funds also grew rapidly during this period as an important channel for institutional investors because many institutions had little prior experience investing in hedge funds and lacked the infrastructure and size to prudently invest directly into hedge funds. In exchange for an added layer of fees, hedge fund-of-funds offer institutions the potential to source managers, conduct due-diligence, provide diversification and monitor the underlying hedge funds in their portfolio. According to the April 2009 Bank of New York Mellon and Casey Quirk study, the hedge fund-of-funds channel represented 17% of assets invested in hedge funds in 2000, 37% in 2004 and 47% in 2008. Despite the growth of hedge fund-of-funds prior to the economic downturn, we believe the turmoil of 2008 highlighted some important limitations in the fund-of-funds model: prominent fund-of-funds were invested with managers who defrauded them; hedge fund-of-funds correlations to the equity markets were much higher than expected; and investors paid incentive fees to underlying managers who achieved individual positive performance despite losses in the aggregate hedge fund-of-funds portfolios. We believe that because hedge fund-of-funds firms lack ownership or other forms of legal control over the funds in which they invest and have restricted and infrequent transparency rights which, together with limited liquidity rights, reduce their ability to oversee and respond to the risk in their portfolios. We believe that our approach to acquiring and combining our funds into investable composites may be an attractive alternative to hedge fund-of-funds due to the diversification of our single strategy managers, the lack of a second layer of fees, the netting of performance fees between funds and daily transparency and risk oversight provided by our systems.

We believe that the fundamental drivers of demand for hedge fund strategies have remained in place:

Institutional demand. Historically, the main driver of hedge fund growth has been increasing demand from institutional investors such as endowments and foundations, corporate and public pensions and insurance companies. The Bank of New York Mellon and Casey Quirk study estimates that institutions represented 33% of hedge fund investor assets in 2005 and 43% of hedge fund investor assets at the end of 2008.

Higher institutional demand has been driven by several factors. More conservative institutional investors, such as U.S. pensions, expected hedge funds to provide steady market-neutral income streams necessary to pay longer-living retirees. More aggressive investors, such as endowments, looked to hedge funds to generate significant excess returns. Overall, institutional investors viewed hedge funds as an asset class less correlated to traditional asset classes and, as the hedge

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fund industry matured, became more comfortable increasing hedge fund allocations in their portfolios. In particular, we believe that institutions increasingly viewed long/short equity hedge, event driven, and equity market neutral strategies as replacements to their long-only equity portfolios. Despite the recent downturn in hedge fund performance, we believe institutions will continue to view hedge funds as replacements for long-only portfolios and as sources of alpha especially as institutions resume the allocations they generally suspended in 2009. According to Hedge Fund Research, the average hedge fund performance decline in 2008 was -18.3%, which was less than the S&P 500 decline of -37.0% for the same period.

Despite rapid institutional growth in hedge funds, and notwithstanding the recent outflows, we believe there is evidence that institutions are in the “early adoption” stage of hedge fund investing. An October 2006 research study by Bank of New York and Casey, Quirk & Associates suggested that as of October 2006, only 15% of institutions globally had a hedge fund investment, although this varied by region. In the United States, half of endowments and foundations, as of October 2006, were invested in hedge funds, while the rate is 10% among U.S. defined benefit plans. Outside the United States, use of hedge funds is still limited to only the largest institutions. The study indicates that, at the end of 2005, the United States had over 41% of the global institutional hedge fund assets.

Alpha and beta mandates. As institutions have embraced investments in hedge funds in the past five years, they also began to drive a convergence between their allocations to traditional asset managers and hedge fund managers. Institutional sponsors were no longer awarding mandates strictly along the lines of traditional equity and fixed income classes. Instead, they selected managers on their ability to consistently generate alpha (idiosyncratic or excess returns attributable to manager skill) or to provide less expensive sources of beta (market-based returns, such as index funds). Hedge funds, which are less constrained than traditional asset managers, positioned themselves to provide and receive compensation for alpha through incentive fees and allocations. We believe that a longer-term consequence of mandates that separate alpha and beta is that only true alpha generators will continue to command premium fees.

Demand for effective hedging. An important component of returns attributable to manager skill is hedging market downturns. The turbulent market environment in late 2008 was a test of the ability of hedge funds to manage their portfolio beta exposure and limit market-based losses. We believe investors are differentiating between strategies that employ effective hedging techniques and strategies that do not.

Increasing transparency. The institutionalization of the alternative asset management industry has encouraged hedge fund managers to develop more robust infrastructures, as large institutional investors require greater transparency and effective risk management systems. The recent financial crisis and high-profile scandals will also cause investors to make even greater demands with respect to transparency, requiring disclosure of portfolio risks and the drivers and rationale behind specific investment decisions.

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Business

Overview

We are a newly formed investment management firm focused on acquiring controlling interests in the general partners or managing members of a diversified group of hedge funds, which we refer to as our “manager affiliates.” We will use a portion of the proceeds of this offering to acquire our interest in each of our six initial manager affiliates, which have investment track records ranging from five to 19 years. Each of our manager affiliates currently has assets under management of less than $1 billion and generally focuses on a single investment strategy. As of March 31, 2010, the eight funds managed by these six manager affiliates had aggregate AUM of approximately $1.9 billion. As of the date of this prospectus, our general partner, Aveon Management L.L.C., employed seven investment professionals and our six initial manager affiliates employed an additional 52 investment professionals.

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investment strategy;

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level and quality of assets under management;

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historical performance;

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risk management systems and controls and operational infrastructure;

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correlation of returns to our other manager affiliates and to market indices;

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quality of investor base; and

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quality and experience of the management team.

We will generate income from management and incentive fees or allocations pursuant to contractual arrangements with our manager affiliates and from any returns on our general partner or managing member interests in our funds. Our manager affiliates will receive 100% of the gross amount of management fees and incentive fees or allocations generated by their respective funds. As the general partner or managing member of each manager affiliate, we will generally have the right to retain approximately 30% of the gross fees (with our operating member receiving the remaining approximately 70% of gross fees) resulting from the fund’s total AUM until the fund reaches a specified level of AUM, generally $600 million, above which all incremental fees and allocations will be allocated to our operating members. In the case of Viridian, and possibly other funds we may acquire in the future, we will have the right to retain approximately 30% of the gross fees associated with only a portion of the fund’s total current AUM, initially $450 million for Viridian. We will not be required to pay management or incentive fees on investment returns associated with our capital interests in two of our funds; with respect to the remaining funds, we will pay management and incentive fees associated with our capital interests, but effectively reduced by our participation level, typically 30%, in the fees on such capital interests. As a result of this structure, our operating members will retain significant economic interests in their respective manager affiliates and will have the opportunity to realize future value and be rewarded for growth in assets under management and investment performance of those manager affiliates. Under our oversight, our operating members will maintain day-to-day operational and investment authority over our funds, an arrangement which we believe will preserve the independence and entrepreneurial culture that contributed to the past investment performance and asset growth of our manager affiliates.

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management and incentive fees above those charged by the underlying funds and will benefit from incentive fee netting since investors in such composites will only pay incentive fees on the aggregate, not individual, net returns of the underlying funds. We believe these investment vehicles will be attractive to institutional and other qualified investors and will contribute to the growth in assets under management of our manager affiliates.

Aveon Group L.P. S-1