Market Discussions

I have run some backtesting and found out that the original business model is not compatible with my game style (which is not about station trading).

In fact the mineral markets have too long descending phases and since the game has no short selling, it becomes hard to stay profitable during those phases, expecially during summer. Expecially on the size of about 50-100B that would be involved (I eyeballed the various forum and in game requests). Add the complexity of not being able to partition the funds into EvE wallets due to the many security kinds, add the fact that the secondary markets for those would be too illiquid with all this fractioning. Add the difficulty to hedge the various minerals since each investor wants his capital preserved.

Furthermore, I don't just look at minerals, so it'd be reductive to only accept investments on basic minerals when I could have spotted a nice opportunity in T2 or PI.

Therefore the new plan would be to create less funds but based on categories:

- 1 fund for minerals
- 1 fund for ices
- 1 fund for T2
- 1 fund for PI


Payment structure:

- Active fund management fee: 7% of profits (30% less of what BSAC asked for some of their active funds I found on their web site).
- No load (it means no front payment or other fees). Secondary market will have transaction fees due to avoid 0.01 ISKing (for now I have to manage everything by hand).
- Face value is 1M per share, in order to let small Investors participate. I prefer having more workload but sharing the wonderful markets experience to everybody.

The investment (for me) is a majorly complex operation and so it will be launched in multiple stages, because I want to be actually be able to manage it. In fact this is an open fund with no immediate limit, I need to gauge the Investors real interest.




Phase 1: reservations

Phase 1a:

- Market makers (like in RL): individuals who want to buy shares in bulk for whatever (including resale).

Minimum block: 10B in the preferred fund(s). They may split the 10B across multiple funds.
They will only pay 96% of face value, that is 0.96M per share. This is a potential 400M profit - fees just by flipping those shares on the secondary market.
The market maker obligations are:

- he has to tell me about his intention to be a market maker right at the start. Once phase 1 is over no market makers will be accepted. New "phase ones" will possibly happen again in case of capital raise, however this is a rare event.
- he can't redeem any share of his block for 3 months. He can sell them on the secondary market of course, with no restriction of time. In RL this usually causes the share value to temporarily drop (see any basic fund performance chart).


Phase 1b:

- Minerals fund reservations are started.

Individual Retail Investors will reserve their shares.
All the Retail Investors who reserve shares before the fund NAV reaches 50B, will receive a 1% bonus dividend on the first 2 (two) months.


Phase 1c:

- The other funds reservations are started, with the same procedure of Phase 1b.


Phase 2: deposit

In this phase the Investors may deposit the ISK and get virtual shares. In game shares have too many issues to be used, plus an open fund may require to issue new shares with more frequency than an IPO.

Investors who will not deposit within the allotted time will lose their preferred shares slot (if they have one) and will not receive bonuses.


Phase 3: run

In this phase the funds will do their job and deliver monthly interests. In case shares are traded then what I posted in the posts above applies (pro rata and stuff).
In case (say I am travelling or whatever) I can't deliver the dividends at the end of the month, the interests will be preserved and the current month dividend will be paid ASAP.
In case of large shares redemptions I may not have the required liquidity ready at hand, the payment might be spread across a period of time.

Estimated share dividends: they will greatly vary during the year. The winter months should yield some good results, on par with some good bonds, the summer will be quite though. I reserve the right to hedge winter and summer months profits in order to provide a smoother curve.


Accounting: Like in RL and EvE, investors names will be held private (i.e. unlike BSAC, they won't show in the market orders book and similar).

A monthly prospectus will be provided, showing profits and losses (hopefully none).

Auditing: people like Grendell may receive API keys (he seems interested in the investment) or whatever to see what's being done and are free to disclose anything related with this investment (and only that). It will be a big, big chore however, because between wallet division swaps, hopping between VEMEX and VAHFT and then the end-of-the-chain traders won't be trivial to follow.


If I get some positive feedback about this hulk of text, I will proceed with preparing an investment prospectus and then start phase 1.

Hopefully by the end of this week. Half of the next week as maximum.

VV if it's not an issue I'd like to reserve 20b spread equally across all 4 funds. If it's too much, I can reduce that to a lower amount, you just have to let me know. As far as API, I would like to have access, but at the same time I don't really want any obligations to post any info. Time is something I'm generally short on, so I like to keep any free time I have available for my current projects.

Let me know where you stand with the above.

Regards,
Grendell ♥

Also, I am spending many many hours to find a functional business model that is also easy for EvE players to participate in.

Due to lack of large swap investors the hybrid mutual-closed fund I had in mind (also known as Active ETF but with some variations) could be impossible to implement, the NAV tracking errors would be too large.

Things will still change before a final draft!

In the mean time enjoy some instructional funds documentation that is not the usual Wikipedia stingy definition:

Open funds

Funds investing basics
SEC Mutual Fund definitions
Understanding mutual funds
Some end of day shares operations details

Closed end funds

What are closed funds
Open vs Close end funds
Understanding discounts and premiums

Interested as a Retail Investor, probably investing 1b at first.

I am tentatively interested in depositing, if I can ever stop spending my market gains on shiny PvP ships for my main. Stupid wormholes.

Interested as an investor, might invest 2-3 billions total.

The funds are capped, I am not going to have 30B a month in liabilities because a little grain of sand in the mechanism and it crumbles.

Furthermore I do understand that most EvE markets are weaker than GW2's and cannot sustain certain orders, even if I "iceberg" them. This is also why my assets allocation strategy involves the most liquid EvE markets except PLEX.

PLEX and Technetium are both manipulated by two large entities that really do whatever they want and I am not going to subject my Investors to their whims.

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Said this, I am really tempted to simplify the fund structure by providing two different offers:

- Adaptive commodity baskets (notice: NOT indexes, this is not an index fund), to be managed as 4 closed end funds, with all what this involves (exchange, market makers, phases etc).

- One easy mode, no brainer open ended mutual fund, expecially catered to smaller investors who don't want to commit to advanced trading. All they have to do is to buy share(s) today and get dividends at the end of the month.
The open ended fund has some challenges I am still analyzing:

- lack of liquidity in case of big withdrawals
- monthly dividends are nasty on markets that work on quarters. I'll have to create a reserve able to pay 2+ months of monthly interests while the assets need 3+ to appreciate like I want.

The mutual fund is still easier to pull off, because the shares value will obviously be = end of day NAV / number of outstanding shares and the NAV calculation can be automated much easier than an exchange.

The exchange ATM is my crux, I need to start before my targetted markets take off (they are already warming up) but I also have to figure out how to deal with the micromanagement imposed by potentially thousands of trades being swapped.

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IMPORTANT ADVICE

I am glad my plea to know if someone was interested (to size the funds) went FAR beyond my rosiest hopes.

However all those requests to reserve ISK I am getting in game go beyond showing interest and I have to be fair with all the Investors.

This means that the real reservations will be started being accepted at a certain to be announced day and hour.
I will try posting the IPO reservation at about 9pm EvE time, hoping it's a fair medium both for EU and American participants (I have no clue about Australians, they seem to get the bone every time).

If the expressed interest will reflect into the reservations, the first 50B (those with the revenue bonus) will go in few minutes and the hard cap (still unsure, 80 or 100B) might also be reached in some hours.

If you have ideas about how to spread the reservations over the day to make it fairer to everybody, they will be welcome.
Maybe if you have a friend who may play at those hours you could give him a formal delegation. I.e. the Investor and the Delegate both contact me so I know they are truly in agreement and then the Delegate will post the Investor reservation.

Please notice how the text mentions the bonus is to retail Investors only. They would take longer to fill the intended assets value than market makers.

It's going to be funny, as I think I could raise 200B-ish but I don't want to make this a second job.

Also, paying dividends on > 100B would defeat my 2 emergency alternate income revenues in case stuff goes hairy.

I want first to be sure the whole thing works before un-capping the fund too much.

I've somehow managed to miss the deadlines for every single auction or investment opportunity over these past few years, and now I am sure that I'll mess this one up as well :)

Maybe I can send my ISK now?