Market Discussions

So, I was sitting here looking at my ISK and considering getting into trading a bit, but I don't really have the skills or time to play the market as much as others. Then it hit me - I have this problem in real life. And what I did was invest in a mutual fund. So why isn't there one in EVE (beyond the fact that 90% of you people are scammers).

Before you put it down, consider the model I spent a few days working on:

Generally, it would work by people giving a corporation money in exchange for a number of virtual "units" (not to be confused with corp shares which come with voting rights). Those units would be bought at a certain price.

The money would go into the corp and would be used by traders in that corp to make more money. Each corp would be dedicated (ideally) to a certain type of product - like minerals or ores. Traders would essentially make money by buying and selling products in the category with the aim of enriching the corporation. I think the corp permissions have enough rights to make sure nothing is stolen from the corp easily (essentially you would need to buy/sell things on behalf of the corporation but not remove them or ISK from the corps assets). This could be through playing the market and/or by offering futures to miners (or even just normal buys).

The value of the unit would be the total value of the assets of the corp (plus fund money on hand), divided by the number of units (with, of course, an initial starting cost per share). Each night, the profit of the day would be calculated and divided up: some money goes to the corporate wallet (because we need to turn a profit eh ;)), some goes to the traders to keep them honest and some goes to the various services the corp will require (hauling, security, etc) - the rest gets reinvested into the fund. The individual values would not be that hard to calculate - simply agree on some kind of metric (probably the regional median or weighted and IQR adjusted mean price) and use it consistently.

At any time, unit owners could pull money out at the current rate.

I'm some most traders would object to this, because they could make a lot more just by playing with their own money. To help with this, I thought of creating a "premium" unit which basically has additional value (which comes from the corporate profit - essentially, the corp gets lower or no profit, and the premium shares get additional value each night). Traders (or haulers, or related companies or special partners) who work with the corp could invest their money through premium unit. That way, they trade their own money at the same time and can benefit from shared hauling services, security, etc plus having more money to trade means you can probably turn a bigger profit.

Handling people who get out of line would be a problem - you'd need some kind of enforcement mechanism that ensures that they don't yank all the assets and run. A corp of low-sec pirate groups interested in hunting down and destroying these kinds of people for your corp would be useful - kindof a private police service.

So, it's decent for the traders involved, and it's decent for the investors (who would get a sizeable fraction of the profit because they're not doing very much except providing capital). The corp makes money and there's room, in an alliance of commodity fund corps for partnerships with haulers, industrial types and security.

The biggest downside is trust - it needs a management team so trustworthy that people will invest without much fear that they'll cut and run. That part, I haven't quite figured out yet, beyond just encouraging people to start small and build reputation.

A neutral 3rd-party clearinghouse that maintains the records of who owns what and provides some form of deposit insurance (perhaps at a small cost?). It could also provide the values from current market data so that corps that provide their units through it just have to maintain their current assets (in goods and ISK) and it handles the rest of the calculations. I've even toyed with setting up such a site, because it sounds like fun (though I don't have the backing to start the rest of it). If this clearinghouse provided a neutral corp for fund transfers as well (ie the investor wires 1M ISK to it to deposit to X and then files a request on the website noting where it should go, then the clearinghouse wires it to the investing corp, then the reverse process for withdrawals) it could really cut down on the number of "hey, why didn't you give me my money" complaints. Plus, it could force funds to leave a certain percentage of their assets in cash with the clearinghouse to make good any requests for money (plus if the fund crashes, that money can be used to give back to investors).

Anyone want to weigh in on the ideas?

There is no way you could give your traders the roles needed to buy and sell, without them also gaining the ability to empty the entire wallet division they are using. I'm not sure if its possible to block direct withdrawal, but even if it was, anyone smart enough to play the minerals market would easily find one of the many ways to get money out of a corp without a direct withdrawal.

Deposit insurance is also a non-starter, as the insurer isn't really going to be able to better assess the risk then an investor. At which point, all your doing is externalizing the risk, which an insurer is going to want a lot for. Suppose Firm A is paying 5% a month, why should I insure it for 2% a month, when if they bail with the money, I loose just as much as if I had just invested. Obviously no investor will be willing to pay more for insurance then they are making...

Finally, why not just start an investment corp that does this? Why not have everyone focus on vetting one person/group, rather then many? What does the creation of the larger market really accomplish?

There is an older thread, https://forums.eveonline.com/default.aspx?g=posts&t=82325, that does discuss clearing houses, among other things.

The thread kinda goes all over the place, but might be worth a read.

Still boils down to a few basic issues, trust, administrative overhead, lack of in-game support, means of retribution.

Biggest drawback would be trust issues unless there were ways to guarantee that a player couldn't just run off with ISK that isn't 'rightfully' theirs. Although I would like to experiment sometime, run a corp like a hedge fund. Have several players in charge of hedging different parts of the market. You could also have a loan department as well to build long-term isk reserves. Each player would be paid a salary based off of monthly/bi-weekly or weekly performance, although it would be damned difficult to keep track of the isk that goes in and out considering its literally coming out of the 'wallet' per player instead of a general corp wallet.