Answers to the most frequently asked questions about the Commodity Discovery Fund.
What is the role of Circle Partners?
Circle Partners is in charge of administering all participations, and independently calculates the intrinsic value on a monthly basis. They will report the value of your participations every month, via email or post, as per request. Circle Partners performs these services for dozens of other investment funds.
What is the minimal subscription amount, and why is it so high?
The minimal initial subscription amount must be at least 45,000 Euros. We have deliberately chosen to present ourselves as a so-called boutique fund. This implies that we focus not on the general retail investor, but rather aim at attracting the more affluent investors that are keen to invest part of their capital in natural resources. We have no plans to change this policy in the near future. We also do not foresee seeking a listing on a stock exchange, for the next few years. Without such a listing, daily trading in the participations of the fund is not possible.
Will I always be able to withdraw my participations in the fund?
Yes, participations can be withdrawn on a monthly basis, barring exceptional circumstances as mentioned in the Prospectus. You can exit the fund every month, on the last day of the month. However, a notice period of 10 working days is applicable. You can also withdraw a part of your participation, although the remaining sum must always amount to at least 45,000 Euros. Click here (link) to download the redemption form. You will receive your money roughly two weeks after the beginning of the new month (so if you exit per 1st January, you will receive it around 15th January). The fund will always purchase your participations at the NAV value as calculated by Circle Partners, after deduction of the redemption fee of 1%.
How do I participate?
Go to our website page Invest, where a full explanation of how to participate is given. However, a simple email to firstname.lastname@example.org is sufficient to get you started.
Does the fund have a position in physical metals?
Not directly. We sometimes have a position in an ETF that is covered by physical gold or silver.
What is the role of Willem Middelkoop?
Willem Middelkoop is one of the founders of the fund, and involved on a day-to-day basis as a fund manager. He is responsible for research and communications for the fund. Willem has invested a significant part of his capital in the fund. Willem has completely ceased his work as a financial journalist. He is, however, still an active presenter on financial and economic topics. For more information, please send an email to email@example.com.
Is this a gold-focused fund, or a natural resources fund?
The Commodity Discovery Fund is actually a natural resources fund, but is currently heavily weighted towards companies active in the exploration and mining of precious metals (75%), mainly because this is currently the sector with the strongest fundamentals. Should market sentiments change, however, we can easily shift the relative weight in favour of other metals or natural resources in our pursuit of opportunities. For example, we are also exposed to base metals and the energy markets through our positions in uranium, coal, and oil & gas exploration companies. Besides this, almost 10% of our portfolio is invested in Rare Earth Elements.
How can I add to my participations? Will I need to fill out another subscription form?
Every addition to your participations is considered a new participation and requires filling out a new subscription form. However, we can make things easier if you send an email stating your intention to expand your participation to firstname.lastname@example.org, upon which we will provide you with a pre-filled subscription form. All you would need to do is fill in the sum, sign the document and return it to us. Wiring the money would be the last step in this simple process.
What are the effects of participating in the fund on taxation?
This varies per case. We would recommend seeking advice from a tax counselor or the government tax service.
Costs and fees
What are the costs involved in participating in the fund?
The subscription costs are 0.5% of the participation sum (so 500 Euros for every 100,000 Euros), whilst the exit fee amounts to 1% of the exit sum. There is also a fixed management fee of 0.5% of the invested capital. This is automatically processed in the NAV calculation, and you will not receive an invoice for this. In the case of a performance exceeding 1.5% per quarter, a performance fee of 20% will be charged for all returns over 1.5%.
Is the 1.5% per quarter called the hurdle rate?
Yes, this is the part of the return which is not subject to the performance fee charge. Because of the higher risk nature of investments, we feel it imprudent to charge a management fee if no gains have been made. Thus, we have decided to exempt the first 1.5% per quarter returns from the performance fee. The hurdle rate is calculated separately for every individual participant, and is settled every quarter with the performance fee. Again, you will not receive an invoice for this.
Why is the management fee set at 2%, and the performance fee at 20%?
In contrast to the average fund investing in index-related stocks, the Commodity Discovery Fund spends an inordinate amount of time researching the large pool of small companies that are target for investments. This elaborate research is costly. It is these costs that are covered by the 2% annual management fee, and include office rental, staff and promotion activities. The fund managers have proven that this fund is capable of creating significant value for investors, and seeks extra compensation for this, once performance is good. We use a construction often applied in the boutique and hedge fund environments. The first 1.5% per quarter returns are exempted from the performance fee (assuming a quarterly return of 2.5%, a performance fee of 0.2% (equaling 20% of the extra 1%) is deducted. Unlike most other funds, the calculation of the performance fee is done for every participant separately. Under normal circumstances, this implies that no performance fee is deducted for the first 6% annual returns. For a further explanation of the calculation of the performance fee, please refer to section 7.1.2 of the Prospectus
What is a high water mark?
The high water mark is the highest value the fund has obtained over the period of an individual's participation. This is of importance in calculating the performance fee. Should the value of the fund drop below its highest mark, the participant will not be charged a following performance fee unless the initial high water mark is once again surpassed. In addition it is important to note that, because the performance fee is deducted once every quarter, the value of the fund at the close of the quarter will be considered the high water mark, even if the value of the fund has been at higher levels during the course of the previous three months. The high water mark is therefore the highest NAV over the period an investor is participating in the fund.
NAV and rendement
What does the NAV stand for
The acronym NAV is the Net Asset Value. This term can best be translated as the intrinsic value. The Net Asset Value of the Fund is the value of all investments and cash of the Fund, less the costs and the management fee, but before deduction of any performance fee. The Net Asset Value per share is calculated by dividing the Net Asset Value of the Fund by the number of outstanding units. The value of the investments is never subject to a premium or discount
Who calculates the NAV?
The NAV is calculated independently by our administrator, Circle Partners. This company provides this service for more than a hundred different investment funds. In addition, the figures are audited annually by KPMG.
How often is the NAV calculated?
The NAV is calculated each month. Every participant receives a monthly overview of the NAV and the net value (NAV minus performance fee) of his or her shareholdings, from Circle Partners. In addition, the fund manager will publish an indicative NAV per participation on the website, each week.
Why are both the NAV and the performance calculated with deduction of all expenses and the management fee, but before deduction of the performance fee?
Because the performance fee charged to an individual participant depends on both the timing of purchase and that of any withdrawals or additional deposits by the participant, the final net value and the net yield of each participation is different. This is the reason it is better to report returns before deduction of a performance fee. Most of our peers use a similar method for calculating their performance.
Do you pass dividend?
The Commodity Discovery Fund will receive dividends on some of their positions, but does not itself pass dividends to participants. Dividends will add to the NAV.
What kind of returns are you expecting as a fund manager?
We strive for an annual return of 15%. Despite two heavy corrections in the past four years, we have attained 70% of this goal, and we continue to expect to achieve an average 15% annual return over the next few years.
Have the fund managers invested personally in the fund?
Yes, the managers have been invested in the fund since its inception. The value of their current participations exceeds three million Euros.
Will the founders publish any sales of their participations?
Should the participation of the founders change, an official announcement will be made in the monthly report. This counts for both additions as well as redemptions.
Does the fund use debt capital?
No, the fund does not borrow money for investment purposes. We will not invest more than the total value of deposits that participants have added to the fund, while maintaining an average cash position of 10%.
Will I ever have to supply additional funds? Not even if the value of my participations is lower than 45,000 Euros?
No, the fund will never force participants to supply additional money. Should the value of your participations be lower than 45,000 Euros because of market developments, you will not be asked to top up. You are, naturally, welcome to add to your participations at any time.
Will the Commodity Fund ever lend shares of their positions to "shorters"?
We have agreed with our brokers that they will never lend out any of our shares.
What do you do about the foreign currency exposure?
We aim to achieve returns on our investments, not by anticipating currency fluctuations. When we buy shares denominated in a currency other than euro, we will buy that currency for the same amount, so that we will not incur a currency exposure between the moment we buy the shares and the moment we actually pay for the shares. Shares denominated in a currency other than euros that have already been paid for may decrease in value when expressed in euros as a result of currency fluctuations. We will not take any action to prevent this.
Does the fund have an AFM license?
Yes, we have been attributed a full license by the Dutch regulatory authorities, the AFM. Despite this, we are maintaining our minimum initial subscription amount of 45,000 Euros.
Is my cash well protected?
We have deliberately chosen a construction where we are only mandated to trade with the money deposited, and cannot actually access it in any other way. Circle Partners, the administrator, is the actual guardian of the fund's cash deposit and its positions (Stichting bewaarder Commodity Discovery Fund).
Who audits Circle Partners?
KPMG officially publishes an audited yearly financial statement where the calculations made by Circle Partners are checked. This statement is reviewed during our annual shareholder meeting, which takes place in April.
How often will I receive notice of the fund's performance?
We will send you a monthly report containing the latest developments related to the fund. Circle Partners will also send you a report of the current value of your participations. And we publish the fund's net asset value on our website (performance Commodity Discovery Fund), on a weekly basis. You will also receive an more elaborate Quarterly Report, in which we discuss developments in more detail.
Will the participants gain insight in the complete portfolio?
No, due to competitive considerations, we will not publish a full list of all our positions. We do cover a number of specific newsworthy investments in our monthly report. Many investors are curious which discoveries we are invested in.
Can I speak to the fund managers personally?
Under normal circumstances, the fund managers are very busy managing the fund. However, questions posed in an email will normally be replied within 24 hours. The office management in Aerdenhout is also available at +31 23 8009970, during office hours. Furthermore, you will have the opportunity to meet with the fund managers during the regular company presentations.