Here is what maybe a huge step for Domains to become a real world asset in the wider investment community.
In a press release today, a company called the The Domain Developers Fund says they will officially launch on August 1.
“The DDF offers institutional and private investors equity investments in Internet Domain Names.”
“Its the first fund to invest in domain names only.”
The release from Grand Cayman
“Recent million-dollar domain deals and stories such as the ones around sex.com, slots.com, vodka.com have curbed interest from the public, media and institutional investors in domains as an investment and asset of high interest. With the introduction of an investment fund dedicated only to domains, the market takes another step in establishing domains as a real-life asset.”
“The domain business is still at an embryonic stage and I see more and more institutional investors are moving into this segment.”
“When domain names had been introduced 25 years ago only few could imagine into what the domain business would grow into.
“The fund started in the summer of 2008 when 3 long time domainers from Austria, Hong Kong and Germany joined forces and merged their domain portfolios. Starting in March 2009, the trio offered friends and family to invest into their domain-business to be able to purchase more valuable domains.”
“Due to the great performance many more investors wanted to move in. In its first year the fund had a performance of 135% and close to 100 investors but was still just a managed account based in Austria.”
“Early 2010, as even more investors wanted to move in, the trio decided to incorporate the DDF as a mutual and administered fund in the Cayman Islands and to formally incorporate the business. Michael Marcovici, who is the fund´s founder and 1st director expects more competition in the next years: “the domain business is still at an embryonic stage and I see more and more institutional investors are moving into this segment.”
The Domain Developers Fund holds a portfolio of in various segments of the domain market, in the .com space as well as in some of the popular ccTLDs of Germany, India, UK, China, Switzerland, Colombia and many others. On the funds website www.ddf.lu the Fund´s Management is especially bullish for ccTLDs: “search and services are becoming increasingly local and domains just go along, we see the biggest growth in ccTLDs (country code domains) in the years to come.”
“The fund uses various monetizing techniques to generate returns of up to 50% of ROI/year and domain. The fund is managed by Michael Marcovici and Alberto Sanz de Lama, both well experienced in online markets and long time domainers. The board of advisers consists of Stefan Piech, Marko Rodzinek and Philip Schindler.”
“The DDF is the first of its kind and is an opportunity for investors who want to be a part of the domain market. The funds mangers Marcovici and Sanz expect returns of 20 to 40% per year.””
Certainly interesting and something many domainer have been talking about trying to do for years.
From their website:
“”The DDF offers you a great opportunity to participate in the growing domain monetization business. The roots of the DDF go back to 2006 when the core team of the Fund around Michael Marcovici first met and joined forces in order to optimize the return of their portfolios. Finally, in early 2008, the team decided to merge their portfolios into a single one, allowing for every one of the three founders to concentrate on one part of the business. In early 2009, the team decided to open up their operation to investors in a Friends and Family program. The fund managed a performance of 124% in 2009 and another 7% in the first 9 weeks of 2010 . In February 2010 the Fund incorporated in the Cayman Islands, which proved to be the best location for the first and only fund in domains open to investors.”
I guess the question now is does anyone know or have heard of any of the managers of this fund, because I don’t.
Michael Marcovici
Alberto Sanz de Lama
Stefan Piech
Marko Rodzinek
Philip Schindler
???
The fund appears to be offshore, not sure about compliance with US security laws. Funds in the US usually do not “predict future results”, or at least use a disclaimer that past results are not an indication of future results.
While a successfully run fund would immeasurably help the domain industry, in the short and long term, and on many levels, the last thing we need is a publicized fund that concentrates in domain names to run into any problems, financial, legal or otherwise.
Here are the particulars of the fund from their site:
| Type | Open-Ended Administered* | |
| Jurisdiction | Cayman Islands Mutual Fund Law | |
| Assets | Domains | |
| share classes | individuals(Class A), institutionals(Class B) |
|
| Lockup period | 6 months | |
| ISIN (Class A) | KYG280681076 | |
| ISIN (Class B) | KYG280681159 | |
| CUSIP No. (Class A) | G28068 107 | |
| CUSIP No. (Class B) |
G28068 115 | |
| SIX Telekurs (Class A) | 11536830 | |
| SIX Telekurs (Class B) |
11536925 | |
| Directors | Michael Marcovici, Alberto Sanz |
|
| Advisory board | Marco Rodzinek, Philipp Schindler, Stefan Piech |
|
| Management Fee | 2,5% (A) 2% (B) | |
| Hurdle Rate | 5% | |
| Incentive Fee | 25% (A) 20% (B) |
|
| Administrator | JP Fund Administrations | |
| Auditors | BDO | |
| NAV | monthly | |
| Bank | Deutsche Bank |
|
| Web | www.ddf.lu |
Some concerning issues I’m already seeing is on their site they list as “Corporate Partners” is ICANN. Other than paying ICANN fees like the rest of us, I would love to know how ICANN is a “Corporate Partner”
Also listed on their site as “Industry Partners” is most of all the auction houses where most of us get many of our domains from, including NameJet.com. SnapNames.com and Sedo to name a few. Just using these company’s service doesn’t make them a “partner”.
I have already contacted the fund and hope to have some additional information soon.
Know what domains they own would tell us all we need to know – wonder if Philip Schindler has a list….? 😉
Smells fishy to me
Also on their site;
*The Domain Developrs Fund is an administered Fund in the Cayman Islands, this means that the Fund is under the strict control of an Administrator appointed by the Government of the Cayman Islands, no Funds can be taken out or in without the permission of the Administrator.
I don’t know about CI company law, but that sounds ominous.
They also only list 4 domains they currently own:
Biorust.com
Jewelers.co.uk
Fontsy.com
Species.com
This is the best that they got?
What the hell is Fontsy? or Biorust for that matter?
the company’s website should be ddf.lol
Marcovici would appear to be the impetus behind the site. He claims to have started MarshallIndex.com late last year and the DDF is working with that company (self-dealing?). He doesn’t google well, but check out qentis.com!
The few domains they claim show “Natalie Gruenwald” in the whois, with mike at qentis.com as the email.
Usually a site for a fund like this would include more chest-thumping about assets under management and deals they’ve done, not deals other people have done. The writing and overall impression of the site is not very professional.
Finally, I don’t see a prospectus on their site.
Russ
A prospectus may not be required under Cayman law.
Check out what they list as “THE RISKS”
“”Like any other business, investing in domains bears certain risks. At present, we can’t see how any of them would seriously affect our business; we however do not intend to keep our clients uninformed on the issue.
One risk to consider is the possibility of a total restructuring of the internet. Although there are no signs indicating such a development at present, one must keep in mind that, in time, changes can happen that might have an impact on our industry. This has been so in the past, when Yahoo and Google downgraded all domains containing “-“, numbers, or any name made up of more than nine letters, which was not a big loss since the names concerned were not too valuable anyway, but still, 10 or 20 USD in each case went down the drain with nothing one could really do about it.Another risk is browser technology: Browsers have a huge impact on the way we surf and navigate to a site; if a browser ended up diverting traffic to sites other than the ones we intended it to go to, direct navigation traffic revenues would seriously be affected, and along with it, also the value of certain domains. Another technology that could affect the way we surf is speech recognition, a technology that never really took off but might become relevant in the future. ”
How about the new gTLD’s isn’t that a huge “risk” to domain investing?
They don’t even mention it.
-anything and everything on the internet always smell damn fishy and it will get more stinky fishy as each day goes by.
We are just smelling on the decaying skin, not the inner guts yet.
*****************************
Samir Patel permalink
Smells fishy to me
Actually it would be interesting to found out if they actively acquire domains from other domainers, participate in scheduled SEDO/Moniker auctions or focus more on Namejet & Snapnames drops.
good idea + bad execution = exciting times.
I really like what they’re trying to achieve, but the biggest mistake they’ve made is that any domainer worth his salt can pokes holes in their site. I’m shocked they didn’t consider this. Who would they think would be the first people to scrutinize their presentation to either criticize it or give it credibility? If their site can’t pass muster with the domain industry it will stand little chance with the general public. Which is a shame because domain names are truly the greatest “unknown” investment out there.
Using tax havens to avoid taxes is worth the risk for them but what about anyone else?
I’ve just sent them a mail, to propose them to buy my domains… will they do it? 🙂
They point out that domain name (after)markets are “inefficient”. The CI tax haven market may be very inefficient too. It may not scale, since securities laws may not require issuing companies to disclose relevant information, few analysts follow the securities being traded there, dealings appear very risky financially and may trigger undesirable tax related alarms and expenses.
Jewelers.co.uk is listed as a “DDF Estate”
Well, has no one else noticed that for a .co.uk this would be a typo. It’s spelt Jewellers in the UK so hardly a major asset?
“have curbed interest from the public”
…methinks that “curbed” is not really the word they were looking for.
If you go to qentis.com, you will learn that a “Michael Marcovici” is the author of “The End of eBay: The Rise and Fall of eBay’s Biggest Powerseller”
You can read the description of the book here:
http://www.amazon.com/End-eBay-eBays-Biggest-Powerseller/dp/1439221057/ref=sr_1_2?s=books&ie=UTF8&qid=1282077083&sr=1-2
…and read some excerpts of the book here:
http://sites.google.com/site/theendofebay/
sorry for the multiple posts
From the sound of this, it will only hurt real investors and legitimate companies trying to make inroads into the larger business community. Yeah, smells fishy to domainers … and by extension will stink to high heaven in the general investment community.
@ Pat, LOL “Recent million-dollar domain deals and stories such as the ones around sex.com, slots.com, vodka.com have [lessened the intensity of; tempered; held in restraint] interest from the public . . . ” Curb has the OPPOSITE meaning of what the author intends.
@MHB, I thought this is an article about FUSU.com.
Louise
FUSU was a completely different concept where you would buy into a partial ownership of 1 domain.
This is a fund where you are buying an interest in whatever the fund owns which maybe hundreds, thousands or tens of thousands of domains
…or 1-10 domains with investors told that it is hundreds, thousands or tens of thousands of domains.
Interesting Feedback so far…. thanks, we can definitely use it. Let me give you some more information on the ddf and answer some of the comments (and concerns) above.
-I am a little surprised of the negative bias against the fund especially that it is raised by domainers. I have been a long-term visitor to domainfest, traffic, and many other events, on which occasions I had the chance to talk to many people working in the field. I am in touch with quite a number of them and also posted the release of the fund at namepros weeks ago and sent the news out to many fellow domainers in order to find mistakes in our offer, but unfortunately received no reactions.
-I am aware that the Caymans are used as a tax haven (even by domainers and parking companies), however, almost 85% of the world’s investment funds are located in the Caymans. There are good reasons why we, also, have chosen the Cayman Islands as business locale, one of them being that, with domains as an asset, there is no other place available to incorporate. No fund will pay taxes in the Caymans because taxes in funds are always to be paid by the investors in the countries they live in.
-For a couple of reasons, we can not release a list of domains owned by the fund, but we consider to make some showcase in the future. The domains published on the site are just a random choice and definitely not the best we own. Also, most investors take no particular interest in domain lists; the ones interested are domainers who will most probably not invest into the fund.
-The prospectus is not on the site, mainly for legal reasons. Since we can not distribute it freely, we need to make sure a person is allowed to invest before we do so.
-The prospectus includes many of the risks involved with domains; it does, however, not mention the new gTLDs- maybe this is a mistake, but probably I did not include them because I have my own opinion about them…and investing in them can be a chance as well.
-There is a short disclaimer if you get to the site, as there is no prospectus online, there is no need for further legal advice on the site.
-I have changed the “partner” section to “links” on the website, obviously in Europe, partner has more general meaning than in the US-I want to clearify that, in this sense, we are not partners with the listed organisations.
Michael Marcovici
http://www.ddf.lu
I like the “…a mutual and administered fund in the Cayman Islands …” I could be wrong but isn’t that where you put money when you want to protect your assets?
@ Michael Marcovici
I believe what you are perceiving as negativity is healthy skepticism. I highly doubt if any domainer wants you to fail for the simple fact that your success would be a huge boost for our industry. Domainers are sick and tired of being the world’s best kept investment secret. Getting the general public to embrace our industry for what it is has been the Holy Grail for as long as I’ve been in this business (1997).
It is for that reason that we are all aware that we may never get a second chance to make a first impression. If your company presents anything less than a sterling model and produces mediocre results we will all suffer because your timing could not be more perfect. The economy is in flux, people are looking for answers and your visibility will be significant.
@Michael Marcovici – “Also, most investors take no particular interest in domain lists; the ones interested are domainers who will most probably not invest into the fund.”
That tells me everything I need to know right there.
“For a couple of reasons, we can not release a list of domains owned by the fund, but we consider to make some showcase in the future. The domains published on the site are just a random choice and definitely not the best we own. Also, most investors take no particular interest in domain lists; the ones interested are domainers who will most probably not invest into the fund.”
==========================
This is horseshit, pure and simple, and stinks to the moon.
You’re claiming yourselves to be a ‘domain fund’ yet are unwilling to articulate exactly what domain assets you have under management and prospective investors will be buying in to?
‘Yes yes, I’m going to start an Agricultural Real Estate Investment Trust and I’d like you to invest. All I can really show you is three raised garden beds in my back yard with a few tomato plant, but to be sure, I’ll be filing all the needed paperwork and it will look very, very official…”
You claim that ‘most investors take no particular in domain lists’ which is beyond absurd; I think you can safely assume that anyone investing in a DOMAIN FUND is going to want to know exactly what it is they’re investing in; unless, of course, your motives are uglier. If you’re just out fishing for suckercash on the margins by creating a ‘domain fund’ that hopes to reel in people who wish to invest in something they might be excited about, but really don’t understand.
Color me a hard-core skeptic about this. It’s triggering every bullshit sensor I have. Best case scenario, you’re an underqualified group of people with otherwise good intention who are leveraging loose regulations in an offshore haven to create the illusion of a more robust and legitimate practice; upon receiving investors, will put that cash to work buying better domains… Worst case scenario, I’ll leave up to the imagination.
Now, if David Castillo wants to make a fund with the Castillo brothers names, I’ll buy a taste of that.
Haha, James and I posted at the same time. I guess I’m not the only one who got a laugh out of that.
I’ve seen this movie before
A bunch of johnny-cum-latelys attracted by all the big money stories of late with good intentions (or not)
It will end in tears.
This ain’t even 2004 anymore.
Most of the good stuff is held in “strong hands” & won’t go cheap.
just to clarify, the list of domains is not a secret, the fund has Investors allready, most of them have made a due dilligence and have checked the domains we own. We also release the list of domains to all prospective investors with real interest to invest into the fund.
However, if I look at the bias towards the fund in this thread, I would say it was the right decision not to publish a list so that every domainer comes up with his own evaluation of the funds assets.
Michael Marcovici
@Michael Marcovici
Sorry to say this, but credibility is falling with each post. You’re happy to show people with money to invest but no domain experience the names, but not to show people with domain experience (who likely have money to invest also).
Honestly Michael, how do you think that looks?
I can help here. I fully undderstand that openly publishing good names and sending them to “domainers” may adversely affect the quality of the portfolio. Valuable other extensions are likely to be registered by the domainers, regardless whether they are worth anything. Mos of th domainers cannot tell the difference which names are aqre valuable or not. The less skilled domainer are prayed upon the other ones who need them to go to conventions, to take parts in auctions, and unlod unload their inventory. This is how the domain industry works by and large.
Am I the only one that “doesn’t” want their names valued as an asset? For me, they are “liabilities” of my corporation and registrar fees are write-offs. …though I’ll buy-sell-trade those “liabilities” as opps come up. 😀
@RL – “I can help here. I fully undderstand that openly publishing good names and sending them to “domainers” may adversely affect the quality of the portfolio. Valuable other extensions are likely to be registered by the domainers, regardless whether they are worth anything. Mos of th domainers cannot tell the difference which names are aqre valuable or not. The less skilled domainer are prayed upon the other ones who need them to go to conventions, to take parts in auctions, and unlod unload their inventory. This is how the domain industry works by and large.”
None of what you wrote makes any sense. How can showing people the domains affect their value?
And what does this mean “Valuable other extensions are likely to be registered by the domainers, regardless whether they are worth anything. “
I know nothing about this fund, other than what is written here, but all that really matters is whatever info they show to a potential investor, not what they publish on their site. We may think they are making stupid marketing decisions, but it is their fund to do what they want with, and maybe they have their reasons for doing things like that. From the reaction here, they seem to be doing a bad job of promoting the fund, but that does not mean it is a bad fund. If I were looking to invest (I am not), I would need a huge amount of convincing though, to make me feel like my money is safe, plus I would want to see a list of all the domain transactions they did to make those amazing profits they have made so far.
James,
RE: “Sorry to say this, but credibility is falling with each post. You’re happy to show people with money to invest but no domain experience the names, but not to show people with domain experience (who likely have money to invest also).”
If they publish names in their portfolio and they only registered .com names, some domainers will register domains with other extensions and flip them to make few dollars. If they claim that their .com names are wotrth something, they need to spend on other extensions to support their claims, don’t they. Or they may delay their additional registrations. I have an option not to renew the domains for 30 days when they expire, and when I delay my renewals, I am getting emails with offers to sell me the domains I still own, and also offers for the names with other extensions. Occassionally, when I get offers for a .com, the prospective buyers register .net, .org and then sumbmit the offers.
sent mail… no answer yet..
Now PCWorld has mentioned the fund:
http://www.pcworld.com/businesscenter/article/203572/choice_domain_names_pitched_as_investments.html
All we can hope is that the fund is operated properly and uses the investors wisely and produces the results it is advertising as not to give the domaining a black eye
Who should define domain names as Distinct Asset Classs? This should not be left to amateurs, or companies with a very narrow self serving interests, whether they be small or large. There are many regulatory issues that will come up, to protect investors and ensure that taxes get paid. Who will do this work?
@ RL – “If they publish names in their portfolio and they only registered .com names, some domainers will register domains with other extensions and flip them to make few dollars. If they claim that their .com names are wotrth something, they need to spend on other extensions to support their claims, don’t they.”
No. Absolutely not.
Firstly, if the .com names they’ve got are available in .net .org and so on, then there’s a good chance their names are not worth much.
Secondly, if anyone bought the same names in other extensions and created a market for those names (below the .com) then that would help raise the value of the funds domains.
The name, ‘Domain Developers Fund’ – doesn’t sound like a pure domain fund – why have ‘Developers’ in the name given the meaning that word has within the industry?
James,
Some portfolio holders may have plenty of great reasons not to publish their names if they are not actively involved in sales. I am one of them.
This question was posted by James: “The name, ‘Domain Developers Fund’ – doesn’t sound like a pure domain fund – why have ‘Developers’ in the name given the meaning that word has within the industry?”
The name choice is poor, perhaps they registered the name ddf.lu first and then had to assign some meaning to the second ‘d’? (“The DDF offers institutional and private investors equity investments in Internet Domain Names.”…“Its the first fund to invest in domain names only.”)
RL – if you are actively involved in trying to get investors for your fund, you need to show a track record – only wanting to show your purchases to date to people who don’t know what they’re looking at, isn’t right.
End of this topic for me.
This is a very interesting move, albeit any problems and issues with this fund. There is a dire need of impetus in the so called “Domain Industry” and this fund with whatever quirks it may have, could catalyse other players to set up Domain Investment Funds if there really is any perceived value. Here is something I’ve noticed…. there has never been for instance a T.R.AF.F.I.C or DomainFest conference in London? Yet everyone knows London is where all the heavy financial power brokers are, from Wall Street to huge Russian oligarchs and Hedge Funds, they all cut massive deals in London. So the fact that Domains as a potential “Alternative” Investment has not even surfaced on this side of the pond, tells me the industry has not been taken seriously at all. Why? probably because the main domain players have not done a good job so far of creating the essential media effect, not because domains are not worth a bob or two! Rick Schwartz suggested in his recent blog, that the Domainer pool is shrinking. It’s no good to most people if only premium one word domains are all that money should buy. That’s a very parochial market for a lucky few… not an Industry.
I’ve always maintained, the impetus required to take domain names from an extremely highly speculative investment, to a desirable alternative investment, requires a lot of creativity. This is more likely to ensue from outside players once they spot the opportunity, hence DDF. After all, the credit crunch bubble that burst 3 yrs ago, should have meant smart money should find other investment alternatives. Even if all goes terribly wrong with DDF, as a lot of things do in the beginning, this could well be what the domain industry really needs… PUBLICITY to create scale! If you do a little research in GROUP BUYING for instance, its now all over Wall Street already! Why? because it’s serious instant cashflow! Even the UK Web media have picked this up. There must be a way to get Madison Avenue, US & UK Media, Wall Street and the London Square Mile to take note of the real inherent value that Domains potentially provide for sustainable business development online in the 21st Century. All those graduates with no jobs could be developing domain names.
In my opinion, DDF presents a start in the right direction, even if it fails initially…there will be others who now take notice.
what might make more sense… perhaps it’s already being done… is to set up a “fund”, backed by an enforceable agreement, that provides mutual *protection* for particpating domain holders. so the investment is in mutual protection of each others’ assets from “third parties” (“non-domainers”). (fortunately it doesn’t seem like “domainers” go after each other’s domains.)
in plain terms, i mean it funds negotiation and, if necessary, litigation costs for “domainers” whose registered domain names attract attention from parties who overzealously or illegitimately contest their right to ownership. through such agreement, domainers might mutually support one another against such challenges, such as reverse hijacking.
as it is a private agreement, participation need not be public information.
this by nature would force participants to screen the domain names for potential risks. (as they *should* now be doing.) assuming smart domainers, it would not be possible to have a pool of dodgey names, as some, unnamed companies are now holding. no conscientous domainer would agree to support protection of such names.
just a thought… maybe too far fetched. i’ve thought that “the good, honest domainers” sometimes need something like the EFF when their assets are at the disposal of otherwise technologically illiterate decision makers under pressure from complainants that will not hesitate to take advantange of the situation by any means possible.
@Michael Marcovici
If you are still following this post I would like to see 1 or 2 examples of what you consider your top five most valuable domain holdings, no need for a whole list. This might help clarify the level of the organization you have put together.
@James
“That tells me everything I need to know right there.”
Just a side note:
Last February I started a general thread at Namepros in which I made my company portfolio of several hundred domain names available on the basis that it would further discussion on what makes (or doesn’t make) for a good, balanced domain portfolio. I fully expected that my list of names would be subject to the usual range of comments.
http://tinyurl.com/2bqep6z
I don’t know what surprised me more – the fact that there was very little interest in even seeing the list or the virtual lack of comments by those domainers who had taken a look.
I still think it was a good idea. Why the lack of interest? I don’t know.
Well, someone had to say that “rolling” would be a good way to “move”, but I’m sure a few triangles and squares were attempted before they found the wheel. Wouldn’t it be fantastic if major lenders and WS started looking at domains as “appreciable marketing assets”?
I’ll be there is a 90% profit success rate on sold domains since 1998. (How many domains sold made a profit).
damn… false alarm…sigh
Cool artwork by the same guy that runs this fund
http://www.artmarcovici.com/
is a Ponzi scheme, tothing else. once there are no more new investors, the system crack!