DomainMart is offering investors a chance to invest in managed domain name funds. Returns are in the form of PPC parking revenue and sales of domains in the investment portfolio. The initial service appears to be for all domains and has a $50,000 minimum investment. It is more of a managed individual account than a fund pooling service. You can see the prospectus here. Just looking at this prospectus makes me shiver. Would you trust a company with $50,000 when they have a spelling error in a title in the prospectus? And where are the legal disclaimers? Did a lawyer even create this prospectus?
Now DomainMart is offering a .EU investment fund with a $5,000 minimum investment. According to the DomainMart site, the fund’s objective is:
“The Fund seeks to provide value growth over the long-term and earn income from monetizing traffic of the Fund’s domain names in order to achieve an attractive total return consistent with prudent investment risk.”
The .EU fund appears to be a closed fund, in which all investments must be made upfront. The .EU fund prospectus says that investments will be made in pre-registrations and registrations of .EU domains after they become available on the general market. But it also says that fund ownership is limited to the cost of .EU pre-registrations, and that investments in excess of the cost of .EU pre-registrations will be returned to investors on a last-in-first-out basis. So I’m not sure where the money for making further investments will come from. Furthermore, it takes a 66% vote of the fund’s owners to allow you to terminate your ownership. It is unclear if the fund will sell its illiquid investments to pay your distribution.
You should also review the fees. There’s a 2% upfront load, a 5% fee on all PPC monetization, the cost of domain registrations (how is this charged?), and a 12% sale fee on all sold domains. This 12% sale fee worries me. It might be in the fund manager’s best interests to sell a domain below market value in order to reap a 12% commission.
Yes, I’m skeptical. But I also think that pooling money in domain name investments is a great way to reduce risk and potentially increase returns. I just shudder when I look at DomainMart’s web site. Links that don’t work (including two on the .EU fund information page at the time of writing), different fonts in one sentence…these may all seem like trivial things, but I like investment managers that pay attention to details.
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