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[Cassius]

E9

Supporting the Nxt ecosystem: Multistrategy hedge fund

Asset ID: 5056017329645101426 (EIX)

The supply of NXT is finite (1 billion or 1E9), whereas the market cap of the Asset Exchange has no limit. Bringing money into NXT from fiat and supporting existing Nxt businesses is therefore a clear strategy for ensuring both the financial and practical success of Nxt.

Strategy

E9 will generate revenues from manual trading and brokerage activities (managed by Whale) and market-making/arbitrage/trading bots (coded by Coinomat), further managing risk by using a proportion of profits to purchase a wide range of assets, which will themselves generate income and support the broader Nxt economy. It is a balanced fund targeting constant capital growth and increasing revenue generation.

Allocation of funds and Revenues

E9 will have a diversified portfolio based on crypto trading and bulk purchases; market-making, arbitrage and trading bots; a range of revenue-generating assets to manage risk; and cash reserves for rebalancing the fund. After management fees, a proportion of revenues will be reinvested to increase NAV, grow the fund and generate higher future incomes. 1% will be donated to key Nxt organisations, with the remainder dividended out to assetholders monthly. Above a gross return of 10% per month on AUM, a further 5% of revenues will be held for discretionary bonuses. Initial/provisional allocations will be:

Asset issue

An initial offering of 200,000 assets will be made to organisations core to the success of Nxt (e.g. NXTer.org, Nxt Foundation, etc) and other bulk purchasers (likely 25k assets and above), who will receive a 5% discount. Depending on the nature and suitability of the business, there is scope for an asset swap at negotiated rates if the buyer has outstanding assets, since these would become part of E9’s supporting portfolio. A further 220,000 assets will be sold at 10 NXT on the Asset Exchange, giving a total of 4.2m NXT. 15% of total assets will be granted to the management team, who will also purchase further assets as private individuals. 1% will be reserved for NXTi, for escrow/security. Remaining assets will be escrowed with NXTi. If existing/profitable allocations of funds are maintained, the asset will scale indefinitely without harming holders. New investors can be added at or above market price without dilution.

Security and succession

E9’s dividends and 15% management payments will be dealt with by NXTInspect (NXTi). If one of the management team leaves, payment can simply be switched to the incoming employee – rather than tying up large amounts of assets themselves as payment. This also enables the fund to scale indefinitely.

Coinomat, Whale and Cassius

UPDATE: Asset issue is complete. Initial assets have been distributed and the remainder escrowed with NxtInspect.

[Cassius]

Guys, we'd like to gauge interest at first. We're looking to sell several tranches of 25k assets at 5% discount before the rest go on the AE. We'd really like to give first refusal to organisations that are core to Nxt's success but could use extra income. Obviously, the organisations that need the funding most are less likely to be able to afford assets, but I'd hope this was one way the community could step up and support through donations.

Please register your interest here and once we have an idea of who would like to buy we can make a decision on whether everyone can be accommodated at discount price. This initial stage will last a week from now (12:40 GMT Friday).

[Cassius]

List of requested assets (current priority list in red):

Azeh:           25k (sorry, overlooked this one at first)
Whale:          37.5k
MMBTCD:      37.5k
Cassius:        10k
JamesList:     25k
MartinYin:      30k
MadCow:       25k
VanBreuk:     10k
Twinwinnerd: 25k
TwinVnTure:  25k
Chanc3r:       25k
JefDiesel:       10k
KarlKarsson:  25k
Yassin54:       10k
Apenzl:          2k
godt:             25k
martismartis:  25k
marechou:      25k
BTCOR:         50k
Abraxas 147: 10k
crumb-bum:   10k
DeBuNe:        25k
Capodieci:      25k
NXTer/Nxt Foundation: 25k (Combined tranche)

I think it's fair to say that the discount tranche is going to be well oversubscribed. Sorry folks. Still hoping that another couple of Nxt organisations will get in there too.
Early discount was for bulk buys (ideally by Nxt orgs, to whom priority is given, but that's not entirely the way it's gone so far) so smaller/later buyers will probably need to wait for AE release.

We're just finalising the list now. It looks like Nxt organisations will buy most of the discount tranche, which is great. We've had to decrease a couple of the larger tranches (MMBTCD and whale) to fit everyone in, and BTCOR has been increased as part of the deal we cut for an asset swap. Still waiting on final confirmation, then we will start collecting funds and release the asset for purchase on AE.

[Nxtblg]

Guys, we'd like to gauge interest at first. We're looking to sell several tranches of 25k assets at 5% discount before the rest go on the AE.

Too rich for my blood, but I'll certainly add the Asset ID to my bookmarks once it's ready to be sold at 10.

[mezzovide]

Isnt 15% for management a little bit too much? maybe 5% of it should be distributed into nxt ecosystem and reinvestments.

[TheCoinWizard]

Isnt 15% for management a little bit too much? maybe 5% of it should be distributed into nxt ecosystem and reinvestments.

I don't see you creating an alternative with only 5% management fees...

[Cassius]

Isnt 15% for management a little bit too much? maybe 5% of it should be distributed into nxt ecosystem and reinvestments.

I don't see you creating an alternative with only 5% management fees...

We thought about this fairly carefully. Some similar assets pay out e.g. 70% as divs, some reserve a large proportion of assets for the issuers, some do both. We've tried to address that by reducing the proportion of shares that go to issuers, and compensating with a management fee. That hopefully makes it more sustainable since there are potential problems if the team changes and they've been paid with assets at the start.

[Freebieservers]

Isnt 15% for management a little bit too much? maybe 5% of it should be distributed into nxt ecosystem and reinvestments.

I for one know the quality of cassius's work and I am constantly in touch with him regarding FS projects. He's played a nice role in our involvement with Nxt. Anyone that values his work will not sell himself low to the point of 5 percent imo

[mezzovide]

ok, my english obviously broken, sry not my mother tongue

What i mean is reduce 15% management to 10% management, and redistribute 5% to nxt ecosystem and reinvestment. i.e 10% management 30% reinvest, 55% dividend, 5% nxt ecosystem. just a suggestion though...

[Freebieservers]

ok, my english obviously broken, sry not my mother tongue

What i mean is reduce 15% management to 10% management, and redistribute 5% to nxt ecosystem and reinvestment. i.e 10% management 30% reinvest, 55% dividend, 5% nxt ecosystem. just a suggestion though...

I think the nxt ecosystem allocation can be done within the portfolio split they are doing.
What am saying is, let the asset owner take  a good cut because good pay = good work an I've seen great quality of work come from these folks and I can vouch on it.

[maddy83]

Will this fund have "full transparency" like the LIQUID fund has?

Like, can people view the balance of the trading accounts in real time, and that sort of stuff?

[Azeh]

Cassius, good stuff.

I'll try to pull together some funds to buy a tranche.

Put me down for 25k.

[whatnxt]

Isnt 15% for management a little bit too much? maybe 5% of it should be distributed into nxt ecosystem and reinvestments.

I don't see you creating an alternative with only 5% management fees...

We thought about this fairly carefully. Some similar assets pay out e.g. 70% as divs, some reserve a large proportion of assets for the issuers, some do both. We've tried to address that by reducing the proportion of shares that go to issuers, and compensating with a management fee. That hopefully makes it more sustainable since there are potential problems if the team changes and they've been paid with assets at the start.

I see so the 15% management fee should be seen as equivalent to giving the management team shares:

                            15*100%/(55+15) = 21.4286% of  shares

which it uses to pay the management team regardless of the number and names of people in it.
So 15% management fee is equivalent to 21.4286% share holding in one account used for the management group.
Given the 3 current members of the Management team that's a 7.1428% share holding per member. Which is close to the 5% mentioned earlier.

On the plus side
No individual member of the team has ownership of the income. So the Management team is not dependent on individuals.

The income of the management team grows with the asset so the management team can also grow and change as the fund develops. Which is good, we do not want the fund to be limited by the decisions at the start.

On the down side
If the shareholders are diluted (more shares issued) then the Management team is not diluted and still receive the 15%. This is a conflict in the interests between Management team and the Shareholders which would not occur if the Management team held shares in one account.

As I see it the current members of the Management team all have other commitments to other share holders of other assets. So the fee is to buy their time away from these commitments. Another conflict of interests.

[Cassius]

Will this fund have "full transparency" like the LIQUID fund has?

Like, can people view the balance of the trading accounts in real time, and that sort of stuff?

Initially, probably not to that extent, but it's something we'll continue to discuss - particularly if it's a priority for holders.

[Cassius]

Isnt 15% for management a little bit too much? maybe 5% of it should be distributed into nxt ecosystem and reinvestments.

I don't see you creating an alternative with only 5% management fees...

We thought about this fairly carefully. Some similar assets pay out e.g. 70% as divs, some reserve a large proportion of assets for the issuers, some do both. We've tried to address that by reducing the proportion of shares that go to issuers, and compensating with a management fee. That hopefully makes it more sustainable since there are potential problems if the team changes and they've been paid with assets at the start.

I see so the 15% management fee should be seen as equivalent to giving the management team shares:

                            15*100%/(55+15) = 21.4286% of  shares

which it uses to pay the management team regardless of the number and names of people in it.
So 15% management fee is equivalent to 21.4286% share holding in one account used for the management group.
Given the 3 current members of the Management team that's a 7.1428% share holding per member. Which is close to the 5% mentioned earlier.

On the plus side
No individual member of the team has ownership of the income. So the Management team is not dependent on individuals.

The income of the management team grows with the asset so the management team can also grow and change as the fund develops. Which is good, we do not want the fund to be limited by the decisions at the start.

On the down side
If the shareholders are diluted (more shares issued) then the Management team is not diluted and still receive the 15%. This is a conflict in the interests between Management team and the Shareholders which would not occur if the Management team held shares in one account.

As I see it the current members of the Management team all have other commitments to other share holders of other assets. So the fee is to buy their time away from these commitments. Another conflict of interests.

There's a slightly difficult balance to strike in issuing an asset. Some asset issuers take 20-50% of the asset, depending on what they're bringing to the table. Now, what happens if they (or one of a team) move on? Someone still holds a big chunk of the issue, but they're not actively involved any more. On the other hand, it seems reasonable that the team who put the initial work in should be rewarded with an equity stake to some degree.

The alternative is to pay the team off the top of revenues. That has the advantage that it's sustainable - if one of the team moves on for whatever reason, another can come in and be guaranteed pay. You'll see from OP that we've tried to strike a balance between these two things.

You'll also see from OP that dilution should not be an issue. This isn't a limited pie where issuing more shares means everyone gets a smaller slice. Raising extra capital will be put to work generating more revenues. No one loses out. There's a line that reserves 5% of future assets issued for founders/team, which would go to whoever was on the team at the time - again, not diluting the proportions held by anyone.

On the subject of giving some revenues away, we've limited it to 1% on an ongoing basis. The tension we have is that the more revenues are donated, the less attractive the fund is to investors, the less capital raised and the lower any cap growth. Hence the idea is to enable organisations that are actively involved in Nxt (like NXTer, Nxt Foundation) the chance to buy in at the beginning, or have people donate assets to them. Someone has to get in on the ground floor, and it would be nice if it was organisations like these that do great work and need the funds to continue. That's why we wanted to do the 5% discount to start with. But anyone will be able to buy when the remaining assets go on the AE at 10 NXT, and hopefully that will still be a good price over the medium term.

So there has been a series of balances to strike. We've come to the conclusions we have for a reason, though realistically no solution will be perfect and, of course, you can't please all the people all the time.

[whatnxt]

There's a slightly difficult balance to strike in issuing an asset. Some asset issuers take 20-50% of the asset, depending on what they're bringing to the table. Now, what happens if they (or one of a team) move on? Someone still holds a big chunk of the issue, but they're not actively involved any more. On the other hand, it seems reasonable that the team who put the initial work in should be rewarded with an equity stake to some degree.

The alternative is to pay the team off the top of revenues. That has the advantage that it's sustainable - if one of the team moves on for whatever reason, another can come in and be guaranteed pay. You'll see from OP that we've tried to strike a balance between these two things.

Another alternative is to hold assets for the Management team in one account.

You'll also see from OP that dilution should not be an issue. This isn't a limited pie where issuing more shares means everyone gets a smaller slice. Raising extra capital will be put to work generating more revenues. No one loses out. There's a line that reserves 5% of future assets issued for founders/team, which would go to whoever was on the team at the time - again, not diluting the proportions held by anyone.

As described I think your logic is off.

There are a few long term outcomes of a second share issue:
Maintaining the dividend yield: New and old shareholders get the benefit of their investments. Management team get an increase.
Increasing the dividend yield: new shareholders subsidise old shareholders. Management team get an increase.
Decreasing the dividend yield: old shareholders subsidise new shareholders. Management team get an increase.

In the short term there is one outcome:
While the new capital is invested, the original dividend is shared between both new and old shareholders so the new shareholders get a dividend they would not have got if they had started a new business and the old shareholders receive less. The original shareholders lose out and have a 1 in 3 chance of getting the subsidy back. The management team is initially unaffected, and then slowly receives an increase.

There is a conflict of interests between shareholders and management team.

I have ignored the NAV in the above, because the Management team do not benefit from the NAV directly where as shareholders can if they sell.

Ultimately its up to the investor whether they invest, but it would be nice to get some commitments for the future development of the fund.

[Cassius]

^^^ You are right. Good catch.
We will discuss. It looks like we should address this one way or another.

[prometheus]

good move, given the success of mmbtcd

[whale]

Please stick to altcoin trading if you intend to maintain that issuers do not deserve compensation (the whole premine mentality that was born in bitcointalk). NXT assets are different and it is very common for an asset issuer to retain 40%+ of the supply. Therefore, 30% is very reasonable considering there are three people working on the asset (my opinion).

Cassius, please put me down for 500,000 NXT.

[Cassius]

I'd also like to sign up MMBTCD for one or two tranches of 25k. They are not a Nxt business (the purpose of MMBTCD is to increase liquidity in BTCD markets and they pay out in superBTCD) so it may be more appropriate for this to come out of the non-discount lot at 10 NXT, depending on demand.

I'd personally like to buy 100k NXT too, but this will not be eligible for discount either.