Cutting Red Tape in the World’s Most Exclusive Industry
The Carbon Fund is being founded to provide trade finance to well-established diamond traders and manufacturers who are active in the midstream of the diamond value chain, with a strong focus on the rough diamond trade. Carbon Fund cuts away a lot of the red-tape which currently exists with the traditional banks, while at the same time reducing the actual credit risk.
| REGULATION | Domiciled in the DIFC and registered with Dubai Financial Services Authority (the “DFSA”) |
| TYPE OF FUND | Open-Ended |
| CORPORATE STRUCTURE | A Shariah Compliant Protected Cell of the ‘Carbon Investments PCC’ |
| MINIMUM INVESTMENT | USD 1 Million |
| MINIMUM AUM | USD 100 Million (required to cover operational/legal/set-up expenses of the fund) |
| SCALABILITY | USD1 bn (the fund can be scaled without reducing credit quality) |
| CAPACITY UTILIZATION RATE | 90% -95% of the available funds |
| CURRENT GROSS RETURN | 7.8% (based upon current LIBOR) |
| CURRENT NET RETURN | 6% |
| PROFITS DISTRIBUTION | Quarterly |
| FEE STRUCTURE | 1/10 (Annual Management fee – 1% of AUM*, Performance fee – 10% of Profits) |
| HIGH LIQUIDITY | If less then 5% of AUM* are redeemed, payment will happen within 30 days If 5%-33% of AUM are redeemed, payment will happen, end of the quarter + 90 days If 33%-66% of AUM are redeemed, payment will happen, end of the quarter + 180 days If 66%-100% of AUM are redeemed, payment will happen, end of the quarter + 360 days |
| PENALTY FOR EARLY WITHDRAWAL | 2.5% for the funds redeemed within the first year of investment |
| Company’s experience in the business | min 20 years |
| Company’s Consolidated Equity | min USD30 Million |
| Company’s Consolidated Turnover | min USD200 Million |
| Existing trade finance available from specialized banks | min USD20 Million |
| Global presence | Offices in all the major diamond hubs |
| Market reputation | Impeccable |
A Compelling Private Debt Opportunity for Institutional Investors Seeking Sources of Attractive Risk-Adjusted Returns
Attractive Returns
Fund financing offers higher yields compared to public bonds: floating rate (LIBOR + spread ~5%) vs fixed rate (4.95%)
Reduced fraud risk
Substantially reduces the ‘accommodation’ or ‘fraud’ risk which exists with current structures used by banks, like invoice discounting or receivable securitization
Short financing cycle
The financing cycle is very short with receivable tenors of 30-165 days; average receivable tenor would be 90 days, with a 30 days grace period, which is in line with industry standards.
Dual recourse
Seller provides a guarantee in case of non-payment by Buyer. If Buyer has not made the payment 15 days after the grace period, Seller makes the payment within 7 days as per the guarantee issued
Reduced risk of bad loans
As no ‘credit limits’, ‘facilities’ or ‘loans’ with fixed tenors are issued, it is much easier and faster to reduce exposure to certain entities in case of a deterioration in their credit worthiness. Simply no new purchases are made from a certain Seller (if the credit worthiness of the guarantee deteriorates), or no new sales to a certain Buyer is made if that Buyer always pays late
No initial set-up costs
The set-up cost for a receivable securitization structure is quite high, so only a handful of diamond companies have access to institutional investors. The other way around as well, investors only have access to a few diamond companies who can normally command low returns. The fund structure is much more scalable as a lot of triple A clients can get finance without having to do any initial legal set-up cost, which automatically increases the returns for the investors