In a notice to investors dated 18 September 2017, the Blackstar Commodities Fund directors said they had been unable to get accurate valuations for the trade financing loans in which the fund invested.
“As a result, the Blackstar Commodities Fund finds itself in a situation preventing it from evaluating its investment positions and the board of directors of the fund has decided to suspend the calculation of the net asset value of the sub-fund, as well as the issue, redemption and conversion of shares in the sub-fund,” it said.
The Luxembourg regulator, the Commission de Surveillance du Secteur Financier (CSSF), has been notified.
Trade financier
The Blackstar Commodities Fund said it focused on providing finance to the physical commodity trade sector, which it described as “one of the oldest forms of finance, dating back to the 17th century”.
It aimed to provide its investors with access to the sector, with the objective of achieving stable, non-correlated, double-digit returns through the advancement of short-term, secured finance to established physical commodity traders and primary producers.
The fund’s investments went into so-called master companies which, as of 31 December 2016, stopped providing any financial statements or any independent formal valuation as evidence of the value of these investments.
“As a consequence, the alternative investment fund manager (AIFM) of the fund, assessed that the value of the investment could not be accurately ascertained,” the board of directors said.
Due process
According to the fund’s prospectus, Blackstar Commodities Fund only used reputable counterparties when lending to the trade finance sector, conducted a comprehensive due diligence process, and made sure all transactions had a short term physical trading cycle (normally 14-45 days) to ensure the liquidity of the investments.
Each transaction was also approved by the fund’s Luxembourg-regulated board of directors.
The suspension of the Blackstar Commodities Fund, which is part of Blackstar Capital Group, follows that of a similar fund called the Columna Commodities Fund, which also invested in the receivables from profit sharing loans issued by companies in the commodity sector.
The Columna fund was suspended in late 2016 when it was found that it had lent the bulk of its investment funds to a single Hong Kong-based Master Company that had stopped providing the fund with any proceeds from the loans made.
