Abstract:
An investment method is provided that allows the investor can participate with 100% of its investment in the development of the “underlying” (such as Gold)—no Cap and no Floor and is able to generate Income out of the active managed collateral, after deducting the costs for hedging or storage insurance.

Description:
[0001]     This application claims priority to U.S. Provisional Application Ser. No. 60/714,744 entitled REVENUE BEARING, PHYSICAL GOLD INVESTMENT INSTRUMENT AND METHOD filed 7 Sep. 2005, the contents of which are incorporated herein by reference thereto. 
     
    
     FIELD OF THE INVENTION  
       [0002]     The present invention is in the field of financial business practices. More specifically, the present invention relates to banking and investment methods for investing in Commodities and/or precious metals.  
     
    
     BRIEF DESCRIPTION OF THE DRAWINGS  
       [0003]      FIG. 1  is a block diagram example of the present interest bearing, commodity or precious metal investment instrument method illustrating the primary operative components of the method and their inter-relationship.  
         [0004]      FIG. 2  is a table showing three groups of market participants in the market segment of gold investments.  
         [0005]      FIG. 3  is a schematic representation of the relationship of the Asset Management Group, the Depository Group and the Trust/Oversight Group components comprising the SPV enterprise of the present invention.  
         [0006]      FIG. 4A  is a diagram of a precious metal (gold) lending investment vehicle.  
         [0007]      FIG. 4B  is a diagram of a precious metal (gold) future roll over investment vehicle.  
         [0008]      FIG. 5  is a diagram of the roll over strategy (based on the example Gold).  
     
    
     DESCRIPTION OF THE INVENTION  
       [0009]     The major disadvantage of a precious metal investment, gold being the classic example and other precious metals or commodities, always has been the lack of a continuous income related to it. Historically, investments in physical precious metals not only ties up cash, but also has the disadvantage of generating recurring costs, e.g., for physical storage, insurance and financial carrying costs. In times of low or moderate inflation, when accompanied by a sideward trend of the precious price, a precious metals investment becomes of financial relevance for the investment community.  
         [0010]     A solution to the innately flat or often negative return on a precious metals holding, is to somehow develop a vehicle providing a positive return on the holding. The present invention resolves this problem through the securitization of an investment strategy that is able to track to price of the underlying (e.g. Gold) and additionally generate income payable to the investor.  
         [0011]     In general: The following description explains the general method, based on the example gold. It is intended to patent this strategy for each of the precious metals or any other commodity such as (orange juice, wheat, coffee, cattle, gold, silver, and oil etc.) In general all commodities with traded derivatives on the NYMEX (US) or any other future exchange.  
         [0012]     Referring now to the drawings, the details of preferred embodiments of the present invention are graphically and schematically illustrated. Like elements in the drawings are represented by like numbers, and any similar elements are represented by like numbers with a different lower case letter suffix.  
         [0013]     The present invention related to an investment and asset management method providing a revenue bearing certificate on a precious metal or commodity asset. The revenue bearing, precious metal or commodity instrument and investment method comprises establishing a special purpose vehicle enterprise, the special purpose vehicle (SPV) enterprise operating according to an operational plan. As illustrated in  FIG. 1 , the SPV enterprise  14  is set up to receive and process requests  20  for the purchase and divestment of a precious metal asset. Also, the SPV enterprise  14  is disposed to hold purchased physical precious metal or derivatives based on the precious metal  23  as held precious metal assets or derivatives based on the precious metal  28  for the benefit of purchasers  18  prior to divestment.  
         [0014]     As exemplified in  FIG. 1 , the present investment method  10  defines a unique relationship between the special purpose vehicle (SPV) enterprise  14  of the present invention and the purchasers/stakeholders  18  who found the enterprise  14  by their money purchase  20  of a physical item or amount of a precious metal from or through the SPV enterprise  14 . The SPV enterprise  14  makes an acquisition  24  for value and receives a delivery  26  of precious metal from a metals broker  30  or derivatives (Futures/Forwards/Options) with the right to buy precious metal from a Exchange  30 . An instrument  36  evidencing the transaction is generated and drawn to the benefit of the purchaser  18  who is now a stakeholder in the SPV enterprise  14 . The acquired precious metal or derivatives  23  is held and combined with other held precious metal or derivatives  28  as an investment asset of the SPV enterprise  14  and use as value  34  to find selected investment vehicles  38  as means of making investments.  
         [0015]     In practice, the SPV enterprise  14  takes a purchase request (and payment)  20  from a purchaser  18 , for a weight or item of a physical precious metal. In response, to the request  20 , the SPV enterprise  14  purchases the requested weight or item of precious metal for the purchaser  18 . The source of the purchased precious metal  23  can be from precious metal reserves owned by the enterprise, or the enterprise can broker the sale of the precious metal from a third party source  30 , such as a precious metals broker. At completion of the purchase transaction initiated by the purchase request  20 , the enterprise  14  issues a precious metal instrument  36  vested in the purchaser  18  evidencing the ownership and all attendant rights of ownership of the weight/item of purchased precious metal. At this point, the purchaser  18  is additionally a stakeholder in the SPV enterprise  14 . The SPV enterprise  14  holds the purchased precious metal  23  in trust for the purchaser  18  as held precious metal  28  and an asset of the enterprise  14 .  
         [0016]     As noted above, the held precious metal  28  is an asset of the SPV enterprise  14 , which the enterprise  14  uses as value/collateral for funding investments to derive a return on the investments. In point of fact, the enterprise  14  can use the held precious metal asset  28  in any and all manners of appropriate investment vehicles known in the field for the purpose of deriving a return on the investment for the “benefit”of purchasers/stake holder  18  is the payment of a portion of the derived return as revenue on the precious metal instrument.  
         [0017]     In a preferred embodiment, the precious metal instrument  36  is for ownership of a precious metal selected from the group consisting of: gold, silver, platinum and platinum group metals, including palladium, rhodium, iridium, ruthenium, and osmium or any other commodity such as oil, natural gas, corn, cattle, coffee, energy etc. Most preferably the present interest bearing, precious metal investment instrument and method  10  is practiced for physical gold and silver. Additionally, the interest bearing, precious investment instrument  36  includes a certification of compliance that the bullion meets a standard of weight and of purity. Such standard could be an in-house standard or one of the standards known in the field, for example, the standards published by The London Bullion Market Association or the responsible exchange standards. Other standards are known to and selectable by the ordinary skilled artisan for practice in the present invention.  
         [0018]     Upon receiving a divestment type request  20  from the purchase/stake holder  18 , the SPV enterprise  14  divests the relevant held physical precious metal  28  pursuant to the request  20  and conditions of the investment instrument  36 . The divestment can comprise payment of cash or other consideration for the value of the investment instrument  36 , delivery of a requisite amount and purity of bullion to the divesting stake holder  18 , or delivery of a specific item of bullion to the stake holder  18 .  
         [0019]     In a preferred embodiment, the precious metal instrument  36  provides the right for the owner upon divestment to have the owned precious metal itself tendered into the possession of the purchaser/stake holder  18 . Under appropriate conditions, the precious metal instrument vested  36  can evidence the ownership of a specific piece of precious metal, in much the same way as a title of a deed might. Such conditions might exist as when a purchaser is a “private investor” or a “gold fan” type of investor that has physical gold to invest in the SPV enterprise  14  rather than cash. See Table I. This “purchaser” is in fact an “exchanger,” and the purchase request  20  is in fact an “exchange” request, asking to submit the purchaser&#39;s own precious metal to be held by the SPV enterprise  14  as held precious metal  28  in exchange for an investment instrument  36 .  
         [0020]     As shown in  FIG. 2 , the special purpose vehicle enterprise  14  comprises three operational groups: an Asset Management Group  50 , a Depository  60  and a Trustee  70 . In the present invention  10 , asset management is the process managing the assets and returns for the benefit of the purchasers/stake holders  18 . This is accomplished typically through stocks, bonds and/or cash equivalents, and/or any number of other investment vehicles known to and selectable by on of ordinary skill in the field of precious metal asset investment. Professional investment counselors  54  manage these assets according to specific stated objectives or investment styles. Inter alia, the Asset Management Group  50  provides overall management of the enterprise  14 . The professional counselors  54  of the Management Group  50  provide the strategic decision-making for the investment process to enhance productivity and provide alternative solutions for effective utilization of enterprises assets. The role of the Asset Management Group  50  is to provides a disciplined approach to cost analysis, a method for analyzing allocation trade-offs between initiatives, tools and information for assuring compliance with the mission of the enterprise and furtherance of the interest of the stakeholders  18 .  
         [0021]     The Trustee Group  70  provides oversight  84  of the SPV enterprise  14  to assure compliance with all governmental regulations and requirements, and to assure compliance of the enterprise with its operational plan, and to provide any other accountability measures that are required or appropriate. The Trustee Group  70  should have a degree of autonomy from other groups of the SPV enterprise. Typically, the Trustee Group  70  will have the qualities of a fiduciary usual in the investment industry, including established mechanism of accountability, and will provide the services standard in the industry. Of course the Trustee Group has an appropriate degree of autonomy and independence for the rest of the SPV enterprise, to avoid questions of conflict of interest.  
         [0022]     In a preferred embodiment, the Trustee  70  of the SPV enterprise  14  is a trustee appointed/approved by a national government. Such a government appointed or approved trustee could be an actual federal governmental agency (e.g., a national finance ministry), a quasi-governmental agency (e.g., similar to the USPS in the US), or a federal government appointed trustee. In a preferred embodiment, the Trustee Group is provided by a national governmental finance office, such as the Finance Office of the nation of Luxembourg. Other national governments have actual or quasi-governmental agencies appropriate to provide the desired oversight, such as any major western nation, and many smaller stable nations/governments with an established banking and financial services infrastructures: e.g., the channel Islands, Liechtenstein and others. However, under appropriate circumstances, the Trustee Group  70  may be in-house.  
         [0023]     The Depository Group  60  is any entity duly qualified to handle and store precious metal bullion or a portfolio of derivatives. In addition to appropriate storage and handling capabilities, this component of the SPV enterprise  14  must have appropriate security and accountability characteristics as well. An appropriate Depository Group  60  could be an established bank experienced in the precious metals investment business or a precious metals brokerage house.  
         [0024]     The present revenue bearing, physical gold investment instrument and method includes an operational plan  80 . The operational plan provides the guidelines and organizational structure under which the Asset Management Group  50 , the Depository Group  60  and the Trustee Group  70  operate. Under the operations plan  80 , the Asset Management Group  50  provides an actively managed investment instrument  36 , paying (for the first time) a continuous return  40  on a precious metal bullion holding  28 . The stake holder  18  participates in all changes of the market price of the held precious metal  28 .  
         [0025]     The investment instrument  36  shall be issued by the Asset Management Group  50  of the SPV enterprise to purchasers  18  in exchange (usually) for cash. The investment instrument  36  is a bearer certificate offered to the general public for the purchase of a amount of a precious metal. The cash received from purchaser is used exclusively to acquire the amount and type of precious metal bullion or an appropriate amount of derivatives to buy the precious metal represented by the investment instrument  36 . In this manner, the precious metal asset of the purchaser becomes securitized for the investor/purchaser  18 , and a physical asset of the SPV enterprise  14 . The held precious metal or the derivatives  28  represents the asset on the SPV enterprise&#39;s balance sheet, and the instrument  36  sold to investors/purchasers  18  are on the liability side.  
         [0026]     The held precious metal asset  28  is continuously managed by a professional consulting team  54  of the Asset Management Group  50 . The investment of the held precious metal asset  28  can be accomplished using any of a number of investment vehicles  38  known to and selectable by one of ordinary skill in the industry. For example, as shown in  FIGS. 4A and 4B , the asset can be leased or the short term derivatives can be rolled into a long term derivatives (sell the short term derivative and buy a long term derivative) and used as collateral to purchase other fixed income securities. The Asset Management Group  50  under the guidance of appropriate investment consultants  54 , can build other certificates using proceeds, say from asset lending or the remaining funds in case of the investment in derivatives (usage of the collateral), to purchase other option contracts (put, call and/or a combination of both) related to other underlying assets like currencies, commodities (metals, oil, etc), indices, shares, bonds etc and/or baskets from a combination of any of the above as means to generate a return. After deduction of storage and insurance cost for the gold bullions, part of the generated return is distributed to the stake holder  18 .  
         [0027]     While the above description contains many specifics, these should not be construed as limitations on the scope of the invention, but rather as exemplifications of one or another preferred embodiment thereof. Many other variations are possible, which would be obvious to one skilled in the art. Accordingly, the scope of the invention should be determined by the scope of the appended claims and their equivalents, and not just by the embodiments.