Mutual funds investing in domain names are still rare in China, but this morning I came across one which I find very interesting.
First of all, the organizer says that their first fund has completed. The fund invested in a 4N .com domain name and sold it within 2.5 months for 1m CNY, yielding mid 6 figures CNY as dividend for distribution in just two and a half months.
If this information is true, then the fund managed to give a spectacular performance of about 50% return on investment. They are now seeking investors who can provide fund in the 5m to 80m CNY range.
In terms of domain names the fund acquire, there are three categories: number, letter, and Pinyin. Let’s look at each category in details.
For numeric domain names, they only focus on three extensions: com, net, and cn. The extensions also vary in their perceived quality. Obviously, .com is also king in China. With .com domain names, they can go up to 6N. The next one is .cn (up to 5N), followed by .net (4N). The accompanying note indicates that 8 in a numeric domain name is preferred but 0 and 4 are not unless the domain name is clearly undervalued.
For letter domain names, again .com is most preferred, with up to 4L acceptable, followed by .cn (3L) and .net (3L). Here, they would not consider domain names containing aeiouv.
The last category is Pinyin names. Only .com and .cn are acceptable, and they both can be up to 3-pin.
On the same page they also list some domain names they have acquired: seventeen 4N .com and thirteen 3L .com. One of the 4N contains a 0 so I guess they must have bought the domain name at way under the market value. For the 3L names, none of them contain aeiouv.
Despite the announced stellar fund performance, I still have reservation about this fund. First, the website is too simple with only one page. Then, there is no mention of the organization behind this fund and an obvious spelling mistake. Most importantly, the website does not display an ICP license number. This is unusual, as all websites in China are required to carry an ICP license so that they can publish contends on their site.
This simple exercise has given me some pointers on what domain names are valuable to Chinese. Obviously, Chinese love .com. If you want to invest in numerics for the Chinese market, then maybe you don’t want to go beyond 6N .com. For letter domain names, .com up to 4L are solid investment.
Finally, I have deliberately left out the domain name of this fund so I won’t be seen as promoting the fund. My purpose of writing this post is to try to learn something from the activities of this fund.