Correspondence 0001193125-24-138408 from Gemcorp Commodities Alternative Products Fund (CIK 0002012980)
Gemcorp Commodities Alternative Products Fund (CIK 0002012980)
Date: May 14, 2024 · CIK: 0002012980 · Accession: 0001193125-24-138408
AI Filing Summary & Sentiment
File numbers found in text: 811-23940
Letter
Division of Investment Management Washington, D.C. 20549 Attn: Aaron Brodsky Re: Gemcorp Commodities Alternative Products Fund (the “Fund”) (File No. 811-23940)
Dear Mr. Brodsky:
This letter responds to comments that you conveyed to me via email regarding the Fund’s registration statement on Form N-2, filed with the Securities and Exchange Commission (the “Commission”) on February 27, 2024. The Fund has considered your comments and has authorized us to make the responses and changes discussed below to the registration statement on its behalf. Below, we describe the changes that will be made to the registration statement in Amendment No. 1 thereto (the “Amendment”) in response to the Staff’s comments and provide any responses to or any supplemental explanations of such comments, as requested.
PROSPECTUS
Cover Page (pages ii-iv)
1. Comment: Given the use of the term “Alternative” in the Fund’s name, please confirm supplementally that the Fund will invest a large portion of its assets in one or more of the three following categories: (1) non-traditional asset classes (for example, currencies); (2) non-traditional strategies (such as long/short equity positions); and/or (3) less liquid assets (such as private debt).
Response: We hereby confirm that the fund will invest a large portion of its assets into commodities-related issuers and alternative credit, which we, and we believe the market, view as a non-traditional asset class.
2. Comment: Please disclose how the Fund is defining “market cycles” as used under the “Investment Objective” subheading.
Response: The disclosure has been revised to clarify the meaning of the term “market cycles.”
3. Comment: If the Fund will invest more than 15% of its net assets in hedge funds and private equity funds that rely on sections 3(c)(1) or 3(c)(7), please note that registered closed-end funds that invest more than 15% of their net assets in such hedge funds or private equity funds should impose a minimum initial investment requirement of at least $25,000. Please therefore disclose a $25,000 minimum for Class U shares.
Response: The Fund does not intend to invest more than 15% of its net assets in hedge funds and private equity funds that rely on sections 3(c)(1) or 3(c)(7). Accordingly, the Fund respectfully declines to make any changes in response to this comment.
4. Comment: Please disclose how the Fund is defining “commodity-producing companies, countries, and state owned enterprises,” “relevant credit derivatives,” and “limited partnership interests in commodity related vehicles and private investment in public equity as well as relevant equity derivatives” as used under the “Principal Investment Strategies” subheading.
Response: The disclosure has been revised accordingly.
5. Comment: In the second-to-last sentence under the “Principal Investment Strategies” subheading, please delete “[T]he Fund may invest in additional strategies in the future,” and instead disclose whether the Fund anticipates using additional strategies, and, if so, what those strategies are and under what circumstances the Fund would use such strategies.
Response: The Fund respectfully acknowledges the comment. We believe the referenced disclosure is standard and appropriate to notify investors that the Fund’s strategy may change over time. Further, in accordance with the applicable Securities laws, the Fund
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would make any necessary updates to its disclosure before adding material additional strategies. Accordingly, we believe that the disclosure is appropriate as written.
6. Comment: Under the “Principal Investment Strategies” subheading, the Fund states that it may invest in assets in “particular sectors of the commodities futures markets.” Please explain supplementally how investing in particular sectors of the commodities futures markets is consistent with the Fund’s policy not to concentrate in any one industry.
Response: The Fund believes that, because sectors are a broader category than industries under the Global Industry Classification Standards, this disclosure is consistent with the Fund’s policy not to concentrate in any one industry.
7. Comment: The Fund indicates that it expects to rely on multi-class exemptive relief. Has the Fund obtained this relief? If not, the Fund may only offer a single class to the public and the filing must clearly disclose that other classes presented are not available to the public.
Response: The disclosure has been revised accordingly.
Summary of Terms, Investment Opportunities and Strategies (pages 2-5)
8. Comment: Are the phrases “commodity-related” and “commodity-linked” as used on page 2 intended to modify the terms “instruments,” “securities,” “derivatives,” and “supply chain financings”? If so, please revise the disclosure to make this more clear.
Response: The Fund has incorporated this comment. The impacted disclosure has been revised as follows:
The Fund’s investment objective is to provide risk-adjusted returns across various types of market cycles (i.e., periods of positive and negative macro trends in the markets), by investing in a globally diversified portfolio of liquid and illiquid instruments, securities, derivatives and supply chain financings that are commodity-related or commodity-linked, as applicable. The Fund may also utilize physical commodities as collateral for loan transactions or as part of supply chain financing transactions.
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9. Comment: Please disclose how the Fund is defining “originating transactions by directly engaging with counter parties” as used on page 2. Is this referring to investing directly in operating companies?
Response: We respectfully acknowledge the comment and the disclosure has been revised to clarify that this language indicates that the Fund will negotiate and structure its own transactions rather than act as a price-taker.
10. Comment: Please disclose how the Fund is defining “opportunistically investing in special situations that take advantage of market dislocations” as used on page 2. Is this referring to a type of investment (such as debt and equity identified in item (i) in the same paragraph), or to an investment strategy?
Response: The disclosure has been revised to clarify that the disclosure refers to allocations to different types of investments, sectors and/or issuers that have suffered disruptions to normal operations.
11. Comment: Please delete “[T]he Fund may invest in additional strategies in the future” from page 2.
Response: Please see our response above.
12. Comment: On page 2, the Fund states that it may invest in assets in particular sectors of the commodities futures markets. Please disclose the sectors in which the Fund will invest.
Response: The Fund has incorporated this comment. The impacted disclosure has been revised as follows:
In addition, the Fund may invest its assets in particular sectors of the commodities futures markets [, including the soft commodities, metals and mining, and oil and energy sectors].
13. Comment: On page 2, please disclose how the Fund is defining “renewables” and “in associated businesses and companies that provide services or have exposure to such businesses.”
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Response: The Fund has defined renewable to include sustainable energy sources, including solar, wind and hydro energy and companies that have material exposure to such businesses, either as producers or service providers.
14. Comment: On page 3, please clarify what “platform” the Fund is referencing when it refers to the “broader Gemcorp platform’s deep and experienced teams...”
Response: We respectfully acknowledge the comment and note that this refers to Gemcorp’s broader investment operations and resources and is consistent with normal industry usage of such term.
15. Comment: On page 3, the Fund lists “supply chain financings” among its investment opportunities and strategies. Please briefly clarify how the Fund will use supply chain financings to further its investment objective.
Response: The disclosure has been revised accordingly.
16. Comment: It appears from the disclosure on page 4 that the Fund may invest in other funds. Please revise the fee table to include acquired fund fees or expenses, as appropriate.
Response: We respectfully acknowledge the comment. Although we reserve the right to invest in other funds in the future, we do not expect it to be so meaningful as to require AFFE disclosure.
17. Comment: It appears from the disclosure on page 4 that the Fund may hold physical commodities. Please explain supplementally how the Fund will comply with custody obligations under Section 17(f) of the 1940 Act and rules thereunder.
Response: The Fund confirms that custody of the Fund’s assets will be maintained in the United States with the Fund’s custodian or otherwise in accordance with Section 17(f) and the rules thereunder, and the Fund will consent to service of process and examination of its books and records.
18. Comment: On page 5 under the “Other Investment Strategies” subheading, please briefly describe in the disclosure the term “overriding royalty interests.”
Response: The disclosure has been revised accordingly.
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Summary of Terms, Leverage (page 5)
19. Comment: Disclosure states that the Fund may borrow money through a “credit facility or other arrangements.” Please disclose how the fund is defining “other arrangements.”
Response: We respectfully acknowledge the comment and note that the Fund reserves the right to borrow money through a credit, facility, note or bond issuance.
Summary of Terms, Risk Factors (page 13)
20. Comment: If exposure to the price volatility of electricity, oil, natural gas, natural gas liquids, consumable fuels, metals, and agricultural products is a principal risk, please also include that such exposure is part of the principal investment strategy above, or otherwise explain why it would not be appropriate to include in the principal investment strategy disclosure.
Response: The Fund hereby confirms that exposure to the price volatility of electricity, oil, natural gas, natural gas liquids, consumable fuels, metals, and agricultural products is not a principal investment strategy of the Fund, but rather a risk of the strategy the Fund will pursue given the sensitivity to commodity prices inherent in its targeted portfolio companies. Accordingly, we do not believe any changes are appropriate to the principal investment strategies.
Summary of Fees and Expenses (page 15)
21. Comment: Please disclose that the fees are based on an estimate.
Response: The disclosure has been revised accordingly.
22. Comment: Please revise the incentive fee for Class U shares in the fee table to be zero, rather than a negative figure.
Response: The disclosure has been revised accordingly.
23. Comment: Footnote 3 in the fee table references interest expenses and indicates that the amount shown includes dividends payable on the Fund’s preferred shares. Please explain supplementally how including disclosure that the interest expense includes dividends on
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preferred shares is appropriate and consistent with the Form N-2 instructions given that the Fund does not disclose that it plans on issuing preferred shares.
Response: The disclosure has been revised to remove this statement.
Investment Objective, Opportunities and Strategies, Investment Opportunities and Strategies (page 20)
24. Comment: It appears that the Fund will invest in derivatives. Please disclose, or direct us to disclosure of, the purpose that the derivatives are intended to serve in the portfolio (e.g., hedging, speculation, or as a substitute for investing in conventional securities), the types of derivatives that will comprise the principal investment strategies, and the extent to which derivatives are expected to be used.
Response: The Fund respectfully acknowledges this comment and notes that disclosure regarding the intended use of derivatives can be found in the Investment Objective, Opportunities and Strategies section under the “Investment Opportunities and Strategies” sub-section.
25. Comment: Please supplementally explain how investments in “companies that provide technology and services to commodity-related companies” provides exposure to commodities pursuant to the Fund’s 80% policy.
Response: We respectfully acknowledge the comment. We note that, based on our experience in the industry, these commodity services companies are highly correlated with the commodities market, and accordingly we believe that they provide exposure to the risks and returns of an investment in commodities, as suggested by the Fund’s name.
Investment Objective, Opportunities and Strategies, Risk Management (page 23)
26. Comment: Please disclose how the Fund is defining “single name net exposure.” Is this referring to exposure to a single issuer?
Response: We respectfully acknowledge the comment and note that this is the long exposure to an issuer, less any hedges or offsetting positions.
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27. Comment: Please disclose how the Fund is defining “commodity net exposure.” Is this referring to potential exposure to one specific type of commodity? If so, how is the Fund identifying and defining commodity types?
Response: The Fund has incorporated this comment. The impacted disclosure has been revised as follows:
“Commodity Net Exposure” shall refer to the long exposure of a given commodity that has a unique Harmonized Identification System Code (“HS Code”), less any hedges or offsetting positions. HS Codes are issued by the Harmonized System, an internationally standardized system of names and numbers to classify traded products that is used by customs authorities around the world to identify products when assessing duties and taxes and for gathering statistics.
28. Comment: Please supplementally explain and disclose with more specificity how the Fund expects to obtain leverage of up to 1.3x NAV.
Response: The Fund has implemented this comment and the disclosure has been revised accordingly.
Investment Objective, Opportunities and Strategies, Portfolio Composition, Physical Commodities (page 24)
29. Comment: The Fund indicates that it may make investments in physical commodities directly or through a subsidiary. Given that the Fund may utilize a subsidiary, please address the following:
a. Disclose that “Subsidiary” includes entities that engage in investment activities in securities or other assets that are primarily controlled by the Fund.
Response: The disclosure has been revised accordingly.
b. Disclose that the Fund complies with the provisions of the Investment Company Act governing investment policies (Section 8) on an aggregate basis with the Subsidiary.
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Response: The Fund does not invest through a subsidiary at this time but acknowledges the Staff’s comment and confirms that, if it were to invest in a subsidiary in the future, it would revise the disclosure accordingly.
c. Disclose that the Fund complies with the provisions of the Investment Company Act governing capital structure and leverage (Section 18) on an aggregate basis with the Subsidiary so that the Fund treats the Subsidiary’s debt as its own for purposes of Section 18.
Response: The Fund does not invest through a subsidiary at this time but acknowledges the Staff’s comment and confirms that, if it were to invest in a subsidiary in the future, it would revise the disclosure accordingly.
d. Disclose that any investment adviser to the Subsidiary complies with provisions of the Investment Company Act relating to investment advisory contracts (Sec
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CORRESP 1 filename1.htm CORRESP 1095 Avenue of the Americas New York, NY 10036-6797 +1 212 698 3500 Main +1 212 698 3599 Fax www.dechert.com JON GAINES jonathan.gaines@dechert.com +1 212 641 5600 Direct +1 212 698 0446 Fax May 14, 2024 U.S. Securities and Exchange Commission Division of Investment Management 100 F Street, N.E. Washington, D.C. 20549 Attn: Aaron Brodsky Re: Gemcorp Commodities Alternative Products Fund (the “Fund”) (File No. 811-23940) Dear Mr. Brodsky: This letter responds to comments that you conveyed to me via email regarding the Fund’s registration statement on Form N-2, filed with the Securities and Exchange Commission (the “Commission”) on February 27, 2024. The Fund has considered your comments and has authorized us to make the responses and changes discussed below to the registration statement on its behalf. Below, we describe the changes that will be made to the registration statement in Amendment No. 1 thereto (the “Amendment”) in response to the Staff’s comments and provide any responses to or any supplemental explanations of such comments, as requested. PROSPECTUS Cover Page (pages ii-iv) 1. Comment: Given the use of the term “Alternative” in the Fund’s name, please confirm supplementally that the Fund will invest a large portion of its assets in one or more of the three following categories: (1) non-traditional asset classes (for example, currencies); (2) non-traditional strategies (such as long/short equity positions); and/or (3) less liquid assets (such as private debt). Response: We hereby confirm that the fund will invest a large portion of its assets into commodities-related issuers and alternative credit, which we, and we believe the market, view as a non-traditional asset class. 2. Comment: Please disclose how the Fund is defining “market cycles” as used under the “Investment Objective” subheading. Response: The disclosure has been revised to clarify the meaning of the term “market cycles.” 3. Comment: If the Fund will invest more than 15% of its net assets in hedge funds and private equity funds that rely on sections 3(c)(1) or 3(c)(7), please note that registered closed-end funds that invest more than 15% of their net assets in such hedge funds or private equity funds should impose a minimum initial investment requirement of at least $25,000. Please therefore disclose a $25,000 minimum for Class U shares. Response: The Fund does not intend to invest more than 15% of its net assets in hedge funds and private equity funds that rely on sections 3(c)(1) or 3(c)(7). Accordingly, the Fund respectfully declines to make any changes in response to this comment. 4. Comment: Please disclose how the Fund is defining “commodity-producing companies, countries, and state owned enterprises,” “relevant credit derivatives,” and “limited partnership interests in commodity related vehicles and private investment in public equity as well as relevant equity derivatives” as used under the “Principal Investment Strategies” subheading. Response: The disclosure has been revised accordingly. 5. Comment: In the second-to-last sentence under the “Principal Investment Strategies” subheading, please delete “[T]he Fund may invest in additional strategies in the future,” and instead disclose whether the Fund anticipates using additional strategies, and, if so, what those strategies are and under what circumstances the Fund would use such strategies. Response: The Fund respectfully acknowledges the comment. We believe the referenced disclosure is standard and appropriate to notify investors that the Fund’s strategy may change over time. Further, in accordance with the applicable Securities laws, the Fund - 2 - would make any necessary updates to its disclosure before adding material additional strategies. Accordingly, we believe that the disclosure is appropriate as written. 6. Comment: Under the “Principal Investment Strategies” subheading, the Fund states that it may invest in assets in “particular sectors of the commodities futures markets.” Please explain supplementally how investing in particular sectors of the commodities futures markets is consistent with the Fund’s policy not to concentrate in any one industry. Response: The Fund believes that, because sectors are a broader category than industries under the Global Industry Classification Standards, this disclosure is consistent with the Fund’s policy not to concentrate in any one industry. 7. Comment: The Fund indicates that it expects to rely on multi-class exemptive relief. Has the Fund obtained this relief? If not, the Fund may only offer a single class to the public and the filing must clearly disclose that other classes presented are not available to the public. Response: The disclosure has been revised accordingly. Summary of Terms, Investment Opportunities and Strategies (pages 2-5) 8. Comment: Are the phrases “commodity-related” and “commodity-linked” as used on page 2 intended to modify the terms “instruments,” “securities,” “derivatives,” and “supply chain financings”? If so, please revise the disclosure to make this more clear. Response: The Fund has incorporated this comment. The impacted disclosure has been revised as follows: The Fund’s investment objective is to provide risk-adjusted returns across various types of market cycles (i.e., periods of positive and negative macro trends in the markets), by investing in a globally diversified portfolio of liquid and illiquid instruments, securities, derivatives and supply chain financings that are commodity-related or commodity-linked, as applicable. The Fund may also utilize physical commodities as collateral for loan transactions or as part of supply chain financing transactions. - 3 - 9. Comment: Please disclose how the Fund is defining “originating transactions by directly engaging with counter parties” as used on page 2. Is this referring to investing directly in operating companies? Response: We respectfully acknowledge the comment and the disclosure has been revised to clarify that this language indicates that the Fund will negotiate and structure its own transactions rather than act as a price-taker. 10. Comment: Please disclose how the Fund is defining “opportunistically investing in special situations that take advantage of market dislocations” as used on page 2. Is this referring to a type of investment (such as debt and equity identified in item (i) in the same paragraph), or to an investment strategy? Response: The disclosure has been revised to clarify that the disclosure refers to allocations to different types of investments, sectors and/or issuers that have suffered disruptions to normal operations. 11. Comment: Please delete “[T]he Fund may invest in additional strategies in the future” from page 2. Response: Please see our response above. 12. Comment: On page 2, the Fund states that it may invest in assets in particular sectors of the commodities futures markets. Please disclose the sectors in which the Fund will invest. Response: The Fund has incorporated this comment. The impacted disclosure has been revised as follows: In addition, the Fund may invest its assets in particular sectors of the commodities futures markets [, including the soft commodities, metals and mining, and oil and energy sectors]. 13. Comment: On page 2, please disclose how the Fund is defining “renewables” and “in associated businesses and companies that provide services or have exposure to such businesses.” - 4 - Response: The Fund has defined renewable to include sustainable energy sources, including solar, wind and hydro energy and companies that have material exposure to such businesses, either as producers or service providers. 14. Comment: On page 3, please clarify what “platform” the Fund is referencing when it refers to the “broader Gemcorp platform’s deep and experienced teams...” Response: We respectfully acknowledge the comment and note that this refers to Gemcorp’s broader investment operations and resources and is consistent with normal industry usage of such term. 15. Comment: On page 3, the Fund lists “supply chain financings” among its investment opportunities and strategies. Please briefly clarify how the Fund will use supply chain financings to further its investment objective. Response: The disclosure has been revised accordingly. 16. Comment: It appears from the disclosure on page 4 that the Fund may invest in other funds. Please revise the fee table to include acquired fund fees or expenses, as appropriate. Response: We respectfully acknowledge the comment. Although we reserve the right to invest in other funds in the future, we do not expect it to be so meaningful as to require AFFE disclosure. 17. Comment: It appears from the disclosure on page 4 that the Fund may hold physical commodities. Please explain supplementally how the Fund will comply with custody obligations under Section 17(f) of the 1940 Act and rules thereunder. Response: The Fund confirms that custody of the Fund’s assets will be maintained in the United States with the Fund’s custodian or otherwise in accordance with Section 17(f) and the rules thereunder, and the Fund will consent to service of process and examination of its books and records. 18. Comment: On page 5 under the “Other Investment Strategies” subheading, please briefly describe in the disclosure the term “overriding royalty interests.” Response: The disclosure has been revised accordingly. - 5 - Summary of Terms, Leverage (page 5) 19. Comment: Disclosure states that the Fund may borrow money through a “credit facility or other arrangements.” Please disclose how the fund is defining “other arrangements.” Response: We respectfully acknowledge the comment and note that the Fund reserves the right to borrow money through a credit, facility, note or bond issuance. Summary of Terms, Risk Factors (page 13) 20. Comment: If exposure to the price volatility of electricity, oil, natural gas, natural gas liquids, consumable fuels, metals, and agricultural products is a principal risk, please also include that such exposure is part of the principal investment strategy above, or otherwise explain why it would not be appropriate to include in the principal investment strategy disclosure. Response: The Fund hereby confirms that exposure to the price volatility of electricity, oil, natural gas, natural gas liquids, consumable fuels, metals, and agricultural products is not a principal investment strategy of the Fund, but rather a risk of the strategy the Fund will pursue given the sensitivity to commodity prices inherent in its targeted portfolio companies. Accordingly, we do not believe any changes are appropriate to the principal investment strategies. Summary of Fees and Expenses (page 15) 21. Comment: Please disclose that the fees are based on an estimate. Response: The disclosure has been revised accordingly. 22. Comment: Please revise the incentive fee for Class U shares in the fee table to be zero, rather than a negative figure. Response: The disclosure has been revised accordingly. 23. Comment: Footnote 3 in the fee table references interest expenses and indicates that the amount shown includes dividends payable on the Fund’s preferred shares. Please explain supplementally how including disclosure that the interest expense includes dividends on - 6 - preferred shares is appropriate and consistent with the Form N-2 instructions given that the Fund does not disclose that it plans on issuing preferred shares. Response: The disclosure has been revised to remove this statement. Investment Objective, Opportunities and Strategies, Investment Opportunities and Strategies (page 20) 24. Comment: It appears that the Fund will invest in derivatives. Please disclose, or direct us to disclosure of, the purpose that the derivatives are intended to serve in the portfolio (e.g., hedging, speculation, or as a substitute for investing in conventional securities), the types of derivatives that will comprise the principal investment strategies, and the extent to which derivatives are expected to be used. Response: The Fund respectfully acknowledges this comment and notes that disclosure regarding the intended use of derivatives can be found in the Investment Objective, Opportunities and Strategies section under the “Investment Opportunities and Strategies” sub-section. 25. Comment: Please supplementally explain how investments in “companies that provide technology and services to commodity-related companies” provides exposure to commodities pursuant to the Fund’s 80% policy. Response: We respectfully acknowledge the comment. We note that, based on our experience in the industry, these commodity services companies are highly correlated with the commodities market, and accordingly we believe that they provide exposure to the risks and returns of an investment in commodities, as suggested by the Fund’s name. Investment Objective, Opportunities and Strategies, Risk Management (page 23) 26. Comment: Please disclose how the Fund is defining “single name net exposure.” Is this referring to exposure to a single issuer? Response: We respectfully acknowledge the comment and note that this is the long exposure to an issuer, less any hedges or offsetting positions. - 7 - 27. Comment: Please disclose how the Fund is defining “commodity net exposure.” Is this referring to potential exposure to one specific type of commodity? If so, how is the Fund identifying and defining commodity types? Response: The Fund has incorporated this comment. The impacted disclosure has been revised as follows: “Commodity Net Exposure” shall refer to the long exposure of a given commodity that has a unique Harmonized Identification System Code (“HS Code”), less any hedges or offsetting positions. HS Codes are issued by the Harmonized System, an internationally standardized system of names and numbers to classify traded products that is used by customs authorities around the world to identify products when assessing duties and taxes and for gathering statistics. 28. Comment: Please supplementally explain and disclose with more specificity how the Fund expects to obtain leverage of up to 1.3x NAV. Response: The Fund has implemented this comment and the disclosure has been revised accordingly. Investment Objective, Opportunities and Strategies, Portfolio Composition, Physical Commodities (page 24) 29. Comment: The Fund indicates that it may make investments in physical commodities directly or through a subsidiary. Given that the Fund may utilize a subsidiary, please address the following: a. Disclose that “Subsidiary” includes entities that engage in investment activities in securities or other assets that are primarily controlled by the Fund. Response: The disclosure has been revised accordingly. b. Disclose that the Fund complies with the provisions of the Investment Company Act governing investment policies (Section 8) on an aggregate basis with the Subsidiary. - 8 - Response: The Fund does not invest through a subsidiary at this time but acknowledges the Staff’s comment and confirms that, if it were to invest in a subsidiary in the future, it would revise the disclosure accordingly. c. Disclose that the Fund complies with the provisions of the Investment Company Act governing capital structure and leverage (Section 18) on an aggregate basis with the Subsidiary so that the Fund treats the Subsidiary’s debt as its own for purposes of Section 18. Response: The Fund does not invest through a subsidiary at this time but acknowledges the Staff’s comment and confirms that, if it were to invest in a subsidiary in the future, it would revise the disclosure accordingly. d. Disclose that any investment adviser to the Subsidiary complies with provisions of the Investment Company Act relating to investment advisory contracts (Sec