Fees & Economics

Set up your fee system

Management Fees

Management fees are a periodic charge on the assets under management (AUM) to compensate for managing the vault. They accumulate over time and are collected during the vault's settlement, reflecting the Vault Curator's service and oversight.

$$\text{managementFee} = \left( \frac{\text{assets} \times \text{rate}}{\text{BPS}} \right) \times \frac{\text{timeElapsed}}{\text{1 year}}$$

• assets is the total assets being managed.

• rate is the fee rate for 1 year in BPS.

• BPS is a constant representing "Basis Points", 10_000 for percentage conversions (e.g., 1% = 100 BPS).

• timeElapsed is the time period for which the fee is calculated.

The management fee increases linearly over time based on the asset value and the management rate.

Performance Fees

Performance fees are applied exclusively to profits and are calculated only when the asset value surpasses the high-water mark (the highest historical value per share). This ensures fees are charged solely on new profits, not on recovered losses.

$$\begin{align*} \text{If } \text{pricePerShare} > \text{highWaterMark}: \\ \text{profit} &= (\text{pricePerShare} - \text{highWaterMark}) \times \text{totalSupply} \\[1em] \text{performanceFee} &= \frac{\text{profit} \times \text{rate}}{\text{BPS}} \end{align*}$$

• pricePerShare is the current price per share.

• highWaterMark is the previous highest price per share.

• totalSupply is the total number of shares.

• rate is the performance fee rate (in basis points).

• BPS is a constant representing basis points.

The performance fee is directly tied to profits, ensuring managers are rewarded only for returns exceeding the high-water mark.

Entry & Exit Fees

The vault supports entry and exit fees:

• Entry Fees: Applied when investors deposit assets into the vault, these fees can be used to offset initial costs or discourage frequent short-term deposits.

• Exit Fees: Charged when investors withdraw their holdings, these fees can help manage liquidity, cover operational expenses, or incentivize long-term participation.

Both fees are fully customizable by the vault curator and seamlessly integrated into the deposit and withdrawal processes, ensuring transparency and alignment with the vault's investment objectives.

Maximum Fee Limits

Maximum fees: Limits are set to protect investors from excessive charges:

• Maximum Management Fees: 10%

• Maximum Performance Fees: 50%

• Maximum Protocol Fees: 30%

Cooldown Period: Changes to these fee percentages are subject to a cooldown period (e.g., 30 days). This ensures stability and prevents abrupt adjustments that could impact investor trust.

Lagoon does not currently charge any fees.

Fee Distribution

Total fees, including management and performance fees, are calculated and then allocated to the relevant roles according to predefined agreements.

Each role receives an equivalent number of vault shares, aligning compensation with the vault's performance and growth.

• Management Fees: These are distributed proportionally based on the time since the last fee distribution within the year.

• Performance Fees: These are only applied if the price per share exceeds the high water mark.