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 asset manager'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.

Rate Limits and Restrictions

Maximum Rates: There are limits on management, performance, and protocol rates to protect investors from excessive fees:

• Maximum Management Rate: 10%

• Maximum Performance Rate: 50%

• Maximum Protocol Rate: 30%

Cooldown Period: Updates to fee rates can only occur after a cooldown period (e.g. 30 days). This ensures stability and prevents sudden fee rate changes.

Fee Distribution

The total fees, including management and performance fees, are calculated first. These fees are then distributed among the relevant roles based on predefined agreements. Instead of direct currency payments, each role receives an equivalent share of the vault, aligning compensation with the vault's performance and growth.