# Fees

Lagoon vaults support four types of fees: <mark style="color:$primary;">**management**</mark>, <mark style="color:$primary;">**performance**</mark>, <mark style="color:$primary;">**entry/exit**</mark> and <mark style="color:$primary;">**protocol**</mark>. All fee parameters are encoded directly in the vault's smart contract, visible to any investor before deposit. Fees are collected at each settlement and distributed as shares to the designated feeReceiver address.

| Fee type       | Charged on                          | When collected     |
| -------------- | ----------------------------------- | ------------------ |
| Management     | Total AUM                           | At each settlement |
| Performance    | New profits above high-water mark   | At each settlement |
| Entry and Exit | New deposit and withdrawal requests | At each settlement |
| Haircut        | Synchronous redemptions             | At redemption      |
| Protocol       | Vault fees collected                | At each settlement |

## **Management Fees**

A periodic charge on the total assets under management. It accumulates continuously over time and is collected at each settlement, based on the vault's current valuation.

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

* **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.

{% hint style="info" %}
The management fee grows **linearly over time.** The longer the period between settlements, the more fees accumulated. The fee is proportional to the vault's AUM and the annual rate.
{% endhint %}

## **Performance Fees**

Applied exclusively to new profits, calculated against the **high-water mark,** the highest price per share the vault has ever reached. This ensures managers are only rewarded for genuine new gains, never for recovering previous 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 highest price per share reached.
* **totalSupply** is the total number of shares.
* **rate** is the performance fee rate (in basis points).
* **BPS** is a constant representing basis points (10 000).

{% hint style="info" %}
The performance fee is directly tied to profits and managers are rewarded only for returns exceeding the high-water mark.
{% endhint %}

## Protocol fees

Lagoon earns a percentage of the fees collected by the vault. For example, if the vault computes 200 shares for performance and management fees, and the protocol fee rate is 10%, Lagoon receives 10% of the 200 shares, equating to 20 shares.

## Maximum Fee Limits

Protocol-enforced caps protect depositors from excessive fees. These limits are hardcoded in the smart contract and cannot be overridden by vault operators.

<table data-card-size="large" data-view="cards"><thead><tr><th></th><th></th><th></th></tr></thead><tbody><tr><td><mark style="color:$primary;"><strong>Management Fee Cap</strong></mark></td><td><strong>10%</strong></td><td><sup>per year, maximum configurable by curator</sup></td></tr><tr><td><mark style="color:$primary;"><strong>Performace Fee Cap</strong></mark></td><td><strong>50%</strong></td><td><sup>on profits above high-water mark</sup></td></tr><tr><td><mark style="color:$primary;"><strong>Entry and Exit Fee Cap</strong></mark></td><td><strong>2%</strong></td><td><sup>on new deposit and withdrawal requests. Rates can only decrease, never increase.</sup></td></tr><tr><td><mark style="color:$primary;"><strong>Haircut Fee Cap</strong></mark></td><td><strong>20%</strong></td><td><sup>on synchronous redemptions</sup></td></tr><tr><td><mark style="color:$primary;"><strong>Protocol</strong></mark></td><td><strong>10%</strong></td><td><sup><strong>fix protocol fee.</strong> On-chain limitation set to 30%</sup></td></tr></tbody></table>

## **Fee Distribution**

At every settlement, the vault mints new shares to represent the fees owed. These shares are sent directly to the `feeReceiver` address configured at vault creation.

{% hint style="info" %}
Fees are distributed as **shares, not assets**. This means the fee receiver participates in the vault's performance from the moment fees are collected, without triggering any asset movement.
{% endhint %}


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