Management Fees

The capped percentage of the Management Fee is 3% annualized.

Management fees are charges imposed on vault token holders to compensate the Vault Manager for their expertise and efforts in managing the digital assets and generating returns. These fees contribute to the operational costs and profit margins of the vault.

Management Fee Calculation

To calculate the management fee, dHEDGE DAO employs a formula that involves various factors.

The smart-contract formulas take into account the token supply, period of time, and the set manager fee. The vault's token supply represents the number of tokens outstanding of a vault, while the time change reflects the time interval over which the fee is being calculated. The manager fee numerator represents the specific percentage of the fee that the manager is entitled to.

The calculation multiplies the token supply, time change, and manager fee. This calculated amount is then further divided by the number of seconds in a year (365 days) to ensure that the fee is normalized over a one-year period. This result is the Management Fee that is charged to users.

Minting the Management Fee

Once the Management Fee is calculated, it is added to the available manager fees.

It's important to note that as these management fees are minted, new vault tokens are minted, and these tokens are distributed to the manager's wallet as compensation for the Manager Fee. This issuance of new tokens increases the total number of vault tokens outstanding in the vault.

This leads to a minimal decrease in the price per share of each vault share outstanding due to the dilution effect caused by the issuance of new tokens. The value per share experiences a minor decrease in proportion to the number of new tokens that were issued to the manager.

Despite the issuance of new tokens, the assets and positions of the fund itself remain unchanged. Importantly, these fees are charged proportionally across all users in the vault based on their respective percentage tokens in the vault. This ensures that fees are distributed fairly according to each user's stake in the vault.