Performance Fees

The Manager only receives a performance fee if the overall vault tokens have an appreciated price beyond the previous high water mark, and not on an individual to individual basis.

A high-water mark constitutes the highest level reached by the vault since taking the latest performance fee. The investment manager is required to bring the net asset value of the vault above the high-water mark before it is entitled to another performance fee.

For example, a depositor may have a 50% return (ROI), but if their vault tokens have not reached its high water mark then performance fees will not be available to mint. The Manager has the right to mint performance fees at any time if they are available, in its sole discretion.

The Performance Fee, if any, is automatically calculated and minted upon any new deposit or withdrawal transaction of the vault. Performance Fees are only minted if available. A new high-water mark is then established if the Fee function is positive.

Performance Fee Mechanics

To account for Performance Fees, new tokens of the vault are minted. These newly minted tokens are transferred to the Managerโ€™s wallet and the Manager's balance of vault tokens increases. Performance allocations to the manager are managed through token inflation to reduce trading fees, vault rebalances, and on-chain activity. This method also aligns the Manager's incentives with the overall performance of the vault.

When an investor exists, the tokens are sent back to the vault and burned in full from the vault's token supply.

There are currently no clawbacks available to depositors, or the ability to establish a preferred return to individiuals before managers can receive a Performance Fee.

Performance Fee Calculation

The formula for the amount of new vault tokens the manager receives as a Performance Fee is:

Max(Token Price-Token Price at Last Mint, 0) * Total Token Supply * (Manager Fee Fraction / Token Price)

If the 'Current Token Price - Token Price at Last Mint' is negative (meaning the fund is not beyond the high-water mark) at the time of calling, the function is multiplied by zero and thus no performance fees are taken if called at a deposit or withdrawal. This means the current token price at the time a new deposit or withdrawal is does not exceed the NAV (token price) at the time the last performance fee was taken.

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