Performance Fee

The performance fee mechanism is designed to incentivize effective fund management by linking the fee to the fund's performance. This fee is calculated and paid only when the share price surpasses the high watermark, ensuring that operators are rewarded only for creating new value for investors.

Contracts:

• eth: 0x6414575854d174dd59392846007deb3369d7480d

• arb1: 0xb358913726F3bAc8626f18a1b2C007F1a59c4fF4

• matic: 0xE9130bed8Ef2d11F1cEA775D1B8104f1A2AFF571

• base: 0x751545c0D7F2a696c9975c9d90428225A1e139cd

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Principles

1. Conditions for Fee Payment:

   • The performance fee is payable only if the share price at the end of a share period exceeds the high watermark (the highest share price previously achieved after a performance fee was last paid).

2. Wealth Creation Requirement:

   • Only the portion of wealth created above the high watermark contributes to the performance fee calculation.

3. Payment Method:

   • The performance fee is distributed in shares, ensuring alignment between the operator and the investors.

4. Actions That Change Share Supply:

   • Buying shares

   • Redeeming shares

   • Claiming fees

5. Order of Fee Calculations:

   • Fees are applied in the following order:

     1. Management Fee

     2. Performance Fee

     3. Entrance Fees

     4. Exit Fees

6. Continuous Accrual:

   • There is no "crystallization period," meaning performance fees accrue continuously rather than quarterly or yearly. As a result, operators are advised to set a lower performance fee rate to reflect the simplified structure.

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Formulas

1. Current Gross Share Price:

$$g_i = \frac{GAV_i}{TS_i}$$

Where:

• $g_i​$: Gross share price at the end of the period

• $GAV i$: Gross Asset Value at the end of the period

• $TS_i$: Total share supply before the action

2. Wealth Created During Period:

$$W_i = \max(g_i - hwm, 0) \cdot TS_i$$

• $W_i$: Wealth created during the period

• $g_i​$: Gross share price at the end of the period

• $hwm$: High watermark (highest share price after the previous performance fee calculation)

• $TS_i$: Total share supply before the action

3. Value of Performance Fee:

$$F_i = W_i \cdot x$$

• $F_i$: Performance fee value

• $W_i​$: Wealth created during the period

• $x$: Performance fee percentage

4. Performance Fee Shares (Dilution):

$$f_i = \frac{F_i \cdot TS_i}{GAV_i - F_i}$$

• $f_i$: Performance fee shares

• $F_i$: Performance fee value

• $TS_i$: Total share supply before the action

• $GAV_i$: Gross Asset Value before fee deduction

• $F_i$: Performance fee value

5. Updating Gross Share Price:

$$g_i' = \frac{GAV_i}{TS_i'}$$

• $g_i'$: Updated gross share price after fees

• $GAV_i$: Gross Asset Value before fee deduction

• $TS_i'$: Total share supply after all fees

6. Updating the High Watermark:

If $g_i' >hwm$, update $hwm$

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No Crystallization Period:

By removing the crystallization period, the performance fee accrues continuously, which may result in higher fee generation compared to time-limited accrual models. Operators should calibrate the performance fee rate accordingly.