Agreed. And only profits attributable to the vault strategy.
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Calling it a Vanguard or the like is just a simile. Why not aspire to be like some of the largest companies in the world. I completely agree Yearn is its own beast with its own identity 
Iām guessing that over time performance fees could end up being worth more than a nominal management fee (not 2%, likely less), just sayingā¦
Iām glad everyone here wants yearn to grow (so do I). I just didnāt like emulating what made people avoid existing products. Like how you have to hawk over your investments and check if your principal is lower than what you started with after management fees.
This is what Iām betting on. A low-risk, near-free product has more potential clients and profits than a gated āpremium productā.
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A related idea: such a product has an increased chance of becoming integrated in other projectsā products and services, thereby increasing AUM for the vaults. Also, a percent of profit delivered seems more palitable to a larger variety of potential users and potential vault returns.
It is also difficult to consider the options and understand where the group stands because we have some here considering a management fee of 2% while others say they may be ok with a management fee of 0.1% or less. That is a big difference.
Would it help to lay out the options in broad strokes so we can see how what realistic revenue would be generated under realistic assumptions and what rhe messaging would look like for users and porential users?
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Another thoughtā¦ The other aspect of this that I think is being overlooked is that to date all the strategies (I believe) have been single asset strategies. What if one were to create a strategy that gave exposure to a basket of assets? For example, letās say a ātop 10ā basket vault was created where one deposits USDC for those that want long exposure to crypto. Vault strategist would then auto allocate to the top 10 assets as per the vault strategy and then potentially generate yield on those assets (i.e. invest the ETH portion into yETH). The performance fees on this above USDC could be huge in a bull market. Or do you benchmark against Bitcoin? But what if it underperforms USDC/BTC? Does the strategist get nothing for providing investors what they want during a bear market?
In this instance, I think a management fee is a lot more transparent than a performance fee calculated on every asset or every sub strategy
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Iām not sure if such a strategy would qualify for yVaults. A big part of why yVaults donāt provide liquidity to AMMs with divergence loss is because divergence loss can cause loss of principal (explained here). So a strategy that may lose principal might not be able to have a yVault.
Maybe there will be a different y-product in the future (yIndex?) that spells out that it doesnāt guarantee protection of principal, and would be justified in a different pricing model. But I donāt think it aligns with the yearn brand (at least at the moment).
But at the same time, SyntheticRebaseUSD was just released, which people are already discussing how to make it into an index fund.
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Ahhh, I see - I missed the memo on the loss of principal. Interesting.
I agree that a withdrawal fee causes friction.
Some combination of the classic Wall Street 2/20 Hedge Fund style fee structure (just not so high ofc) is appropriate.
One possibility is that the fees could be on a sliding scale.
The higher the APY that the strategy earns, the higher the fees on a percentage basis.
This way, we can have all types of strategies from money markets and index funds all lthe way up to arbitrage and Renaissance Technologies.
But only charging someone a 0.5% fee on a strategy that makes 75% APY (like the current yCRV strategy) is crazy. That is not a money market return. Tradfi money market returns right now are low single digits if that.
So point being, we may want to categorize what āmoney marketā actually means and one way to do that is based on the returns strategies are generating and charge more progressively percentage-wise when Yearn helps people make better returns.
I think the strategy writers in the future might agree. We can compensate them well for coding up very attractive risk-adjusted return strategies.
0.5% on the profits generated on a 75% APY strategy is lucrative, and is more lucrative than 1% of a 12% APY strategy.
Renaissance Technologies is the most successful Hedge Fund in the World and even they do not consistently make 75% APY.
They have averaged 67% returns every year for decades in their Medallion Fund. And they charge a 40% fee on profit.
Also it is possible that strategy writers, as Hedge Funds do, can customize their own fees based on their particular strategies/expertise and let the market participants freely decide where to deposit their funds.
I prefer free competition in the marketplace and giving strategy writers a lot of flexibility on how to structure their fees.
Initially we may be better off with one message for potential users and one easy to understand fee structure. Maybe we decide on a performance fee based on percent of profits attributable to rhe strategy, maybe we decide on a management fee based on value in the vault, but it would likely be a brand and UX nightmare to introduce both and also let strategy designers have free reign to set user fees. The Yearn brand should stand for something. Iād like to think it stands for ease of use, fair fees, and a strong risk adjusted return. Perhaps after we are more established we could introduce other lines of products with a different fee structure.
We can still let the marketplace decide, and if we cannot draw the use and/or fees we are happy with, we can adjust.
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The Yearn brand can stand for ease of use, fair fees, and strong risk-adjusted returns and the platform does not need to bear the brunt of criticism around fees if we allow the Strategy Writers to decide on their own fee structures.
Strategy writers set the fee and fee structure, they take 10% of profits based on their customized fee structure, and Yearn continues unemcumbered on its quest to re-invent the Legacy Financial System.
I have just attempted to trade vault tokens via inputting the vault contract address in uniswap, and it returns insufficient liquidity in any direction like I had assumed.
Where and how are people trading vault tokens? CREAM offers yWETH > WETH, but that is all.
Someone please provide a transaction hash as example of fee avoidance; as far as im aware, funds not deployed in the strategy are not intended to be charged a fee.
Despite the need for a consistent fee structure that doesnt result in loss of initial capital (vaults are interest arbitrage products and not a hedge fund imo) increasing the fee at this juncture further complicates matters.
Right now yCRV earns ~30% adjusted for the past week. Meaning because there are variable rates, the impact of a .5% withdrawal fee is also variable. 2% management fee at this juncture is thus unreasonable, theoretically rates could drop below 2% for certain periods (yaLINK already has).
This is further compounded by curveās threat of a no fee vault in response to the release and adoption of stable credit? This issue must be addressed before a fee change can even be considered.
This seems unlikely. If there is criticism about vault fees, Yearn will bear the brunt. If we are unwilling to stand behind the products and services offered and push for some consistency or quality, what will the brand mean?
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I have personally traded into the a vault using Uniswap. Even if the liquidity is not there now there could be in the future. As you note in another post here, Curve may be readying a pool of several yearn vaults (and USDC) with a stated goal of allowing movement into and between vaults without paying the exit fee. Further, most do not pay the exit fee because their withdrawal comes from the buffer of funds not yet deployed in the strategy.
I recommend (as have others) that we consider removing the exit fee and focus on one easy to understand (and not avoidable) fee. I would go with a performance fee, but a management fee that says below the APR may work if fhat is where the community goes.
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I prefer that the Yearn brand allow for open, permissionless access to numerous Public Wealth Managers.
Allow these Managers (the strategy writers) to set their fees and fee structure as they wish and let customers decide how they want to dine from the smorgasboard.
Some initial vetting process from Yearn Governance may be good as a safety precaution and perhaps some Governance-funded code audits, but other than that, Play Ball.
I think we need a snapshot poll between these two options to gauge hodler sentiment
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I am against management fees, they are an outdated concept that doesnāt belong in DeFi.
Why not introduce a rampable performance fee on withdrawal or something similar that encourage LPs to stick around instead of eating away at what makes Yearn great.
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