Management fee is a good option since AUM is less volatile than returns, it aligns well with the need to actually keep the system running, paying for harvesting and personnel.
I’ve modeled your suggestion and the matching parameters would be:
To be honest, I did not read this entire thread, but I’d like to simply suggest that the rewards be gradient. In that when yeilds are higher, the reward is higher.
I agree there should be tiers to rewards, and i also think is good to drive towards requiring a lot of testing from strategist as a pre requirement to strategy going live, even if the strategy is a “simple” copy paste.
I think is a good requirement to expect a lot of unit testing work to be presented before considering the strategy for live usage, so even if the strategy is low copy effort the testing should be extensive, so even low effort strategies will require this additional effort, so not sure what the minimum number could be, just pointing out that the complexity of the strategy is not the only factor for considering the effort.
Thanks for the model. I think small mgmt fee can work, but no more than 2%.
In my view, vault users are looking for return and strategists should be compensated on return that they strategized rather than general mgmt fee. This seems to be a closer alignment of interest imho.
well… I don’t know how to model but I know how to use spreadsheets, I had this theory of modifying the withdrawal fee to a NAV premium (yield for previous depositors), would be better for the whole Yearn ecosystem as it will pump APY% for long-term investors on the strategies; I did some calcs previously on ParaFi Capital post (the one about pumping Yearn’s performance fee) and the results didn’t satisfy me tbh (Parafi’s data wasn’t there to analyze)
Now with this dataset, I did something that seems way more correct:
bad thing: target on the fees is 80% compared to your model
good thing: APY pumps by about 50% (which would in my mind pump AUM number up and by so, pump fees for the protocol)
the last section of the “Current” line on the graph, its just withdrawal fees (and my analysis might be off by 10-20% as I don’t know how to model)
this one is the previous one I made from ParaFi Capital’s proposal, but its just simple af and based on a ton of assumptions
edit: with NAV = NAV premium
What if we had it so the longer people locked capital in the vault the less they pay in fees? Or maybe they could get a discount for locking up funds for a month or more?
If anyone wants to pull data for other vaults, here is my notebook.
This means positions are not fungible, which is suboptimal for composability with other protocols.
I have the same thoughts. Gradient discount for time period lock in would be great motivation.
In favor of moving to this ASAP.
As strategist receive parts of the Yields he took advantage of, this is not necessary.
He will target high APY to receive high rewards
I would also favour performance fee over management fee. If I understand well the model here, it would still be close to the benchmark.
I understand that the harvesting is consuming some capital… Is there a precise way to calculate this and see its effect on the model?
Couldn’t fungibleness (not sure of the correct word) of vault tokens be maintained by implementing a time lock on specific tokens or perhaps issuing a variation of the vault token (e.g. LyCRV) that can’t be transferred and are swapped out for the fungible vault token after a predetermined amount of time?
I dont think the above approach would be worth implementing based on the current strategies, but I could see it being worthwhile if strategies are developed that depend on a guaranteed balance to juice APY.
My point is that as yields change because they are never constant, the strategist’s reward can change also. Something like 1% when yields are 1-5%, 2% when yields are 5-10, etc… something like this. But the actual numbers would need to be proposed by someone proficient in statistics.
I have… mixed feelings about this. As a (baby, still learning and working with @macarse) strategist, there’s a natural conflict of interest here, so I won’t talk about strategist rewards directly. Instead, I want to talk about the proposed fee structure overall.
Keeping that in mind… I don’t think the 2% management / 20% performance fees are the right solution. My main concern is that one of the largest value propositions for DeFi as it currently stands is higher yields. Copying a centralized finance fee structure where they have robust security, laws, regulations, and insurance in place is not the way to go. We need to compete on an overall return, both in volatile returns (performance) and guaranteed returns (savings re: cost/fees). They can charge higher fees, because their products offer less systemic risks.
I agree with the concept of management & performance fees, I just think we need to create a value proposition that is more enticing to more risk-averse investors. I would say a 1-2% management fee is good, but I’d argue the performance fee should be in the realm of 5-15% instead.
Just my $0.02.
