This is the part 2 of the proposal (part 1 is available from here). It is about restructuring strategist fee for delegated vaults (this part for strategists’ share). This can bring more trust from investors and also more strategies.
It seems after more than 50% of positive votes on part 1 about vault’s share of performance fee, we can proceed to next step about strategist fee.
Currently each delegation step takes its own 10 percent of strategist fee. Compared to non-delegated vaults, which takes 10 percent of generated performance as strategist fee, delegated vault’s strategist fee may need some attention. There are some discussions about the performance fee for strategists in part 1.
Also if there is any consideration about vault share of performance fee which should be calculated once as 10% in last step of delegation and should be 0 for other delegation steps (As voted for in part 1), please describe it here. In part 1 (as I have described in one of my comments), for simplicity, I fixed negligible vault fees in each step of delegation (but the last step of 10%) as 0. If there is any ideas to change this 0 to something else, please comment it here. My opinion is that 0 is appropriate.
About management fee (which is not the subject of this proposal), my opinion is that for each deposit it should be calculated once (like what I think, for generated performance, and collecting votes for, but with different rates). After changing the calculation method to one management fee per deposit, we may also change the rate from the current 2% to cover applicable costs with appropriate margin, if required. Since this requires some analysis which I think is not available yet, and there may be better methods than to calculate it myself, about the impacts and changes to make, I think I will not enter to the subject of management fee in this series of proposals and this post will be the last one for now. Discussions are appreciated.
I think the current fee structure for delegated vaults is not appropriate because the investor will pay fees multiple times on the same yield (s)he has collected.
The other problem is that by the current fee structure, some delegated strategies specifically in long delegation chains may become impractical because of high fees.
The logic for supporting not taking the fees more than once, is similar to the practice of preventing double taxation of parent companies on the profits of their subsidiaries.
Let’s define the new term “investment line” in delegation, as the sequence of strategies a portion of investment travels until it reaches the last strategy generating the actual yield.
For example, let’s assume vault A has a strategy A1 which invests in vault B with some strategies including strategy B1 which invests in vault C with a strategy C1 which actually generates the yield. The yields generated in vault C may belong to some number of investment lines, one of them being (A1, B1, C1), another one will be (C1) for direct investment in vault C, another line will be (B1 , C1) for investment in vault B.
The subject for the current part of the proposal: I propose that the 10% strategist performance fee belonging to each investment line generated by the last strategy will be divided according to an agreed upon ratio between strategies (or another decision method), for example for (A1, B1, C1) each one may get 3.33% (one third of 10%). The implementation which comes to my mind is that the yield will be passed untouched during the path from C to B to A (nobody will take fees in between) and strategists will take their fees from the last strategy in the line.
For: The strategist fee for delegated vaults (for each investment line) is 10% in total and it should be divided between strategists.
Against: The strategist fee for delegated vaults, should not change.