Performance Fees for pre-Sulu releases include the concept of a “crystallisation period”. While this concept is important in traditional finance, it is also complicated and gas-expensive to properly implement on-chain.
By removing the concept of “crystallisation period”, we can greatly simplify the implementation of the performance fee in the protocol.
This also implies that performance fee can be claimed at any time.
Without a "crystallisation period" the manager can potentially earn more performance fees through continuous accrual instead of quarterly or yearly accrual. Managers should therefore set the rate for the new simplified performance fee lower than the rate of the previously used performance fee.
Principles
Performance fee is paid after a period of constant share supply. Share supply changes on the following actions:
buy shares
redeem shares
claim fees
Performance fee is only paid if the share price at the end of a share period is larger than the high watermark.
Only the wealth created for the share price above high watermark is
Performance fee is paid out in shares, as all other fees.
Performance fee needs to be registered after management fee (i.e. management fee needs to be calculated first and management fee shares need to be ), but be
Order of fee registrations: Management Fee, Performance Fee, Entrance Fees, Exit Fees
Formulas
Call totalSupply =
TSi
i.e. totalSupply before minting or burning shares for the action)
Read highWatermark from storage (this is the share price after the previous performance fee calculation, see below),
hwm
Current gross share price
gi=GAVi/TSi
Wealth created during period:
Wi=max(gi−hwm,0)⋅TSi
Value of performance fee during period
Fi=Wi⋅x
, where
x
is the performance fee percentage
Performance fee shares (dilute existing shares):
fi=GAVi−FiFi⋅TSi
Calculate share price (after all fees have been minted or burnt):
gi′=GAVi/TSi′
where
TSi′
is the new total supply after all fees have been settled. If