Fees

Tokenized Vaults can be configured with flexible fees based on manager preferences and underlying strategies. All fees are charged in the form of vault shares.

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Overview

Category	Fee Type	Description
Vault	Subscription	Charged on deposits as a percentage of issued shares. Burned to retain value in the vault.
	Redemption	Charged on withdrawals as a percentage of redeemed shares. Burned to retain value in the vault.
Manager	Subscription	Charged on deposits as a percentage of issued shares. Claimable by the manager.
	Redemption	Charged on withdrawals as a percentage of redeemed shares. Claimable by the manager.
	Management	Charged over time based on AUM. Paid in newly issued shares claimable by the manager.
	Performance	Charged on profits above high water mark or hurdle. Paid in newly issued shares claimable by the manager.
Protocol	Base	Charged over time based on AUM. Paid in newly issued shares claimable by the protocol.
	Flow	Charged as a percentage of manager fees. Paid in shares claimable by the protocol.

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Vault Fees

Vault fees serve to protect both investors and the long term integrity of the vault. Instead of leaving the system or going to external parties, these fees are burned. This reduces overall supply and effectively reinvests value back into the vault without requiring any token flows.

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Subscription

The subscription fee is applied when a user deposits funds into a vault. It is calculated as a percentage of the shares that would otherwise be issued based on the vault’s Net Asset Value (NAV). The fee is burned, reducing the number of shares issued and preserving value for existing holders.

For example, if a user deposits 1,000 USDC into a vault with a NAV of 1 and a subscription fee of 0.1 percent:

• $\text{Gross Shares} = \frac{1{,}000}{1} = 1{,}000$
• $\text{Net Shares Subscribed} = 1{,}000 \times (1 - 0.001) = 999$

The user receives 999 shares. One share is burned as the subscription fee.

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Redemption

The redemption fee is applied when a user withdraws from a vault by redeeming shares. It is calculated as a percentage of the shares being redeemed. The fee is burned, reducing total share supply and preserving value for remaining holders.

For example, if a user redeems 1,000 shares from a vault with a 0.1 percent redemption fee:

• $\text{Fee} = 1{,}000 \times 0.001 = 1$
• $\text{Net Shares Redeemed} = 1{,}000 - 1 = 999$

The user receives assets based on 999 shares. One share is burned as the redemption fee.

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Manager Fees

Manager fees are charged to compensate the vault manager for operating and maintaining the strategy. Unlike vault fees, these shares are claimable by the manager and represent a source of revenue rather than being burned.

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Subscription

The manager subscription fee is applied when a user deposits funds into a vault. It is calculated as a percentage of the shares issued for the deposit. These shares are allocated to the manager.

For example, if a user deposits 1,000 USDC into a vault with a NAV of 1 and a manager subscription fee of 0.1 percent:

• $\text{Gross Shares} = \frac{1{,}000}{1} = 1{,}000$
• $\text{Net Shares Subscribed} = 1{,}000 \times (1 - 0.001) = 999$

The user receives 999 shares. One share is issued to the manager as the fee.

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Redemption

The manager redemption fee is applied when a user withdraws by redeeming shares. It is calculated as a percentage of the redemption amount. The fee is claimable by the manager.

For example, if a user redeems 1,000 shares from a vault with a manager redemption fee of 0.1 percent:

• $\text{Fee} = 1{,}000 \times 0.001 = 1$
• $\text{Net Shares Redeemed} = 1{,}000 - 1 = 999$

The user receives assets based on 999 shares. One share is allocated to the manager as the fee.

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Management

The management fee is a time-based fee charged as a percentage of AUM (assets under management), regardless of vault performance.

Considering an annual management fee, at any time $t_1$, the fee is calculated as:

• $\text{Management Fee} = AUM_{t_1} \times \frac{t_1 - t_0}{\text{time\_units}} \times \text{fee\_pct}$

Where:

• $AUM_{t_1}$ = assets under management at $t_1$
• $t_0$ = the time the management fee was last crystallized
• $\text{time\_units}$ = number of time units in one year (GLAM supports Second and Slot)
• $\text{fee\_pct}$ = annual management fee

The management fee is distributed by issuing new shares that can be claimed by the manager.

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Performance

The performance fee is charged on profits and is typically based on a high water mark (HWM) and an optional hurdle rate. It is claimable by the manager and paid in newly issued shares.

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High Water Mark (HWM)

The HWM represents the highest Net Asset Value (NAV) per share a vault has reached after a performance fee was last crystallized. Performance fees are only charged on profits above this threshold.

If:

• $NAV_{\text{current}} > HWM$

Then:

• $\text{Performance Fee} = (\text{NAV}_{\text{current}} - HWM) \times \text{Shares} \times \text{fee\_pct}$

This ensures managers cannot charge fees for recovering prior losses.

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Hurdle Rate

The hurdle rate is a minimum return threshold that must be exceeded before performance fees can be charged. GLAM supports fixed hurdle rates.

Two modes are supported:

• Soft Hurdle: If the vault return exceeds the hurdle, performance fees apply to all profits.
• Hard Hurdle: Performance fees apply only to profits above the hurdle.

Example (Hard Hurdle):
If the hurdle rate is 5 percent and the vault return is 8 percent, the performance fee only applies to the 3 percent excess.

HWM and hurdle logic are evaluated at the time of fee crystallization, and fees are distributed as claimable shares to the manager.

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Protocol Fees

Protocol fees compensate the GLAM protocol for maintaining and securing the infrastructure. These fees are charged at the vault level and are claimable by the protocol.

The protocol charges two types of fees: a fixed base fee and a configurable flow fee.

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Base

The base fee is a time-based fee, charged as a percentage of AUM, similar to the manager’s management fee. It is paid by issuing new shares to the protocol.

The base fee is fixed at 0.01 percent (1 basis point) annually for all tokenized vaults.

If:

• $AUM_{t_1}$ = assets under management at time $t_1$
• $t_0$ = the time the base fee was last crystallized
• $\text{time\_units}$ = number of time units in one year (GLAM supports Second and Slot)
• $\text{base\_rate}$ = base fee rate (default 0.0001)

Then:

• $\text{Base Fee} = AUM_{t_1} \times \frac{t_1 - t_0}{\text{time\_units}} \times \text{base\_rate}$

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Flow

The flow fee represents GLAM’s share of manager fees, including subscription, redemption, management, and performance fees. It is applied as a percentage of the total manager fee amount.

The default flow fee is 20 percent.

For example, if a vault accrues $X$ shares in manager fees:

• Vault manager can claim: $X \times (1 - 0.20) = X \times 0.80$
• Protocol can claim: $X \times 0.20$

Flow fees can be customized on a per-strategy basis.