Management Fees

OpenFund provides fund managers with full control over their management fee structures, allowing them to tailor fees to their investment strategies, risk profiles, and investor expectations. This customizable approach ensures that managers are incentivized to perform well while maintaining a competitive and transparent fee model for investors.

Fund managers are able to set a fee initially ranging from 5-25% of profits generated. Funds that maintain consistent performance and become Partner Funds are permitted anywhere from 25-50% management fees. Fund managers and OpenFund Protocol alike collect fees solely from profits generated by funds, not directly from user deposits.

Types of Management Fees

Fund managers can mix and match different fee models based on their fund structure and investment philosophy:

1. Flat Percentage-Based Management Fees

• A fixed percentage fee on the total Assets Under Management (AUM).

• Charged periodically (e.g., monthly, quarterly, annually).

• Ensures consistent revenue for fund managers, regardless of short-term performance.

• Ideal for funds with long-term investment strategies or passive index funds.

2. Performance-Based Fees (Profit Share Model)

• Fees are directly tied to the fund’s profitability.

• Typically structured as a percentage of investor profits, incentivizing fund managers to maximize returns.

• Often uses a high-water mark model, meaning fees are only charged when the fund exceeds previous peak performance.

• Common in hedge funds and actively traded portfolios.

3. Subscription-Based Fees

• Investors pay a periodic subscription fee for continued access to exclusive funds.

• Ensures a steady revenue stream for fund managers, independent of AUM size.

• Best suited for specialized strategies, research-driven funds, and algorithmic trading models.

Fund Manager Fee Customization Tools

1. Dynamic Fee Adjustments

   • Managers can modify their fee structures before new investor deposits but cannot adjust fees retroactively for existing investors.

   • Helps maintain investor trust and regulatory transparency.

2. Tiered Fee Models

   • Managers can introduce tiered fee structures where high-net-worth investors or early adopters receive preferential rates.

   • Encourages long-term capital commitments and fund growth.

3. Auto-Compounding Fees

   • Investors can opt to have performance fees reinvested automatically, compounding their returns over time.

   • Creates long-term alignment between fund managers and investors.

How OpenFund Collects Fees

• Revenue Share: OpenFund takes a small percentage of all management fees to sustain platform operations and ensure ongoing development.

• On-Chain Transparency: All fee calculations and distributions are conducted on-chain, ensuring complete transparency for fund managers and investors.

Why Flexible Management Fees Matter?

• Encourages Performance: Performance-based models align incentives between fund managers and investors.

• Customizable Investor Experience: Different funds can cater to retail, institutional, and high-net-worth investors with tailored fee models.

• Scalability: As funds grow, managers can adjust fees to match market conditions and investor expectations.

With OpenFund, fund managers have the tools and flexibility to create sustainable, profitable, and transparent funds, ensuring both investor satisfaction and long-term success.