# 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.
