- Each Crypto Strategy manager can combine both
Crypto Strategies managers are able to monetize their knowledge by generating returns for followers (investors), and in turn, be rewarded with a performance fee for their skills. While followers (investors) can be sure that when the market goes down, and the Crypto Strategy is not performing well, they are spared the fees.
Note: A performance fee and “high-water mark” feature are commonly used. If you need in-depth knowledge, we encourage you to get more familiar with these terms also from other resources (internet, etc.).
- Performance fee benefits
- fees are collected only when you make a profit from your initial investment
- managers with better Crypto Strategy performance are rewarded more
- fees bring fairness and balance to the follower(investor)/manager relationship
- followers (investors) don’t pay performance fees for strategies that do not perform
- Setting up
Each Crypto Strategy manager can set up the performance fee up to 30% and determine the period of collection of the performance fee – it can be weekly, monthly, or quarterly.
Please find information on how to change the fee at the bottom of this article.
- How the performance fee is calculated
Note: For easier understanding, the calculation below is simplified.
> Example 1:
John is an investor.
He decided to diversify his investment, and follow a certain Crypto Strategy created and managed by ICONOMI Crypto Strategy Expert. He invested 100 euro to follow the Strategy. The manager has set the performance fee to 20%, the period of fee collection is weekly.
The end of Week 1 (calculation starts based on 100 euros):
The market goes up 15%.
John’s investment is now worth 115 euros.
He pays a 3-euro performance fee (20% from the 15 euros profit) and has 112 euros left.
The End of Week 2 (calculation starts now based on 112 euros):
The market goes down 20%.
John’s investment is now worth 89.60 euro.
There is no profit and he pays no fee.
The End of Week 3 (calculation starts now based on 89.60 euros):
The market goes up 10%.
John’s investment is now worth 98.56 euro.
Despite the profit in Week 3, he pays no fee because of the “high-water mark” implementation – his investment has not surpassed the highest peak investment value of 115 euros from Week 1.
The End of Week 4 (calculation starts now based on 98.56 euro):
The market goes up 25%.
John’s investment is now worth 123.20 euro and reaches a new “high-water mark.”
He pays only a 1.64-euro performance fee (20% from the 8.20 euros profit: 123.20 euros in Week 4 minus previous “high-water mark” 115 euros in Week 1; and not 20% from the 24.64 euros in Week 4 profit ), and has 121.56 euros left.
What did we learn?
The performance fee is only being deducted from John’s (investor’s) account when the market goes up.
To bring additional fairness to the table, we’ve also implemented the so-called “high-water mark”. Please find the explanation about “high-water mark” below.
> Example 2:
Joyce is a Crypto Strategy Expert/Manager.
Joyce decided to create her own Crypto Strategy that includes a 2% following fee and a 20% performance fee. As an experienced strategy manager, she got 10 followers (investors) right away. In the meantime, a month had passed, and her Crypto Strategy had a return of 10%. What does that mean for her and her followers (investors)?
Let’s say Joyce’s followers (investors) pulled together €100,000. After a month, their investments are worth €110,000. What does this mean for Joyce?:
Crypto Strategy value (Assets Following Strategy (AFS) - represents the sum value of all assets following strategy): €110.000
Fee Income:€1.733,33 (after deduction of ICONOMI's share of fees)
- “High-water mark”
In order to treat our users (Crypto funds followers (investors)) fairly, we implemented the so-called “high-water mark.” What does that mean? Simply put, in case the value of your investment in a Crypto Strategy drops, you will not pay any performance fees until the value of your investment reaches the previous high. In other words, you will not pay any performance fees twice for the same amount of performance.
When do you start paying performance fees?
On the day that the Crypto Strategy switches to a performance fee, we will calculate a high-water mark for each follower (investor). We will calculate it based on the values at the time you invested (average high-water mark applies: Fee is calculated based on followers’ (investors’) average entry point and not the high-water mark on the day the performance fee came into force. This applies only to followers (investors) who have less value now than when they added funds (invested). For followers (investors) who are better off now than when they added funds (invested), the performance fee kicks in immediately).
Example: Let’s say you’ve invested 200 EUR to follow a Crypto Strategy. The strategy manager later added a performance fee and on the day the performance fee goes live, the value of your investment is 150 EUR. This means you will not pay any performance fee until the value of your investment exceeds high-water mark 200 EUR.
What if you bought and sold, and bought again? In this case, we follow the so-called ‘FIFO’ (first in first out) principle to calculate your average price.
When the market goes down, and up again – do you have to pay the performance fee twice?
In a word – no. The very point of the high-water mark is to prevent you from paying twice for the same service. So until the value of your investment reaches the previous peak, you will not be charged any performance fee.
- How is the fee collected
ICONOMI collects the performance fee directly from the users’ (followers’(investors’)) accounts and shows the fee as a transaction in the users’ activity page.
- How is Crypto Strategy manager payed
Fees are credited directly to Crypto Strategy Experts’/Managers’ portfolios by increasing the value of their portfolio in the amount of collected performance fees.
- What does the fee mean for a Crypto Strategy investor
The performance fee is charged based on the period of collection – it can be weekly, monthly, or quarterly, to users (investors) who follow Crypto Strategy.
- Changing the fee
Performance fee can be changed twice a year.
When do changes take effect?
In case a Crypto Strategy manager reduces a performance fee, such a reduction takes immediate effect.
If, however, a Crypto Strategy manager decides to increase a performance fee, existing followers (investors) will receive email notification of such a planned increase. However, the new performance fee will only apply after one month or more (followers (investors) will receive another email on the day the new performance fee takes effect) giving the followers (investors) a chance to reconsider their investment options. If followers (investors) don’t agree with the change of fees for the Crypto Strategy they are following with their funds, they can remove funds from following the strategy (exit) any time they want, they can exit to euro, bitcoin, or ether.
How do you as a Crypto Strategy manager change the fee?
Login to your ICONOMI account and follow these steps:
Changing the fee: Login > My Strategy > Dashboard tab > Overview section > click on "Change" beside the Following Fee / Perform. Fee
Please find additional information in our blog posts "The Crypto Strategy I invested in is migrating to a performance fee. What does that mean for me?" and "Crypto Strategy Managers, Get Rewarded for Your Performance".
Note: Please find information on other ICONOMI fees here.