February and March 2021 specific calendar situation
April system update


The Performance fee** is an essential feature of the ICONOMI Platform.

It brings a much-needed balance to the relationship between the manager and their copiers, giving the managers incentive to succeed.

We implemented performance fees back in 2018. Since then, the performance fees system has been running, collecting, and distributing fees. We did not have the chance to monitor and re-evaluate the system during the “bull market.” Up until recently.

With the bull market, many managers became aware of how profitable the performance fees can be and started to monitor them more closely. Since then, we started to receive multiple questions about the performance fee, its mechanics, and predictability.

The performance fees reached their peak throughout February and March 2021. We were also faced with a situation where the part of performance fee payout was processed in February instead of March and March instead of April (collided with a specific calendar situation on the 1.2. and 1.3. which were also the first Mondays of the month)*. This blog post focuses on explaining how and why that happened. You can rest easy, as no earnings were lost or miscalculated.

Please note that only users whose strategies collection is on a monthly basis were directly affected. Keep in mind that this is not a bug but merely unwanted behaviour which we are addressing. We want a predictable payout system that pays out every month.

Performance fee Definition

Performance fees are collected based on the high watermark level.**

The performance fee is a ‘reward’ that a manager gets for making profits through their Crypto Strategy performance.

It consists of:

A) Performance fee when a user/copier is still copying the strategy at the end of the collection period

This part of the fee is allocated on the first Monday of the following month and paid out one month after.

For example, December’s performance fees will be allocated from the Crypto Strategy on the first Monday in January and paid out in February.

B) Performance fee when a user/copier sell the strategy during the collection period

The performance fee is immediately allocated from the Crypto Strategy after a user/copier sells the strategy during the collection period. These fees get collected throughout the period and get paid out by the 10th of the following month.

Collection period

The Collection period is a period during which the performance fee is collected from the users/copiers. Based on the manager’s decision, this period can either be weekly, monthly or quarterly.

During these periods, we calculate the Crypto Strategy performance fees based on high watermarks**.

Allocation

At the end of the collection period, collected fees will be allocated from the Crypto Strategy and prepared for payout/distribution.

A) Performance fee when a copier is still copying the strategy at the end of the collection period

The allocation of fees always happens on the first Monday of the following month (for example, performance fees collected in December will be allocated from the Crypto Strategy on the first Monday in January and paid out in February).

B) Performance fee when a user/copier sells the strategy during the collection period

The fees apply immediately when a user/copier sells the Crypto Strategy.

Payout

The Performance fee is distributed and paid out by the 10th of the month.

A) The performance fee collected from users/copiers who are still copying the strategy at the end of the collection period is paid out by the 10th of the following month.

B) The performance fee collected from users/copiers who sold the Crypto Strategy during the collection period is paid out by the 10th of the month.


Note: Crypto Strategy fees are split between ICONOMI, the Crypto Strategy Manager, and the referrer/user according to the Referral program (after VAT).

Collection and payout algorithm

Let's explain the payout of Performance fees on a month to month basis scenario:

The Performance fees collection period starts on the first Monday of every month. During that period, we calculate the profits of each user/copier. We set the performance fee based on that data and their high watermark**.

December 2020 actions:

  • Collection period: Collected eligible fees from users/copiers between 7.12.2020 (first Monday of the month) and 3.1.2021
  • Allocation: The first Monday of December – 7.12. 2020. Allocated fees collected during the previous month (between 2.11.2020 and 6.12.2020)
  • Payout: performance fee paid by the 10th of December based on:
    - Performance fees from October for users still copying the Crypto Strategy at the end of that collection period
    - Performance fees from users who sold their Crypto Strategy in November

January 2020 actions:

  • Collection period: Collected eligible fees from users/copiers between 4.1.2021 (first Monday of the month) and 31.1.2021
  • Allocation: The first Monday of January – 4.1.2021. Allocated fees collected during the previous month (between 7.12.2020 and 3.1.2021)
  • Payout: Performance fee paid by the 10th of January based on:
    - Performance fees from November for users still copying the Crypto Strategy at the end of that collection period
    - Performance fees from users who sold their Crypto Strategy in December

February 2021 actions:

  • Collection period: Collected eligible fees from users/copiers between 1.2.2021 (first Monday of the month) and 28.2.2021
  • Allocation: The first Monday of February – 1.2.2021 for fees collected during the previous month (between 4.1.2020 and 31.1.2021)
  • Payout: Performance fee paid by the 10th of February based on:
    - Performance fees from December for users still copying the Crypto Strategy at the end of that collection period
    - Performance fees from users who sold their Crypto Strategy in January

    AND ALSO for
    - Performance fees from January for users still copying the strategy at the end of that collection period (collided with a specific calendar situation on 1.2.2021, which was also the first Monday of the month)*

March 2021 actions:

  • Collection period: Collected eligible fees from users/copiers between 1.3.2021 (first Monday of the month) and 4.4.2021
  • Allocation: The first Monday of March – 1.3.2021 for fees collected during the previous month (between 1.2.2020 and 28.2.2021).
  • Payout: Performance fee paid by the 10th of March based on:
    - NO PAYOUT for Performance fees collected in January for users still copying the strategy. These were ALREADY PAID OUT in February (collided with a specific calendar situation on 1.2.2021, which was also the first Monday of the month)*
    - PAYOUT for Performance fees from users who sold their Crypto Strategy in February

    AND ALSO
    - PAYOUT for Performance fees from February for users still copying the Crypto Strategy at the end of that collection period (collided with a specific calendar situation on 1.3.2021, which was also the first Monday of the month)*

April 2021 actions

  • Collection period: Will collect eligible fees from users/copiers between 5.4.2021 (first Monday of the month) and 2.5.2021. (SYSTEM UPDATE: 5.4.2021 – 28.4.2021)
  • Allocation: The first Monday of April – 5.4.2021 for fees collected during the previous month (between 1.3.2020 and 4.4.2021) collection period.
  • Payout: Performance fee paid by the 10th of April based on:
    - NO PAYOUT: for Performance fees collected in February for users still copying the strategy. These were ALREADY PAID OUT in March (collided with a specific calendar situation on 1.3.2021, which was also the first Monday of the month)*
    - PAYOUT for Performance fees from users who sold their Crypto Strategy in March

May 2021 actions

  • Collection period: Will collect eligible fees from users between 29.4.2021 and 28. 5. 2021
  • Allocation: 28.5.2021 for fees collected during the collection period (between 29.4.2021 and 28.5.2021)
  • Payout: Performance fee paid by the 10th of May based on:
    - Performance fees collected during the collection period from 1.3.2021 – 4.4.2021
    - Performance fees collected during the collection period from 5.4.2021 – 28.4
    - Performance fees from users who sold the Crypto Strategy in April

SYSTEM UPDATE

IMPORTANT NOTE - APRIL SYSTEM UPDATE: We changed the performance fee allocation date starting with APRIL 2021 to avoid specific calendar situations* and to speed up payouts. From April, the allocation will be made on the 28th of each month. Users will be paid by the 10th of the following month.

June 2021 with a new updated calculation and distribution period:

  • Collection period:
    - We will calculate and collect performance fees from users who will sell Crypto Strategies between 1.6.2021 and 30.6.2021.
    - We will calculate and collect performance fees from users who will copy Crypto Strategies between 1.6.2021 and 30.6.2021.
    - We will calculate and collect performance fees on 28.6 (monthly period) for the calculation period from 28.5 to 28.6 for users still copying the Crypto Strategy
  • Allocation: Started on 1.7.2021 for fees collected during the collection period in June. We must sell all non-manager fees to BTC for all Crypto Strategies
  • Payout: Performance fee paid by the 10th of June based on:
    - Performance fees from May for users still copying the Crypto Strategy at the end of that collection period
    - Performance fees from users who sold their Crypto Strategy in May

SUMMARY

Initially, we designed the system in a way where the collection period always happens on the first Monday in a month, to make sure it will always land on work-day, where we are able to monitor the collection and make sure it is executed impeccably. That said, it is also important to note that we allocate those fees at the beginning of the day and always account for the previous day (1.2.2021 - 1 day), which resulted in the fees being distributed one month in advance.

*

This collided with a specific calendar situation on 1.2.2021 and also 1.3.2021, which were both also first Mondays in a month. For that reason, performance fees from December 2020 and January 2021 were paid out in February. And since in March 2021, Monday was also the first day of the month, users didn’t feel the difference because the performance fee for February was paid by 10th March. But the issue became visible in April 2021, where the first Monday in the month was on 05. 04. 2021, which means that the payment of the performance fee for the month of March was not paid out entirely in April, but it will be paid, as usual, in May 2021.

As a solution, we are introducing an update where the fee allocation will be on the 28th of each month, and the collection period will start the day after. Payments will be still processed by the 10th of next month. Performance fees will be collected and allocated on the same basis, but the main difference will be that the performance fee will be paid out sooner.

With this update, managers will be able to directly compare their Crypto Strategy's performance and the proportional payouts. This is one of the many steps we will take to increase the understanding and transparency of fee payouts on ICONOMI.

**

Note:

1. 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 from other resources (internet, etc.) as well.

The high-water mark is the highest peak in value that a Crypto strategy or account has reached. This term is often used in the context of strategy manager compensation which is performance-based. The high-water mark ensures the manager does not get paid for poor performance. If the manager loses money over a period, they must get the strategy above the high-water mark before receiving a performance bonus from the assets under management (AUM).

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.

Please find additional information here.

2. Anytime Crypto Strategy fees are collected, they are split between ICONOMI, the Crypto Strategy Manager, and the referrer/user according to the Referral program (after VAT).