Management fee
It is an annual percentage of assets under management. Across the industry it usually covers the cost of running the fund: research, execution, reporting and compliance. It is charged whether or not there are gains, so its base is worth understanding well.
Ask what value it is calculated on, how often it is charged and whether it includes other costs, such as custody.
At Daleki Capital
2% per year on assets under management, the same across all four funds. The exact frequency and calculation base are set out in the contract.
Performance fee
It is a share of your investment’s gains. Designed well, it aligns interests: the manager earns more only if you do. Designed badly, it rewards volatility, because the manager gets paid on every rebound even when your investment has not truly grown.
What separates one design from the other is the high-water mark.
At Daleki Capital
20% of net gains, only above your investment’s previous peak. If you don’t grow, we don’t earn a performance fee.
What the high-water mark is
It is the highest value your investment reached after the last performance fee was charged. Think of it as a mark on the wall: while your investment sits below it, no performance fee is charged. Only the gain above that mark pays a fee, and then the mark moves up.
Without this rule, if your investment rises, falls and rises again, you would pay a performance fee twice for the same gain: once on the way up and again on the recovery.
An example, year by year
Assume a USD 100,000 investment and a 20% performance fee. To isolate the effect of the high-water mark, the example leaves out the management fee and uses hypothetical yearly changes you can edit.
In the starting scenario, with a high-water mark you only pay a performance fee in years with new gains. Without that rule you would also pay while recovering part of the drop, and you would end up with less capital.
High-water mark simulator
Initial investment of USD 100,000 and a 20% performance fee. Change each year’s move.
| Year | Change | Fee with HWM | Value with HWM | Fee without HWM | Value without HWM |
|---|---|---|---|---|---|
| 1 | +40% | USD 8,000 | USD 132,000 | USD 8,000 | USD 132,000 |
| 2 | -30% | No fee | USD 92,400 | No fee | USD 92,400 |
| 3 | +35% | No fee | USD 124,740 | USD 6,468 | USD 118,272 |
| 4 | +20% | USD 3,538 | USD 146,150 | USD 4,731 | USD 137,196 |
| Total | USD 11,538 | USD 146,150 | USD 19,199 | USD 137,196 | |
In this scenario, the high-water mark saves you USD 7,661 in fees.
Illustrative example with hypothetical figures, without the management fee or other costs. It is not a projection or a result of our funds.
Other costs worth asking about
The two main fees are not always the only ones. Ask about each of these before you sign.
- Entry or exit fees.
- Early withdrawal penalties.
- Custody costs, execution costs and bid-ask spreads.
- How often the performance fee is calculated: once a year or more often.
- Whether there is a minimum return before any performance fee, known as a hurdle.
At Daleki Capital
Every cost is explained in writing in the private contract before you invest.
How to compare fees across managers
Always compare on the same basis: the same capital, the same scenario and every fee included. A fund with a low management fee and no high-water mark can cost more than one with a higher schedule and better rules.
A low fee does not make up for weak custody or a vague mandate either. Cost matters, and it is weighed after trust.
Terms in this guide
Educational content. Not an investment recommendation or a public offering of securities. Investing in digital assets carries the risk of total loss. Risk disclosures