Capital offboarding rules
Last updated
Last updated
It is important to balance the freedom of investors to get in and out of the fund (flexibility) as well as it is important for the manager to understand how much funds he has under management to rebalance his portfolio.
We understand that many investors are uncomfortable that their funds are locked in smart-contract and can not be withdrawn at all. But at the same time, we understand the manager as well, because he needs to know how much capital he has for the next month to rebalance his portfolio accordingly.
To achieve this goal we came up with a solution where flexibility meets security with the concept of Withdrawal Windows and Rage Quit. These 2 parameters are explained below in short, however, if you want to know more, you can read about it here.
Rage Quit Fine is the fine payable for early capital redemption when the investor withdraws funds from the fund earlier than he agreed with the fund manager on deposit (Potential Investor can see the terms of the fund before making his deposit. By depositing funds, he automatically agrees with the terms, provided by fund manager. Manager must know how much capital he has under his management to execute his strategy, that's why Rage Quit Fine is applied if the manager wants to withdraw his funds outside of the "Withdrawal Window" explained below.
"Withdrawal Window" and "Freeze Period". There are 2 periods that infinitely follow each other: "Freeze period", where investors should not withdraw their funds (when the manager uses investors' funds in his trading operations or they are part of the manager's portfolio) followed by "Window" period when a manager gives investor option to get his funds back. Read here for a more detailed explanation.
If an investor withdraws his funds by burning his LP tokens of the fund during the "Freeze period" he will need to pay a "Rage Quit Fine" (Fine for early capital redemption)
If an investor withdraws his funds by burning his LP tokens of the fund during the "Window" period he will not need to pay a "Rage Quit Fine" (Fine for early capital redemption)
Example: In the parameters on the picture below, an investor is able to withdraw his funds without paying a "Rage Quit" fine every first 2 days in a month (To be more exact - 31 days). If an investor wants to withdraw his funds out of the "Window" period or during the "Freeze Period" (Which is the same), then the investor would need to pay "Rage Quit", which in this example is as high as 10% from the deposit. However, we'd like to highlight that to avoid manipulation or blackmailing from the fund manager, so he will not be hunting our user's deposits, this "Rage Quit" is distributed among all other investors in proportion to the size of other investors' deposits.
"Withdrawal Window” is when the user can withdraw his deposit without Rage Quit Fee. After the withdrawal window ends, the user can still withdraw his deposit, but he will be fined with Rage Quit Fee.
It is recommended to open the withdrawal window every month for users to allow them to rebalance their portfolios. To make the right incentive and not to "rob" your investors we recommend setting Rage Quit fine between 5% and 15% depending on your strategy.
