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# Protocol Fees

Each vault collects exit, management and performance fees. Exit fees are kept in the vault at redemption. A portion of the management and performance fees is returned to the vault strategist/beneficiary in the form of shares (freshly minted). The remainder goes to the DAO represented by the holders and stakers.
Only the harvester can collect performance or management fees, it’s a role given by the vault owner. At creation of the vault, the strategist and a global DAO harvester address are granted this role.

### Exit Fees

Exit fees are applied to the redemption of shares and serve to prevent repeated entries/exits.
The variables defining exit fees are specific to each vault and are represented in basis points by exitFees in the FeesProps structure.They can only be changed by the owner, who will always be the DAO of the project, but they are chosen by the strategist at creation.
There is a minimum for management and performance fees to be claimed which is given in USD terms in SecurityProps.minHarvestThreshold

### Management Fees

Management fees are defined by the variable managementFeesRate which indicates the 8-hours management fees rate (not in basis point, but on 1,000,000). The total value of the vault, multiplied by the number of rounds (8 hours) since the last claim and by the managementFeesRate gives the total management fee. Then this amount is paid under the form of shares to the strategist and to the fee receiver given by the FeesManager contract.
The formula to compute the shares to mint for management fees is the following one:
$rounds = \frac{block.timestamp - previousManagementFeesHarvestTimestamp}{8 * 60 * 60}$
$toMint = \frac{rounds * shareTotalSupply * managementFeesRate}{10^6}$
The harvesting of management fees leads to a dilution of the share price, naturally to the detriment of investors, who indirectly pay fees.

### Performance Fees

Performance fees work in a similar way to management fees. A percentage in basis points is given by the variable performanceFeesRate. At the time of the claim, the fund share price is compared to the all time high, which is given by the variable highWaterMark. The formula to compute the share to mint to pay for performance fees is the following one.
$perf = sharePrice - hmw$
$totalPerf = \frac{perf * shareTotalSupply}{10^8}$
$feesOnPerf = \frac{totalPerf * performanceFeesRate}{10^4}$
$feesToMintInShare = \frac{feesOnPerf*10^8}{sharePrice}$
The ratio given by performanceFeesToTrader is sent to the strategist and the rest to the address indicated by the variable feesReceiver in the FeesManager contract. If the highWaterMark is higher than the share price, then the performance fees are paid and the highWaterMark is set to the new share price for future harvests.
Given this implementation, there is an incentive to enter the vault when it has a highWaterMark above sharePrice. The investor gets a ”free ride” by not paying a performance fee when the fund increases.
The harvesting of performance fees leads to a dilution of the share price, naturally to the detriment of investors, who indirectly pay fees.