The Basics for Fund Managers

The fundamental features to understand before starting a Profit Sharing service!

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Profit Sharing - PAMM account

It is just as essential to manage your service as it is to manage your trading. To properly manage it, you must first understand how profit sharing works. Here is the summary.

Because Profit Sharing is based on success fees, your goal as a trader is to profit for the investors and thus yourself.

Success Fee (SF)

When you generate real profits for the investors, you will be paid a percentage of the profits (success fee).

You can pick the success fee percentage that you want. Just consider:

  • 5% is for Zignaly. If your service success fee is 30%, it means 25% for you and 5% for Zignaly.

  • You, as manager, never pay the success fee.

  • The minimum SF should be 0 or 10%. If it is 10%, it will be 5% for the manager and 5% for Zignaly, and if it is 0%, we don't charge anything.

Let's analyze it with an example:

If a user exceeds his HWM by 100 USDT, and your SF is 25%, 20 USDT goes to the manager and 5 USDT to Zignaly.

How do we know if there are profits or losses in your service?

Every day in your service, we will do an accounting. We call to this process Profit Sharing Daily Settlement (PSDS). During the PSDS, we analyze the profits and losses in your service over the last 24 hours due to trading. After that, we distribute them proportionally among your investors.

There are 2 notes:

  • We consider the total value of the funds in your service, even if you have them invested at that moment.

  • We don't include deposits or withdrawals for the PNL calculation. The deposits and withdrawals are executed once profits and losses are calculated.

Let's analyze it with an example:

The service has 10,000 USDT of AUM, and the manager buys ETH for 5,000 USDT. During the last 24 hours, between the previous and current PSDS, ETH has gone up 15%, but the manager still hasn't sold the coins. Thus, this Profit Sharing service will have ETH valued at 5,750 USDT and 5.000 USDT. The new service value will be 10,750 USDT, generating 7.5% (750 USDT) profits.

How do we know when profits are real?- High Water Mark

To know if the profits are real, we have two systems:

  • High Water Mark (HWM): The highest profit value attained by any investor since using that service. The HWM is individual for each investor separately.

  • 3 Days Solid: The investor balance should be above the HWM for 3 consecutive days to avoid paying for spikes. Due to that, we consider unrealized PNL

The HWM starts on the investor's initial investment. Suppose profits are added to the balance and help it to surpass the HWM for 3 consecutive days (3 Days Solid). Then, the investor will pay you the fees for the lowest of those 3, and we will move the HWM up to paid investment value.

For example

Jack invests an initial balance of 1,000 USDT.

  • On day 1 the balance is 1,050 USDT

  • On day 2 the balance is 1,100 USDT

  • On day 3 the balance is 1,075 USDT

The lowest value of these 3 PSDS is 1,050 USDT, so the High Water Mark of the service will be 1,050 USDT from now on. If on day 4 the PSDS is 1,150 USDT, the new HWM will be 1,075 USDT, since it is the lowest value of the last 3 PSDSs performed.

Next, let's learn how to manage funds in your service 😎

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