Summary
I am proposing an amendment to the current fee structure of the GLP vaults, specifically, the 20% cap on the ETH APR. To be completely honest, when I first came across the fee structure in the docs, I thought there was a mistake. The protocol is currently capping the APR on GLP’s staking yields at 20% when the ETH APR > 25%…and to make matters worse, they’re charging an additional 20% performance fee on the already significantly reduced APR.
I cannot for the life of me understand what the thought process was for imposing such high fees on GLP stakers…and neither can @Floflo1904#1470 (member of Core Team) as I asked multiple times in Discord and wasn’t given any legitimate response. To put things into perspective, the current yield for staking GLP directly via GMX is 30.95%. Due to the current fee structure, someone currently deposited into the Vesta GLP vault would be receiving an effective yield of 16% (20% cap, then -4pts for performance fees)…therefore, they are GIVING UP 48.3% OF THEIR YIELD TO THE PROTOCOL. The arbitrary 20% threshold disincentivizes GLP investors from utilizing Vesta and the vaults become increasingly less attractive as the native GLP yield increases. At best, this structure is poorly thought out, and at worst, it feels like blatant theft for users who may not have fully read through the docs.
Proposal (Amend vault performance fees to 2%)
The online docs attempts to justify the 20% performance fee by comparing it to the fees that are commonly charged by hedge funds. This is a misrepresentation of the “2 & 20” fee structure utilized by many asset managers. In short, the 20% performance fees are used to compensate funds for an active management strategy and are only paid out after specific hurdle rates are reached. Given that that GLP staking yields are generated by the GMX protocol, I don’t believe Vesta should be entitled to a 20% performance fee as they are not responsible for those returns. I propose that we amend vault fees to 2%, which is more in-line with the management fee charged by hedge funds/asset managers.
I apologize for the long proposal but I wanted to make clear how poorly thought out (in my opinion) the current fee structure is for the GLP vaults. In addition to not being conducive to vault TVL growth, the egregiously high fees make me question the intentions of the projects team. To be clear, I think Vesta has a huge growth opportunity here by enabling investors to leverage their GLP positions, but it needs to amend its fee structure in order to capture market share. I’d love to hear what your thoughts are on the entire situation. Thanks!