How profit fees work

“I invested $100, the fund doubled to $200, the manager collected a 20% fee, and then the fund dropped back to my entry price. Shouldn’t I be breaking even? Why am I down?”

Short answer: you’re not down. The fee is continuously deducted from profit as it grows — it doesn’t get subtracted all at once when the manager collects. Your NAV never reached $200: it was $180 at this peak. When the fund drops back to your entry, the profit is zero, the fee is zero, and you’re back to $100. The cyan line in the chart below is what you can actually withdraw at any point in time — hover over it to see step by step.

20%

Walking through the scenario

  1. You deposit $100. The fund doubles. The fund grows to $200 gross, but you were never sitting on $200. The 20% profit fee is tracked continuously, so your NAV was $180 the entire time ( $20 accumulated fee on $100 profit).
  2. The fund drops back to your entry price. This is the part that feels wrong: shouldn’t the fee eat into your balance? No — as the profit shrinks, so does the fee. At day 60 the fund is at $100, profit is $0, fee is $0, and your NAV is $100. You break even.
  3. The fund recovers. New profit, new fees. At day 80 the fund reaches $210 and the fee gap reopens — your NAV is $188.

“But what if the manager collects the fee before the drop?” Toggle “Harvest at peak” above to see:

  • At harvest, the $20 fee leaves the fund — TVL drops from $200 to $180. But your NAV doesn’t move — it was already $180 before and after.
  • During the retrace, TVL and NAV overlap perfectly. There’s no profit above the $180 watermark, so no new fees are charged.
  • Only when the fund climbs back above the watermark does the fee gap reappear. Fees only ever apply to new profit — never to your principal.

Detailed numbers

DayFund valueFund %Accum. feeYour NAVYour %
0$100+0%$0$100+0%
5$115+15%$3$112+12%
10$130+30%$6$124+24%
15$150+50%$10$140+40%
20$165+65%$13$152+52%
25$180+80%$16$164+64%
30$200+100%$20$180+80%
35$185+85%$17$168+68%
40$165+65%$13$152+52%
45$145+45%$9$136+36%
50$125+25%$5$120+20%
55$110+10%$2$108+8%
60$100+0%$0$100+0%
65$115+15%$3$112+12%
70$140+40%$8$132+32%
75$170+70%$14$156+56%
80$210+110%$22$188+88%
85$230+130%$26$204+104%
90$220+120%$24$196+96%