> For the complete documentation index, see [llms.txt](https://docs.buoy.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.buoy.finance/for-vault-leaders/earning-fees.md).

# Earning Fees

As a Leader you earn your vault's **performance fee** — a percentage of new profits, set by you at vault creation (0–50%) — less the referral fee carved out of it (see below).

## How the high-water mark works

The fee is charged against a **high-water mark (HWM)**: the highest share price your vault has ever reached.

* When the share price sets a **new all-time high**, your fee applies to the gain above the old high.
* After a drawdown, you earn **nothing on the recovery** — only on the portion above the previous peak.
* There is no management fee, so a flat or losing vault pays you nothing.

This is the same model used by hedge funds, and it's what makes your incentives match your depositors': you only get paid when they make new money.

## You're paid in shares, not cash

When a new high is set, the fee is **minted to you as Buoys** of your own vault — not paid out as USDC. Consequences worth understanding:

* **Your payoff stays tied to the vault.** Your fee shares rise and fall with the share price like everyone else's. Cashing out means withdrawing, publicly, like any depositor.
* **Depositors see it as a share-price adjustment.** Minting fee shares slightly increases supply, which is exactly how the fee is "charged" — all displayed returns (APR, chart) are already net of it.
* **Fees crystallize at settlement moments.** The HWM check runs whenever the vault settles a deposit or withdrawal at a new high — no action needed from you. Between settlements you can also trigger it yourself with **Crystallize fees** in the Manage view (no gas, no signature: the protocol publishes a fresh NAV for you, at most once an hour per vault).

## The referral fee

A fixed slice of every performance fee is the **referral fee** — currently **10% of the fee** — and the rest is minted to you. The slice is snapshotted into your vault when it's created (the creation form shows it next to the fee field), so it can't change under you afterwards. With a 10% performance fee you keep **9% of new profits**; the 1% referral fee funds the [Referral Program](/referral-program/referral-program.md), which pays your depositors and whoever invited them in USDC.

Both parts are minted in the same moment: the fee event on-chain reports your portion (`LeaderFeeCrystallized`) separately from the referral fee (`ProtocolFeeCrystallized` — the contracts use the older "protocol fee" name), and everything the app shows you as "your fees" is your portion only.

## A worked example

Your vault charges **20%** and the share price history goes:

| Event                              | Share price        | Your fee                                           |
| ---------------------------------- | ------------------ | -------------------------------------------------- |
| Launch                             | 1.00               | —                                                  |
| Good quarter, price would hit 1.50 | **1.40** after fee | 20% of the 0.50 gain, minted as shares. HWM = 1.40 |
| Drawdown                           | 1.10               | Nothing                                            |
| Recovery                           | 1.40               | **Nothing** — just regaining the HWM               |
| New high, price would hit 1.60     | **1.56** after fee | 20% of the 0.20 gain *above 1.40* only             |

(The "your fee" column is the whole performance fee; with the 10% referral fee carved out, 90% of it is minted to you.)

## Practical tips

* **Choose the fee rate carefully at creation** — it's part of your vault's public identity, and depositors compare it against your results.
* **A deep drawdown is expensive** — you'll trade "for free" until the old high is regained. Managing drawdowns protects your income as much as your depositors' capital.
* **Deposit into your own vault.** Skin in the game is visible on-chain and is the strongest signal you can send — and a **minimum leader share** set at creation turns it into a commitment the contract enforces. See [Deposit Limits](/for-vault-leaders/deposit-limits.md).


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