Wallfacer Labs would like to propose changes to TrueFi’s fee model today, informed by research we recently published on Centrifuge’s new newly proposed fee model and the fee models of other leading credit protocols. You can find the full research piece on our Substack.
In our research, we found that TrueFi is charging among the lowest overall fees today with its current platform fee at 0.50%. Maple, Goldfinch, and Credix are able to generate more fees by charging performance fees, taking a cut of interest earned in high-yield pools.
We believe that TrueFi can make its fee model the most user-friendly and the most sustainable in the industry by introducing two changes, which we detail below.
- Offer a price-competitive option that allows new managers to try TrueFi with little risk.
- Give high-quality portfolio managers the opportunity to scale with TrueFi, without feeling like fees are too extractive.
- Help TrueFi achieve financial sustainability by generating performance fees that managers & lenders are willing to pay.
Today we have two proposals we wish to get feedback on.
- Change the fee from a flat 50bps platform fee to a scaled protocol fee model.
- Smaller pools (< $5 million) pay no platform fee
- As pools grow >$5 million, they pay 50bps (0.50%) on all TVL exceeding $5mm
- Pools that reach >$100mm TVL see reduced fees as they grow further
Note: There are still technical considerations to be weighed in how exactly we implement this model, so do not take this as the final solution, just a close approximation of the direction we would like to move.
- Charge a 5% performance fee on the interest generated in the junior-most tranche of multi-tranche credit vaults.
- Today, this is the most common type of fee charged by credit protocols with Credix and Goldfinch charging 10%, and Maple charging 2.5% on all capital returned.
- We propose introducing this fee only on the junior-most tranche of a structured credit vault because these tranches typically offer higher yields comparable to the opportunities available on Goldfinch and Credix. If the vault is unitranche, then no performance fee would be charged.
- We believe performance fees could represent as much as 30-40% of total revenue over the long-term if these lower tranches come to make up a significant portion of TrueFi TVL (~20-30%).
You can make a copy of the attached spreadsheet and play around with different values. The relevant tab is called “Simplified Fee Model”.
You can find a video walkthrough by @tylerw here.
There are two hidden tabs in this spreadsheet as well where you can see some former models we played around with.
Let us know your thoughts. We would love feedback from lenders, managers, borrowers, and token holders on this new model before moving to a formal proposal.