What is the method, formula for calculating management fees?

For each asset in custody, strategy, or being used as a collateral, we track the end of the day balance both in-kind and converted to USD using an end-of-day price. Abra then sums up the daily balances and divides by the number of days in the month to calculate the average daily balance (ADB) both in-kind and in USD. The monthly fee is simply that ADB value multiplied by the monthly fee rate (1/12 of the annual fee rate) for that asset which can vary by product and strategy.

Abra generates an invoice at the end of the month, which has detailed itemized fee calculations. For assets in BTC strategy, the management fee is calculated in-kind and charged to the strategy at month end. For assets in custody, automated investment strategies (for example, Lido staking), and those used as collateral for a loan, the management fee is calculated in USD and charged 10 days after invoice generation. We do an automated sweep of the invoiced amount from the reserve portion of your custody account. If you have USDC, we use that. If not, we sweep an equivalent amount of BTC or ETH. If there aren’t sufficient assets held in reserve at that time, Abra rolls the balance forward to future invoices.

Let’s take an example. Let’s assume the daily balance in custody is 1,000,000 for an asset that is subject to 0.5% of annual AUM fee. For a month with 30 days, the management fee will amount to 1,000,000 x 30 / 30 x (0.5% / 12) = $416.67. Because we round up the monthly fee percentage (0.5% / 12), the rate in this example will get rounded up to 0.0417%. Therefore, the invoiced fee amount will be 1,000,000 x 30 / 30 x 0.0417% = $417.