What is the method, formula for calculating management fees?

For each custody or strategy balance, we track the ending balance each day 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 both in-kind and in USD. The monthly fee is simply that value multiplied by the monthly fee rate (1/12 of the annual fee rate) for that balance which can vary for custody or specific strategies.

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 your custody account. If you have USDC, we use that. If not, we sweep an equivalent amount of BTC or ETH.

As an example, where the custody AUM fee is 0.5% annually. Strategies can be either 1.00% or 2.00% annually. If you open your account part way through the month there will be fewer values in the total but we will still divide by the number of days in the full month so that is how it gets pro-rated for the initial partial month. We round up for both calculating the daily balance and the management fee.

As an example, the daily balance in custody (0.5% annual AUM fee) is 1,000,000 and for 30 days it is 1,000,000, then the management fee for that month is 1,000,000 x 30 / 30 x (0.5% / 12) = $416.67 for that month. Because we round up the monthly fee percentage (0.5% / 12), in this example, it will be rounded up to 0.0417%. Therefore, the calculated fee in our system will be 1,000,000 x 30 / 30 x 0.0417% = $417.