TL;DR:
Metagov Stewards completed a review of the Endowment’s fee structure, following our responsibility to oversee the DAO’s relationship with the treasury manager. After sharing our research with delegates and validating the alternatives with kpk, we aligned on moving to a AUM-only fee model. This change improves incentive alignment, reduces complexity, and better reflects ENS’s long-term, conservative investment approach.
1. Why this review happened
One of Metagov’s primary responsibilities is managing the relationship between the DAO and the Endowment’s treasury manager.
Over time, several delegates and community discussions raised thoughtful questions about the incentive alignment of the current fee structure and whether it best served ENS’s conservative IPS.
2. How the process worked
To keep everything transparent and collaborative, we approached the review in four steps:
-
Metagov led a full research effort
We examined the existing structure, modeled alternative fee designs, chatted with fund managers/defi researchers, and backtested each model using historical data. -
We shared the research with Delegates
Their feedback helped shape the direction: simplicity, predictability, and IPS alignment were strongly preferred. -
We validated the alternative structures with kpk
kpk was fully open to discussing both models proposed in the research. They showed clear willingness to adopt whichever structure best serves ENS. -
Consensus emerged around the AUM-only model
Delegates favored its simplicity and alignment, and kpk supported this direction.
3. What’s changing
We are transitioning from the current fee structure:
- 0.5% AUM fee (capped at $100M)
- + 10% performance fee on DeFi yield
To a Decaying AUM-only model, which:
- keeps the base 0.5% fee at $100M
- gradually decreases as AUM grows
- removes the performance component entirely
This brings the structure closer to ENS’s conservative mandate and ensures the DAO isn’t paying performance fees for benchmark-level net returns.
4. Why this is an improvement
The AUM-only model provides several benefits that delegates consistently highlighted:
-
Better alignment with ENS’s IPS
The Endowment aims for stability and preservation, not aggressive yield-seeking. -
More predictable costs
Makes it easier for delegates and the community to understand long-term expenses. -
Simpler to audit and communicate
No performance component means less reporting complexity. Simple governance oversight. -
Lower overall costs and higher net yield than benchmark
Simulations show ~40% lower fees over the last 12 months, aligning the necessity of a treasury manager for outperforming benchmark.
We see this as a healthy and intentional refinement, accelerating the long-term sustainability of the Endowment.
5. kpk’s role
We want to emphasize that kpk was fully open and collaborative throughout this process. They engaged with all feedback, helped evaluate both alternative structures, and were ready to implement whichever model the DAO preferred.
Their flexibility and focus on long-term alignment were important in making this improvement possible.
6. Research materials
For anyone who wants to dive deeper:
Full Research Document:
https://hackmd.io/@alextnetto/endowment-fee-research
Simulation Spreadsheet:
https://docs.google.com/spreadsheets/d/1p_MEJM7xbXKaytFv6ul27nBc_5SvbnI28FlGOBS2tjw/edit
Includes performance backtests, cost comparisons, AUM curves, and the formulas behind the evaluation.
7. Next steps
The fee is already implemented for December. The relevant Endowment documentation will be updated and include the new fee structure in upcoming reporting.
Also we’ll facilitate the discussions for refining the IPS and improve APY while maintaining the risk profile.
If you have any questions or would like more insight into the decision, feel free to comment, we’re happy to walk through any part of the process.