Fume Protocol
On-Chain Fund Management Protocol
Overview
A platform for Fund Managers to create and manage on-chain regulation-compliant investment funds. A transparent, and efficient white-labeled solution where the offering memorandum is encoded and enforced by a smart contract. Fee calculations, audits, and reports are automatically generated.
Problems with Traditional Fund Management
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Inefficiency
Many Intermediaries
The traditional fund management structure is extremely inefficient. To deploy the capital of an investor, the subscribed funds go through multiple intermediaries such as the subscriber's bank, clearing settlement companies, the Fund's bank, and the broker/exchange bank to name a few. A similar, if not more complicated, flow happens in reverse for redemptions.
Expensive Administration
Setting up and running an investment fund is extremely costly and time-consuming for Fund Managers. Initial setup of the fund requires legal and material efforts. At the end of every NAV calculation period, the reporting between the Administrator and the Managers requires tiresome and error-prone manual work.
Expensive Audits
Every financial year, the Fund has to pay auditors to provide transparency and ensure the correct execution of the investment strategy according to its memorandum. Once again, this leads to an increase in the total expense ratio (TER).
Opacity
Opaque by Default
• Trust the Manager
• Trust the Administrator
• Trust the Custodian
Investment Funds are opaque by default. Audits and disclosure regulations are meant to increase their transparency to protect investors. Finally, the investors have to trust the manager to respect the offering memorandum terms, to trust the administrators that all the NAV and fees are calculated correctly and that the Custodian of the underlying assets remains solvent.
Implications
On-Chain Fund Management Solution
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Efficiency
No Intermediaries
The Investor can subscribe to the Investment Fund without any intermediaries, directly from their personal wallet, drastically reducing the overall costs and settlement time.
Automated Calculations
The Manager exclusively provides the price feed, either selecting a source (e.g. Nasdaq, CoinMarketCap, or on-chain oracles) or manually for non-publicly traded assets. The NAV calculation, fee computation, and fee extractions are automatically executed by the smart contract.
Transparency
Transparent by Default
On-Chain Funds are transparent by default, meaning that the investor can have full visibility of the transactions and assets movements, at any time.
Encoded Offering Memorandum
(Only Partially) Trust the Manager
The Offering Memorandum is encoded in the smart contract, enforcing the agreed terms such as the lockup period and eligible assets. The Investor has to trust exclusively the Manager's investment decisions, as any other dishonest behavior would be traceable on-chain and therefore pursuable.
Implications
Next
How Does It Work?
Demo
Basic Specs