# Vault Fees

Compare how Morpho Vaults V1 and V2 charge performance and management fees, set recipients, and mint shares to collect fees from interest.

Source: https://docs.morpho.org/curate/concepts/fee



Morpho Vaults include fee mechanisms that allow vaults to collect fees from interest accruing within vault smart contracts. The implementation and capabilities of these fees have evolved significantly from Vaults V1 to Vaults V2, offering curators more flexibility in designing their business models.

## Fee Structure in Morpho Vaults V2 [#fee-structure-in-morpho-vaults-v2]

Vaults V2 introduce a sophisticated, dual-fee structure, giving curators precise control over revenue streams. All fee-related changes are managed by the `Curator` and are subject to a **timelock**, ensuring transparency and giving users time to react to proposed changes.

### 1. Performance Fee [#1-performance-fee]

The performance fee is a percentage of the yield generated by the vault, aligning the curator's revenue with the vault's success.

* **Fee Basis**: Charged as a percentage of the interest generated by the vault's allocated assets. This is automatically calculated based on the real asset values reported by adapters.
* **Maximum Rate**: Capped at **50%** of the generated interest.
* **Control**: The `Curator` sets the fee rate and the recipient address.

### 2. Management Fee [#2-management-fee]

The management fee is a continuous fee charged on the vault's total deposited assets, providing a fee for the vault's curator.

* **Fee Basis**: Calculated as an annualized percentage of the vault's `totalAssets`. A small portion of this fee is collected each time interest is accrued.
* **Maximum Rate**: Capped at **5% per year**.
* **Control**: The `Curator` sets the fee rate and the recipient address.

### Fee Collection Mechanism in V2 [#fee-collection-mechanism-in-v2]

Fees in Vaults V2 are collected seamlessly without affecting vault users' principal.

1. An interaction (like a deposit, withdrawal, or a direct `accrueInterest` call) triggers interest and fee calculations.
2. The vault aggregates asset values from all adapters to determine the total interest generated.
3. The performance and management fees are calculated based on this interest and the total assets.
4. New vault shares corresponding to the fee amounts are minted directly to the `performanceFeeRecipient` and `managementFeeRecipient` addresses.
5. The vault's `totalAssets` are updated to reflect the new state after interest distribution.

This share-minting mechanism ensures that fees are taken from the profits, while the principal of all vault users remains fully intact.

## Fee Structure in Morpho Vaults V1 [#fee-structure-in-morpho-vaults-v1]

The fee system in Vaults V1 is simpler, consisting of a single performance-based fee controlled by the `Owner`.

* **Fee Type**: A single **performance fee**. There is no management fee.
* **Fee Basis**: The fee is a percentage of the **actual interest** accrued onchain from the underlying variable rate market positions.
* **Control**: The `Owner` of the vault sets the fee rate and the recipient.
* **Security**: Fee parameter changes are **immediate** and do not have a timelock.
* **Maximum Rate**: Capped at **50%** of the generated interest.
* **Collection**: Like in V2, fees are collected by minting new vault shares to the `feeRecipient`.

## Comparison: Vaults V2 vs. Vaults V1 [#comparison-vaults-v2-vs-vaults-v1]

| Feature                   | Morpho Vaults V2                                            | Morpho Vaults V1 (MetaMorpho)                                   |
| ------------------------- | ----------------------------------------------------------- | --------------------------------------------------------------- |
| **Fee Types**             | **Performance Fee** + **Management Fee**                    | Performance Fee Only                                            |
| **Performance Fee Basis** | Interest automatically calculated from adapter asset values | **Actual onchain interest** from variable rate market positions |
| **Management Fee Basis**  | Percentage of **Total Deposited Assets**                    | N/A                                                             |

## Fee Recipient Requirements [#fee-recipient-requirements]

**The fee recipient wallet must be able to interact with the vault to actually receive the underlying asset**. Fees are always minted as shares, and converting them to the underlying asset requires calling `redeem()`.

**Two options:**

* Fee recipient calls `redeem()` directly, they periodically withdraw their accumulated fee shares.
* Fee recipient grants allowance once, then someone else redeems on their behalf, the fee recipient does a single `approve(claimerAddress, type(uint256).max)` (approval on the vault receipt token, not the underlying asset), then another address can call `redeem(shares, feeRecipient, feeRecipient)` on an ongoing basis.

Either way, the fee recipient must be capable of interacting with the vault (EOA, smart wallet, multisig, etc.). A fully passive address that never interacts with the chain won't be able to actually receive fees in the underlying asset.