Does Numerai grow with Hedge Fund dividends?


#1

Hello - this is my first post.

My question for you is this:

Does Numeraire, the NMR currency, grow in proportion to the success the Hedge fund that uses the NMR data does?

That is, apart from the value NMR gets from the weekly contests for data - will the NMR token increase in value as the hedge fund is increasing in value?

Thanks.

I just want to know if the hedge fund has the best strategies, then will NMR benefit too?

All the best.

Jason Chappell


#2

The price for NMR is entirely determined by the market, it is not tied in any direct way to the performance of Numerai. However, the assumed chain of events is something like: Numerai does well -> They increase the staking competition payout -> value of NMR is driven up because there is more demand to use it in staking.


#3

How likely is it that NMR staking payouts will increase? I am interested if it is likely that the staking payouts will increase because then I’d be investing in a smart token that is directly tied to the performance of it’s hedge fund. :slight_smile:


#4

Staking payouts have increased from an initial $1000/week to $3000/week so far. Total speculation, but I think it’s pretty likely they will increase in the future as long as the fund does well. However, even given that, NMR is not directly tied to the fund’s performance, no matter how likely the increases, so you shouldn’t think about it like that.


#5

Just to add a bit of context, traditional hedge funds operate under the 20 in 2 commission structure, 2% on Assets under Management (AUM) and 20% on profits, so for a new hedge fund with AUM of 4.5 million for instance, the commish would be something like (USD) :

| AUM       |           | 2% Annual | Monthly  | Weekly   |   | Payout |
|-----------|-----------|-----------|----------|----------|---|--------|
| 4,500,000 |           | 90,000.00 | 7,500.00 | 1,875.00 |   | 1,875  |
|           |           |           |          |          |   |        |
| Profit    |           | 20%       |          |          |   |        |
| 0%        | -         | -         | -        |          |   |        |
| 5%        | 225,000   | 45,000    | 3,750    | 938      |   | 2,813  |
| 10%       | 450,000   | 90,000    | 7,500    | 1,875    |   | 3,750  |
| 15%       | 675,000   | 135,000   | 11,250   | 2,813    |   | 4,688  |
| 20%       | 900,000   | 180,000   | 15,000   | 3,750    |   | 5,625  |
| 25%       | 1,125,000 | 225,000   | 18,750   | 4,688    |   | 6,563  |
| 30%       | 1,350,000 | 270,000   | 22,500   | 5,625    |   | 7,500  |
| 35%       | 1,575,000 | 315,000   | 26,250   | 6,563    |   | 8,438  |
| 40%       | 1,800,000 | 360,000   | 30,000   | 7,500    |   | 9,375  |
| 45%       | 2,025,000 | 405,000   | 33,750   | 8,438    |   | 10,313 |
| 50%       | 2,250,000 | 450,000   | 37,500   | 9,375    |   | 11,250 |

Purely guessing here, numeral’s last payout was $ 6,774, so that would place it at around 25%-30% in profits if it had 4.5M AUM, more if it had less AUM, less if i had more AUM and so on, there could also be other unknown factors (the websites cost, numerai’s staff salaries, office space etc,etc) .

The appeal for data scientists is apparent if you think that a small Hedge Fund is something like 100 AUM which at the 20 in 2 rate translates to around $166,000 ( weekly ! ) to be divided into the first 100 models and staking.

The burn rate ( destroyed NMR ) which would pressure NMR is hard to estimate,at current tournament participation around 100-200 NMR are destroyed per week, which is not much, if price remains stable and with the above calculation you would see a burn rate of around 4-5K a week, which could in turn affect the price if I understand correctly.


#6

Though with the most recently resolved round, 1025.56 NMR was burned (out of 1026.56 staked). Only a single staked account beat -ln(0.5), so burn rate is hard to pinpoint.