How On-Chain Fund Ownership Works: Shares, NAV, and Cost Basis

Control and ownership are not the same

A fund admin decides how capital meets the market: what to trade, when, at what size, and which assets to hold. That is control, and it is genuine — members cannot direct it.

What the admin cannot do is change who owns what. Share balances, the minting and burning of shares, and the settlement of withdrawals are handled by contracts. An admin cannot alter a member's share balance, transfer someone's shares, change the fund's carry rate after launch, or require their own approval before a member withdraws.

An admin can invest in their own fund and hold shares like anyone else. Their role grants strategy authority; their shares determine economic ownership. The two are tracked separately because they are separate things.

One fund, one NAV

A fund holds capital in more than one place without splitting its ownership. The primary vault holds USDC and supported spot assets in the fund's Safe on Arbitrum. A separate trading account holds perpetual collateral, open positions, and trading PnL on Hyperliquid.

Both roll into a single net asset value: fund NAV equals primary vault value plus trading account equity. Moving capital between the two changes the fund's allocation and nothing else — it does not mint shares, burn shares, or change who owns the fund.

Capital sitting in a pending join request is not part of NAV. It waits in the fund's escrow contract and becomes part of the fund only when the request is accepted and shares are minted against it.

What a share represents

A share is a claim on the fund's live value, not a token with a price of its own. Your ownership is your shares divided by total shares outstanding; your position value is that percentage multiplied by NAV. Own 5% of the shares and you own 5% of whatever the fund is currently worth.

Shares are non-transferable. They cannot be sold, sent to another wallet, or traded on a secondary market. That constraint is the point: their value derives entirely from the fund's assets and positions, so there is no market price to diverge from the underlying, no liquidity crisis in the share itself, and no way for someone to exit at a premium another member pays for.

It also means the usual crypto question — what is this token worth — has a single answer that anyone can compute from the fund's holdings.

What actually changes your ownership

The distinction that confuses people most is between ownership percentage and ownership value. They move independently, and only one of them matters to what you are owed.

When the fund gains or loses value, your share balance and percentage are unchanged; your position value moves with NAV. When another member deposits, your percentage falls but your position value does not — the fund grew by exactly what they added. When another member withdraws, your percentage rises and your value again stays put.

Only your own actions change your share balance. Adding capital mints new shares to you and increases both your percentage and your value. Withdrawing burns shares and reduces both.

So a falling ownership percentage is not dilution in the sense that matters. Nothing was taken from your position. The denominator grew.

Cost basis, and why carry works the way it does

The fund tracks a cost basis for the capital you still have invested. An accepted investment establishes it, further deposits increase it, and a withdrawal consumes the portion attached to the shares you redeem.

When shares are redeemed, the contracts compare their gross value against the cost basis attached to them. Realised profit is the difference, and performance carry applies only when that difference is positive.

This is a meaningfully better deal than the industry norm, and it is worth being explicit about why. Carry is not charged on your principal. It is not charged on unrealised gains, so the admin does not earn on a position that later gives the profit back. It is not charged on assets under management, so an admin cannot earn simply by holding your capital. They earn when you actually realise a profit, and not otherwise.

The rate is set between 0% and 30% when the fund launches and is fixed from that point. It cannot be raised on you later.

Leaving a fund

There is no lockup. A member can withdraw part of a position or exit entirely without the admin's approval, and settlement runs on-chain around the clock.

A partial withdrawal burns the shares attached to the portion redeemed and leaves you a member with a smaller position. A full exit burns your entire balance and ends the membership.

Two costs apply at the exit, and they are separate. Performance carry, if any, applies to realised profit above your cost basis. Rayze's 1% platform fee applies to the gross value leaving the fund, whether or not you made money. Worth planning around: on a position that is flat or down, you still pay the 1%.

What on-chain accounting does not fix

Every share mint, burn, deposit, withdrawal, and exit settles through contracts on Arbitrum, which produces a permanent and checkable record of how ownership entered, changed, and left the fund. You do not have to trust a statement about your position; you can verify it.

That is a real improvement over a quarterly letter, and it is not the same as safety. Shares lose value when the fund's positions lose value. Smart contracts, bridges, oracles, and integrated venues each carry their own risk. Non-custodial design means no intermediary will reverse a loss on your behalf.

Verifiable accounting tells you precisely what you own. It makes no promise about what it will be worth.