Silver Castle: Why Performance Fees Collapsed In A Better Crypto Year
The main article already argued that Silver Castle is not a simple crypto proxy. This follow-up isolates the fee engine: performance fees fell to NIS 276 thousand from NIS 3.735 million because the company gets paid on annual dollar returns and on AUM that kept shrinking, not on crypto headlines alone.
The main article already made the core point: Silver Castle is not a simple listed crypto beta. It is a tiny public wrapper around an investment manager that lives on management fees and performance fees. This follow-up isolates the gap that stayed open after the first read: how can 2025 look like a better crypto year in the headlines, while the performance-fee line almost disappears.
The short answer is that Silver Castle's fee engine is much narrower than the crypto cycle. It does not monetize headlines, intrayear peaks, or a broader institutional narrative by themselves. It monetizes annual dollar returns at the unit level, above a hurdle and above the prior high-water point of that unit, on top of an AUM base that kept shrinking through the year. Once that fee structure is matched against the 2025 return path, the redemptions, and the weaker dollar translation into shekels, the reported result makes sense: a year that looked better for the sector, but much worse for the manager.
Performance Fees Are Charged On A Narrow Annual Path, Not On Market Mood
The first thing to understand sits in the fund section. Momentum charges monthly management fees at a 2.5% annual rate on the average net unit value. Advanced charges 1.5%. That is the recurring layer.
Performance fees are a very different mechanism. In Momentum they are charged only once a year, at a 20% rate, and only after the investor first clears an 8% dollar hurdle and also moves back above the prior peak unit value on which performance fees were already paid. In practice, the first 8% of dollar return stays with the investor, returns between 8% and 10% are allocated to the manager, and only above 10% does the split become 80% to the investor and 20% to the manager. In Advanced, the annual performance-fee rate is 20%.
That matters because it breaks the intuitive assumption that a stronger-feeling crypto year should automatically produce stronger performance fees. It does not work like that. If the year ends below the hurdle, or below the prior high-water level of the unit, or simply on a smaller capital base, the manager does not get a real incentive-fee year even if parts of the year looked strong.
| Fund | Management fee | Performance fee | What this means economically |
|---|---|---|---|
| Momentum | 2.5% annual run rate | 20% once a year, only above an 8% hurdle and above the unit's prior high-water point | Intrayear gains do not matter if December gives them back |
| Advanced | 1.5% annual run rate | 20% once a year | Without a strong year and without real scale, meaningful performance fees are hard to generate |
2025 Delivered Volatility, Not A Broad Fee-Generating Return Profile
The monthly return tables of the two funds explain why stronger crypto headlines did not translate into manager economics. Momentum did not collapse, but it also did not deliver a clean annual path that stayed intact into year-end. There were good months, especially in April, May, July, and November, but the second half also contained negative months in August, September, October, and December. Advanced looked much weaker, with double-digit drawdowns in March, August, October, and November.
This chart matters not because it proves who beat bitcoin in each month, but because it shows the path problem. In Momentum, strong months did not compound into a smooth fee-generating year. In Advanced, rebounds never offset the depth of the drawdowns. So the sector could look more active and more institutional, yet the manager still failed to produce the kind of year-end result that throws off broad performance fees.
The final number makes that clear: performance fees collected fell to only NIS 276 thousand in 2025, versus NIS 3.735 million in 2024. That is not noise. It is an almost complete disappearance of the most sensitive revenue layer.
The Capital Base That Could Generate Fees Also Kept Shrinking
The second hit came from the size of the managed-capital base itself. In Momentum, AUM fell to NIS 26.8 million at the end of 2025 from NIS 46.0 million at the end of 2024, and near the report date it was already down to NIS 22.5 million. In Advanced, the decline was even sharper: from NIS 3.9 million to NIS 1.5 million, and then to only NIS 0.5 million near the report date.
The subscriptions and redemptions tables show why. In Momentum, the first half of 2025 still recorded NIS 19.4 million of inflows against NIS 8.7 million of outflows, but the second half recorded no inflows at all and NIS 14.4 million of outflows. In Advanced, there were no inflows at all through 2025, and NIS 1.0 million of outflows in the first half.
The economic meaning is double-sided. First, management fees are charged on asset value, so a smaller base immediately means less recurring fee income. But the more important point is that less capital today also means less capital that can ever produce future performance fees. Redemptions hurt twice. They erode management fees immediately and shrink the future feeable base.
This is also where one of the standard misunderstandings around Silver Castle falls away. An investor can look at a more active crypto market and assume the manager automatically sits on a stronger fee engine. In practice that engine only works if the money stays inside the funds and if the year finishes in the right place. In 2025, both conditions weakened at once.
The Dollar Did Not Cause The Performance-Fee Collapse, But It Did Remove The Cushion
The director's report provides the missing explanatory layer for the revenue line. The company itself attributes the 2025 decline to two separate factors: performance fees that existed in 2024 and did not repeat at the same scale, and about a 12% exchange-rate move during 2025 that translated management fees into fewer shekels.
That distinction matters. Management fees did not collapse. They fell from NIS 1.336 million to NIS 1.174 million. That is a decline of about NIS 162 thousand, roughly the kind of move one would expect when the fee base is dollar-linked and a lower exchange rate translates those fees into fewer shekels. Performance fees, by contrast, fell from NIS 3.735 million to NIS 276 thousand. So the volatile layer almost vanished, while the supposedly steadier layer also failed to cushion the blow because of currency and because the AUM base was smaller.
This is why the headline "better crypto year" still failed to reach Silver Castle's income statement. Even if the sector backdrop improved, the company's revenue line depends on something much narrower: how much annual return survived all the reversals, on how much capital it was measured, and at what exchange rate it was translated into shekels.
Put differently, 2025 did not expose a gap between crypto and Silver Castle. It exposed a gap between market performance and manager economics. The market can broaden, institutionalize, and generate stronger headlines, while a small manager still earns much less if money leaves, if the second half gives back the first, and if the dollar works against the recurring fee layer.
Bottom Line
The gap between a stronger crypto year and weak performance fees is not a paradox. It is simply the business model. Silver Castle does not sell direct bitcoin exposure. It sells the ability to capture a small, delayed slice of return, and only on capital that stays in the funds through year-end and clears the right thresholds.
In 2025 all three conditions weakened together: the return path was not smooth enough, the managed-asset base shrank, and the dollar did not protect the shekel value of management fees. That is why performance fees nearly disappeared, while management fees stayed too small to hold up the picture on their own.
If Silver Castle wants the fee engine back, it does not just need "a good crypto market". It needs Momentum to finish a year above the thresholds on a broader AUM base, Advanced to prove it still has real economic scale, and a management-fee base that can absorb currency moves without vanishing in shekel terms. Until then, sector headlines and company economics will keep moving at two different speeds.
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