Vault leader

The trader who manages a user-created vault on Hyperliquid, trading the pooled capital of depositors. Protocol rules require the leader to hold a meaningful share of the vault themselves.

Definition

A vault leader trades other people’s money alongside their own. Depositors put capital into the vault, the leader places the trades, and profits and losses are shared according to each participant’s stake, with the leader taking a performance fee on gains.

Why the leader must have skin in the game

A manager who is paid on profits and loses nothing on losses has an incentive to take large risks: a good outcome pays, a bad one costs them only the arrangement.

Requiring the leader to keep a substantial share of the vault in their own name changes that calculation, because a blow-up destroys their capital too. Hyperliquid enforces a minimum leader stake for exactly this reason, and it is a floor rather than a guarantee of alignment.

What the performance fee does and does not solve

Fees on a vault are typically charged against a high-water mark, so a leader is not paid twice for recovering a loss they caused.

What that does not remove is the asymmetry of the payoff. The leader shares in the upside more than proportionally and in the downside only through their own stake, which still favours risk-taking at the margin.

What to check before depositing

The leader’s stake as a share of the vault, since that is the alignment. The track record’s length and its worst drawdown, not just its return. The lock-up or notice period on withdrawals. And whether the strategy is intelligible at all: a vault whose approach cannot be described is a vault whose risk cannot be assessed.

Past performance of a vault is a record of conditions that already happened, not a projection.

Where you will run into it

On Hyperliquid’s vault listings, where user-created vaults sit alongside the protocol’s own HLP vault, and in the vault creation flow, where the leader stake requirement applies.