How does pooling work?
Every pool has an income hurdle (the amount a member needs to earn before they contribute anything to the pool) and a contribution percentage (the % of earnings over the hurdle that is contributed to the pool).
Let’s say your pool has an income hurdle of $500K and a contribution percentage of 2%. In any given year, each pool member will pay into the pool 2% of their liquid income over $500K:
If you earn $600K/year, you will pay into the pool 2% of $100K, or $2,000
If you earn $200K/year, you will not pay anything into the pool that year because your earnings are below the hurdle
If you have a major liquidity event & earn $100M in a year, you will pay $1.99M into the pool (2% of $99.5M) & will retain $98M
How do you make sure people pay?
Pooling only works if contributions and distributions occur as promised. This is the central flaw with similar “handshake deals” among friends.
Every Pando pool is governed by a legally binding and enforceable contract, which lays out the rules for the pool. The contract clearly outlines when and how people pay, the penalties if payment is late or missed, and the intention to use legal remedies to enforce the obligation to pay.
And remember, Pando only gets paid when the pool does, so we have ensured that there is no way for pool members to “game” the system.
Does Pando charge an admin fee?
Pando only makes money when you do. Our fee is calculated as a percentage of distributions from the pool, which covers the formation, administration and enforcement of the pool, as well as ongoing support for the lifetime of the pool.
Additionally, some clients select an optional monthly fee that reduces Pando's percentage. Each client is able to select the option that is right for them.
What if a pool member stops working?
All pool members have a one-year grace period in which they can receive distributions without meeting the minimum earnings threshold. Pando is - by design - here to smooth out income volatility.
In a second consecutive year of not meeting the minimum earnings threshold, a member will be “benched” from receiving distributions until they meet the threshold again. Put simply - if someone in your pool earns less than the minimum for two years, let’s say because they become a scuba instructor, they are no longer eligible for pool distributions until they again earn above that amount.
How are "earnings" defined?
Pools only include income that is a result of material effort during the time you were pooled. We don’t count any inheritance, spousal income or passive investments.
We want to make sure you are only responsible for pool contributions when you can afford to pay, so we don’t count illiquid earnings (like equity or carried interest) until a liquidation event occurs.