Strategy
We propose helping the Aavegotchi DAO create an Enzyme vault on the Ethereum deployment (Mainnet) and whitelisting their safe as the only allowed depositor. While Enzyme is live on Polygon, we would recommend using Mainnet for treasury management due to its robust security and greater range of DeFi integrations and assets.
After discussions with the DAO’s newly appointed Treasury Officer, Maxi Crouton, we are aware that the DAO would like to diversify out of a 100% DAI position into several other reputable stablecoins. This is spurred by the uncertain future direction of DAI as a USD stablecoin.
Therefore, we would suggest the following asset allocation:
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USDC – 25%
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USDT – 25%
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LUSD – 25%
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DAI – 25%
This allocation will be dynamic based on market conditions and the potential risk/reward of each stablecoin. This spreads risk appropriately and enables the DAO to run various stablecoin yield strategies that align with a conservative, low-risk approach. We assume a low risk-appetite here and will focus solely on high-quality stablecoins as determined by our risk assessment frameworks.
Additionally, we could look to enhance these yields by building a custom integration with Morpho, which enables suppliers to enjoy improved APYs. When liquidity is matched peer-to-peer (P2P), instead of via a pool, the capital utilisation rate is 100%, which means superior rates for lenders. Morpho combines the efficiency of P2P with the instant liquidity associated with lending pools. Aavegotchi DAO would benefit from improved rates while maintaining pools’ flexibility. This would be accessible via popular lending protocols such as Aave, Aura, Balancer, Curve and Convex.
Moreover, the DAO could opt to purchase Backed Finance’s new iShares Treasury Bond 0-1yr ETF - IB01, which is a tokenized US treasury bond (with a Chainlink price feed) providing 5.3% APY. If this was of interest, Avantgarde could speak to Wintermute to provide OTC liquidity on-chain via Enzyme’s integration with 0x, enabling the DAO to swap in and out of these tokens. This is an optional route but would provide the DAO with higher yields while retaining a conservative and safe approach.
Here is an example of what these strategies could look like. Please note this is indicative only and subject to approval by the Aavegotchi DAO.
| Asset |
Current Yield* |
Protocol |
Strategy |
| USDC |
1-4% APY* |
Curve |
Liquidity Provision |
| USDT |
1-4% APY* |
Aave |
Lending |
| LUSD |
1-4% APY* |
Liquity |
Stability Pool |
| DAI |
1-4% APY* |
Spark |
Lending |
| Optional: Tokenized US Treasury Bonds |
5.3% APY* |
Backed Finance + 0x + Wintermute |
Optional: Use Backed Finance and 0x/Wintermute for US treasury bonds exposure |
*Note that yields are on the lower end of their 12-24mth range and we expect them to rise. Additionally, floating rates are subject to change depending on market conditions. We will actively manage positions as rewards are collected + compounded and as yields change.
Though these strategies are not subject to change by the day, it would be useful to react to changing market conditions within some pre-defined constraints without requiring a governance proposal. When the vault is configured, smart contract policies could be enabled to allow one wallet to manage the funds with very specific guardrails. In this way, the vault would be managed by a delegated third-party (Avantgarde) in a controlled but flexible way.
In short, Avantgarde acts as the delegated treasury manager to run the agreed strategy on behalf of Aavegotchi DAO. We can execute transactions and manage the DAO’s funds only within the agreed framework you set as the vault owner. Our team of asset managers will regularly monitor and assess the strategy to optimise for maximum ROI while ensuring risk is properly managed.
We believe that in the current environment, a 1-4% annual return target encourages prudent risk management and represents a fairly meaningful increase in the utility of idle stablecoin funds within the treasury.
Funding Schedule
While we don’t believe a sophisticated DAO should sit on idle funds, we also recognise that allocating your entire $8M DAI position to Enzyme in one tranche could seem excessive. We value our partners and view our work as a long-term relationship built on the principles of trust and proven success. As such, we propose that the DAO funds its Enzyme vault in several tranches, until the entire amount ($8M DAI) is actively allocated and benefitting the DAO.
We suggest an initial deposit of $2M, followed by recurring bi-monthly deposits ($2M every 2 months) until the entire idle DAI position is allocated. This would enable Aavegotchi to become comfortable with Avantgarde’s performance and the Enzyme ecosystem, while ensuring that funds are not left idle for too long (thereby presenting an opportunity cost to the DAO).
Proposal and Fees
We propose that Avantgarde’s Treasury Management arm is appointed as the delegated third-party manager for the Enzyme vault. Avantgarde Treasury would help to define Aavegotchi DAO’s treasury strategy, execute the management (according to agreed KPIs) and handle reporting.
Avantgarde will provide continual risk monitoring of market situations and keep the DAO informed of any relevant changes as and when they arise. Additionally, we will schedule monthly meetings with Aavegotchi’s Treasury Officer to ensure the strategy is being executed according to the DAO’s goals and objectives. On a quarterly basis we can present and share with the DAO core team.
As such, we propose charging the following fees:
