Aragon Treasury Management

Hey all,

PieDAO would like to put forward to ANT holders a proposal to diversify and optimise its current Treasury allocation, according to its conservative risk profile and taking into consideration the liquidity needs and opportunity costs of current treasury allocation.

As a background, PieDAO is an Aragon DAO governing tokenized portfolio allocations, which has to date released 8 index products. PieDAO’s indices, Pies, provide a balanced and risk-minimised exposure to a carefully curated set of assets, while also generating passive income through productive use of each underlying asset.

Should the proposal gather support from the Aragon governance, it would be the first implementation of Diversify, PieDAO’s new treasury management service.

With this proposal we would like to put forward two votes:

A) a vote for consensus among ANT holders on their preferred risk level, characterized in the analysis below as medium-low, medium, or medium-high.

B) subject to vote A), a vote for an allocation from the Budget DAO.

Methodology

  1. The Proposal for Aragon Treasury optimization has been constructed according to its conservative risk profile, taking in consideration the liquidity needs and the opportunity cost of current treasury allocation

  2. Backtesting and benchmark of proposed allocations in order to highlight

  • Correlation of underlying assets considered

  • Marginal Contribution to Risk (MCTR) of each asset in respect to the resulting allocation

  • Return and Standard Deviation of the specific allocation, and its resulting Sharpe Ratio

  • β (overall systematic risk) of each allocation vs ETH

  1. Declination of Yield Strategies to be attached to the selected allocation, for growing risk appetites

The Current Allocation

  • Scope: Current assets excluding ANT, ANJ & LP positions held

  • Approx 93% of Risk (MCTR) concentrated around ETH
  • Opportunity cost from the lack of Yield Strategies
  • Good Mid-to-Low correlation of assets

The Proposed Allocation

1. Medium-Low Risk Profile

The proposed allocations would be equivalent to 35% USDC | 15% ETH | 50% BCP (Balanced Crypto Pie - a PieDAO index composed of ETH, WBTC, and the DeFi small caps and DeFi large caps), and would carry the following indicators:

2. Medium Risk Profile

The proposed allocations would be equivalent to 30% USDC | 10% ETH | 60% BCP (Balanced Crypto Pie), , and would carry the following indicators:

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3. Medium-High Risk Profile

The proposed allocations would be equivalent to 25% USDC | 15% ETH | 60% BCP (Balanced Crypto Pie), and would carry the following indicators:

Benchmark

As could be seen on the table below, for comparable levels of β, few moderate risk profiles could improve the Sharpe Ratio by ~14%, spreading the MCTR more evenly among underlyings.

It is worth noting all profiles could well serve for the application of Yield Strategies: particularly, the Mid Risk Profile seems to be a great fit, which we present further for two levels of yield strategies.

Mid Risk profile: Conservative Yield Strategy

  • 20% ETH + 20% WBTC = 40% ETH/wBTC UNI-v2

  • 40% ETH/wBTC UNI-v2 + 14% DEFI+L + 6% DEFI+S = 60% BCP (Balanced Crypto Pie)

  • Stable allocation as 5% USDC (liquid cash position > $800k), 25% as aUSDC (Yield bearing token)

  • 10% ETH to be staked as stETH

**

Mid Risk profile: Aggressive Yield Strategy

  • 20% ETH + 20% WBTC = 40% ETH/wBTC UNI-v2

  • 40% ETH/wBTC UNI-v2 + 14% DEFI+L + 6% DEFI+S = 60% BCP (Balanced Crypto Pie)

  • Stablecoin allocation as 5% USDC (liquid cash position > $800k), 25% as yCRV VAULT

  • 5% ETH + 5% stETH LP as 10% crvSTETH yVAULT

Conclusion

We would like to bring the proposed Treasury diversification strategies to the attention of ANT holders, and welcome their feedback and questions.

Subsequently, we would like to run a Snapshot vote on:

A) ANT holders’ preferred risk level;

B) a vote for an allocation from the Budget DAO, to be directed to the chosen strategy

Thanks for your attention!

4 Likes

Thanks for making this super detailed proposal @Gabo_o.

A few questions from my end:

  • What’s the total amount of funds staked in PieDAO today? And what’s the best resource to check this info for future reference?
  • You mentioned this would be the “The first implementation of Diversify , PieDAO’s new treasury management service”. Can you provide some further input on any perceived smart contract risk here? Are the smart contracts underpinning Diversify audited? and if so, by whom?
  • Are there are lock-in requirements as part of the proposal? Or would the budget DAO be free to liquidate it’s positions as and when required?
3 Likes

Hey @joeycharlesworth

PieDAO as of Today has a TVL slightly higher than $20M, but big plans. From our experience the best resource to track this would be DeFi Llama DefiLlama - DeFi Dashboard, even though there are currently some due updates to their data adapter, so TVL currently results under-counted.

The Diversify implementation will be quite simple and entirely based on the PieVault smart contracts powering our last generation of Pies (more details here). The PieVaults design, formerly know as ExperiPie, was successfully audited by MixBytes() back in December (GitHub - pie-dao/audits: Collection of Audits for PieDAO's Smart Contract). Since then, they have been powering 4 of our current indices.

The PieVault design itself relies on the Diamond Standard (EIP-2535), which passed many audits having seen a multitude of implementations with Aavegotchi, Aavegotchi Staking and BarnBridge, among others.

In any case, we’ll be glad to request a second audit of PieVaults as additional safeguard for the Aragon Community.

No lock-in requirements or strings attached. The Budget DAO will clearly be free to liquidate anytime its positions.

Hope this helps!

1 Like

Thanks for the replies @Gabo_o

As an Aragon DAO, I’m personally keen to support PieDAO’s growth and think this initiative can also help diversify the Budget DAOs’ asset composition. It would be great put this to community vote to allow ANT holders to signal their views on the proposal.

Tagging @isabella and @LucaVJ in case they would like to chime in with any additional questions and/or to discuss next steps.

1 Like