YIP-39: Funding YDS Investment Portfolio with Yam Treasury

Title: Funding YDS Investment Portfolio with Yam Treasury

Author: @Feddas

Forum discussions:

https://forum.yam.finance/t/yip-investment-portfolio-strategy-polling-voting/927 https://forum.yam.finance/t/yam-investment-portfolio-update-2/948 https://forum.yam.finance/t/yam-investment-portfolio-description-and-current-road-map/906

Basic Summary

YDS is ready for testing and full deployment, and this proposal is to determine the amount of yUSD to allocate to YDS

The investment objective of the YDS is to achieve long term capital appreciation and minimize risk in order to support growth and development of the Yam Ecosystem. Yam Investment Portfolio will be moving to an active management system through a collaboration with Tokensets. This will allow a more dynamic allocation of assets with better risk handling and analysis without loss of decentralization.

Abstract

There is currently approximately $2.25mm in yUSD in the treasury. Current and predicted allocations are as follows: Great Yam Wall $350k Predicted - Operations $500k Predicted - Umbrella $250k

Remaining $1,150,000 yUSD that can be allocated to YDS.

The current assets that are being utilized to farm Index, Sushi, and UMA will remain outside the YDS until the proper adapters are built into Set Protocol to handle these assets.

General consensus from the community found that a moderate 3 was appropriate for our initial strategy:

A moderate strategy would target a Beta (vs. ETH) of 1.5 and a correlation of 0.8

• In a real world terms, when ETH is heads up or down, the entire portfolio should follow at maximum of 1.5x ETH’s movement. If it goes up, the gains are magnified by up to 1.5x and vice versa.
• With correlation of 0.8 the assets inside the set will move in the same direction as ETH 80% of the time and would be a counter trend 20% of the time.
• All this is in efforts to minimize systemic risk while being fairly aggressive and target higher gains.

For our initial strategy our underlying assets would be similar to this:

• 33% ETH
• 33% wBTC
• 33% Yielding Stablecoin or Stablecoin

Motivation

Treasury allocation % for Yam Dao Set

@Designer’s Yam Brand Pillar – Yam is committed to decentralized protocol ownership. It seeks to leverage its powerful and forward-looking community to both build and guide the protocol. Community decides how best to invest treasury funds to ensure the success of the project. Governance of the protocol and management of the treasury can only be performed with approval from YAM token holders.

We as the community need to decide how we should allocate the treasury to maximize utility but allowing flexibility to access funds when needed.

Currently there are multiple Yam products that are in development and will require the use of the Treasury Funds (Yam Umbrella Protection, The Great Yam Wall). These two products will require a fixed or increasing usage of the treasury and should take priority in allocation.

The advantage of Yam Dao Set is that it works in a similar way as Defi Pulse Index. The treasury will invest in Yam Dao Set, and the set will in return mint YDS tokens for the treasury that represents the value invested into the Set. The YDS tokens are fungible and can be traded on the secondary market. This allows us to be flexible in the amount invested into the set. After we get an idea of what will be required for Yam Umbrella Protection and the Great Yam Wall protocols, we will decide the allocation for YDS.

Yam Dao Set Manager

The wealth management mantra: “Most people don’t plan to fail; they just fail to plan.” YDS Manager will be directly in charge of investing the assets inside the set according to the overall strategy Yam governance decides. His goal will be to maximize returns and minimize risk while following the guardrails set in place by Yam governance.

YDS Manager will be elected by Yam governance. YDS manager should fit the following criteria:

• Expert knowledge of cryptocurrency assets and more specifically Ethereum based Decentralized Finance.
• Expert knowledge of tokenset contracts and how to effectively use the system to trade and manage.
• Expert knowledge of risk management techniques and methods.
• Undying love for all things Yam.

@Krugman has been elected to the position of YDS Manager.

• He is working with Tokensets to build out the functional and technical requirements noted above. ** He will be directly involved in building the smart contracts needed.
• He’s one of the first social set traders on tokensets and is #2 ranked in assets under management.
• Trading since 2013, experience in cryptocurrency, FX, futures, options and equities.
• Been a core contributor with Yam since the beginning.