Avantgarde Finance to Support Treasury Management for Shutter DAO 0x36

Shutter DAO DAO Proposals
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Changelog

29/11:

  • Updated the proposal to reflect the correct USDC amount ($2.3m rather than 2.7)
  • Adjusted down the management fee to 0.5% from 0.75, which is to cover Enzyme’s infra costs.
  • Removed the bonus option around staking ETH due to little interest expressed.

TL;DR

  • Proposal to deposit 2.3m USDC from the Shutter DAO 0x36 treasury into a vault which mirrors the Avantgarde DeFi Yield Fund, currently yielding 9.5-15% APY.
  • Straightforward non-custodial deposit with conservative risk.
  • No active management required from the Shutter DAO, who still retains ownership over the vault.
  • Full transparency into vault activity with real-time analysis.
  • Potential for long-term partnership with a leading onchain Treasury Manager.
  • Allows the Shutter DAO 0x36 and its core contributors to continue to focus on its core mission, knowing treasury assets are safely managed and productively earning yield.

Proposal

Recent discussions and temp checks on Treasury Management have shown a majority interest from the community to earn yield on idle treasury assets. At the same time, delegates reluctant of the current proposals have expressed a desire for greater simplicity and a strategy that allows for minimized governance attention, operational risk and overhead.

To address this feedback, Avantgarde Finance proposes that the 2.3m USDC from the Shutter DAO 0x36 treasury is deposited into a DeFi Yield Fund vault, completely owned by the Shutter DAO 0x36 and managed on its behalf by Avantgarde. The vault would mirror the allocation of the Avantgarde DeFi Yield Fund (which is a regulated fund for our institutional clients) currently yielding in the region of 9.5% APY. The DeFi Yield fund is a non-custodial vault built on the battle-tested (mainnet since 2019) Enzyme protocol that provides diversified exposure to on-chain stablecoin yield across multiple sources, based on a robust protocol selection process and risk assessment framework.

Shutter DAO 0x36’s vault would be a custom-built, non-regulated vault without all the regulatory overhead and added considerations for institutional investors of the mirrored Avantgarde fund, which would even allow us to increase the current turnover and yield while staying within reasonable risk parameters.

To see the current vault composition, visit the vault’s portfolio page. You can also use this embedded link to access all of Enzyme’s DeFi protocol integrations.

DeFi Yield Fund Summary

  • Non-custodial with smart-contract based roles & permissions
  • Provides access to onchain yields within DeFi, focusing on the largest, most battle-tested protocols
  • Currently yielding 15% APY
  • Aims to be diversified across stablecoins, protocols, and underlying yield sources
  • Balances the level of yield with risk and capacity
  • Actively managed
  • Competitive fees, 0.5% for management and 7.5% for performance
  • Full transparency into fund activity

Operational setup

  • A vault would be configured such that ShutterDAO is the only allowed depositor and Avantgarde Finance would be delegated manager with certain smart contract roles & permissions (ensuring that Avantgarde can not misappropriate the funds).
  • Fees would be calculated in the vault technology and paid out automatically
  • Reporting is on-chain provable and auditable 24/7
  • Ownership would be transferred to ShutterDAO after configuration
  • The DAO can remove or change the asset manager at any time

Avantgarde will provide written reporting on the performance of assets, either monthly or quarterly as the community deems appropriate. We’re also happy to manage any upcoming developments to sDAI and required portfolio changes as the DAO wishes.

Long-term, we can build on a partnership between Shutter and Avantgarde to implement more sophisticated strategies, possibly exploring covered call options for extra revenue, and a holistic treasury management structure that can sustainably support the DAO’s ongoing operations.

About Avantgarde

Avantgarde is a crypto native asset management, advisory and research firm, specialising in asset liability management, R&D, risk monitoring, DeFi and treasury strategies. We’ve been

active in DeFi since 2016, notably as founders of the on-chain asset management protocol Enzyme, with decades of financial services experience from reputable TradFi firms. Avantgarde has conducted work for leading protocols including Uniswap, Gitcoin, Arbitrum, Safe, The Graph, Nexus Mutual, among others, and work closely with DAOs and Foundations to help them optimise treasury management strategies, improve financial sustainability, and promote long-term growth.

About Enzyme

Enzyme is a battle-tested onchain and decentralized asset management protocol designed for builders and managers to create asset management products within a customizable and safe environment and accelerate project outcomes. On mainnet since 2019, Enzyme enables projects to plug into a suite of multi-audited smart contracts at low cost without needing to worry about building and maintaining the underlying smart contract infrastructure.

Enzyme is an open source code base, and the smart contract code for both the Enzyme vaults and the platform’s core protocol can be found on Github. The contracts are fully tested and independently audited; the most recent release (v4) audited by ChainSecurity and OpenZeppelin amongst others, with a current bug bounty of $400’000. The Enzyme App has also been fully audited.

Thank you for engaging with our proposal, and we look forward to hearing the community’s feedback!

2 Likes
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As in the discussion with earlier treasury management proposals where some found both proposals dissatisfactiory (including myself) happy to compare if the new offer is more competitive.

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Hey everyone, we’ll be looking to move this to a snapshot vote soon and would love to hear any final feedback you might have. Thank you!

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At Kleros Labs, our Treasurer Juan has reviewed this proposal and finds it to be well-crafted. Enzyme and AvantGarde are two battle-tested projects, so we think they could be safer options for ShutterDAO Treasury Management.

Regarding the fee structure, does @Avantgarde apply the same management fee to all the projects ? We agree with the performance fee at 7.5%, but we wonder about the rationale behind the 0.75% management fee. Thanks for your answer and for this proposal

1 Like
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Hi @Avantgarde, thanks for the proposal! Quick question, when I look here: Enzyme it shows an average monthly return of 0.2%. Where can I see an indication of the 9.5%?

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Thank you for the question. The management fee of 0.75% is not a fixed rate we apply across all projects but is tailored based on the size of the mandate and the amount of work involved.

In this case, Shutter DAO benefits from our ability to leverage research and operational setups already developed for our institutional DeFi Yield Fund which ensures a competitive rate for the work involved. The annual management fee of 0.75% would equate to some $20,000/year, which we believe is fair given the effort required for monitoring, rebalancing, and risk assessment.

That said, we are flexible and open to feedback from the community. If there is a preference for lowering the management fee to 0.5%, we could adjust the performance fee to 12.5%.

Thank you for your question - this is an important point, and we appreciate the opportunity to clarify.

The DeFi Yield fund holds a number of different positions, including variable yield tokens and also fixed yield tokens with a maturity date. The 9.5% (now closer to 15%) yield is the annualized income generated by the portfolio based on the underlying positions, and represents the forward-looking return potential assuming the tokens are held to maturity.

The 0.2% return displayed on Enzyme reflects the change in the prices of the tokens in the portfolio during the observed timeframe. The price of these tokens can fluctuate in the short term based on a number of factors, including changes in market yields. Specifically, when yields rise (as they have been recently), the prices of fixed yield tokens can fall, and vice versa. However, as they approach maturity, these tokens converge to their par value (since they will be redeemable 1:1), thus realising the level of yield that was fixed at time of purchase.

Price fluctuations affect the realized return if you sell in the short term, but it does not impact the portfolio’s locked-in yield over the longer term (the fund typically holds positions maturing between 3 to 6 months in the future). Since the strategy involves holding these tokens to maturity, their prices at any intermediate point are less relevant than the income they will ultimately generate when they converge to their fundamental value. Over time, as the tokens mature and their full value is realized, the fund returns will converge with the portfolio’s average yield. Therefore, the yield is more indicative of the portfolio’s forward looking earning potential.

Hope that makes sense, happy to answer any further questions!

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To add additional context to the question on yield, here we can see how yields have developed throughout the year, as of today sitting just under 15% (rather than the 9.5% initially stated).

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Thanks again for engaging with our proposal! Any other questions please shoot.

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Just to be clear - is there any sort of lock-up period for the assets deposited in the vault, or is there a penalty for withdrawing funds before a certain date?

1 Like
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Hey @5pence appreciate you engaging with the proposal. There will be no penalty for withdrawing funds nor any kind of lock-up period. We believe that the best way to build a lasting relationship is by delivering consistent value and transparent results that over time can form a partnership that supports the DAO’s long-term goals.

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UPDATE: After speaking to core contributors to the DAO, the proposal has been postponed until next Monday the 2nd and an open community call for Q&A will be held in the coming days. More info soon. Thank you all!

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Hey all, wanted to come on here and share our thoughts and some updates ahead of the temp vote next week. Unfortunately we couldn’t find a time that suited enough people to have the call, but have received useful feedback that makes us confident this can be the first step towards a fruitful partnership between the Shutter DAO 0x36 and Avantgarde.

  • Updated the proposal to reflect the correct USDC amount ($2.3m rather than 2.7)
  • Adjusted down the management fee to 0.5% from 0.75, which is to cover Enzyme’s infra costs.
  • Removed the bonus option of staking ETH due to little interest expressed.

We’ve opted for the full USDC amount for a few reasons:

  • (1) to justify the work involved of setting up and managing a custom vault for the Shutter DAO 0x36, given that the USDC amounts involved are, relatively speaking, on the lower end;
  • (2) to simplify matters for the DAO. The DAO wants a set and forget experience that allows it to focus on building while a reliant and trustworthy partner can oversee treasury management on the DAO’s behalf while providing yield/capital efficiency, strategic guidance and execution in line with the DAO’s goals and ambitions. Introducing multiple managers for a treasury of this size seems like unnecessary bureaucratic overhead for nothing.
  • (3) A reciprocal commitment from the Shutter DAO 0x36 would mean a tighter partnership with a view towards the long-term for both parties, where the DAO will be able to leverage Avantgarde and Enzyme’s experience and network as early DeFi adopters, protocol developers, and active governance delegate across Uniswap, Compound, Safe, Morpho and Paraswap. We believe this will provide more upside potential for the DAO in the long term over competing proposals.

Any questions please don’t hesitate to ask, and any feedback just shoot! Wishing you all a great weekend ahead, and thanks again to those that have engaged with us and the proposal.

2 Likes
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Proposal is live: https://snapshot.box/#/s:shutterdao0x36.eth/proposal/0x9181b434949c18bbb6baaecd3534b581b379c118d6a71a17a33c211a72a83816

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Hey people, wanted to quickly jump on here to address some false comparative statements that have been made against our proposal:

  • Yield is currently 19% on the DeFi Yield Fund which we’ll mirror for the Shutter DAO 0x36.

  • A 7.5% performance fee vs 10% means final fee difference is negligible if any, while we’re not solely incentivised to push returns at the price of excessive risk.

  • Shutter DAO 0x36 will own the vault but will require no active management from the DAO’s side as Avantgarde will handle everything on its behalf. So it’s very much a non-custodial “set and forget” approach.

  • As owner’s of the vault, Shutter DAO 0x36 could withdraw funds at any time, with real-time transparency on holdings and activity through the vault’s portfolio page.

  • Enzyme is one of the most battle-tested protocols in DeFi, regularly audited by the best and trusted by the likes of Nexus Mutual, Stader Labs, Renzo, not to mention the institutional and accredited investors that make use of Avantgarde’s regulated funds which are hosted on Enzyme.

Hope that clears things up! Thanks again for engaging with our proposal and don’t forget to vote! :sunglasses:

https://snapshot.box/#/s:shutterdao0x36.eth/proposal/0x9181b434949c18bbb6baaecd3534b581b379c118d6a71a17a33c211a72a83816

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You say that the yield is currently 19% on the DeFi Yield Fund, but how do you calculate this?

I don’t see it anywhere on the Enzyme UI

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Thanks for your question - I believe I addressed this in a previous answer, but let me know if this doesn’t satisfy!