IIP-114: Transfer USDC from Treasury to the Investment Account and Deploy Productively

iip: 114
title: Transfer USDC from Treasury to Investment Account and Deploy Productively
status: Proposed
author: @Finance.Nest
created: 24/11/2021

Simple Summary

We propose transferring $5M of USDC from the Treasury to the Investment Account. This capital is to be deployed productivity in line with the Stable Coin Asset Management Guidelines and the Investment Account Strategy. Initial investment of the $5M being requested is deployed into productive low vol yield asset strategies. Ie: to earn stable coin yield.

Treasury Account: ‘0x9467cfADC9DE245010dF95Ec6a585A506A8ad5FC

Investment Account: ‘TBA

Abstract

As outlined in the Investment Account Strategy forum post, the Finance Nest recommends holding a productive stablecoin allocation within the Investment Account,that can be deployed to earn interest whilst providing a safety net for the community. Stablecoins offer the most immediate diversification benefits due to their uncorrelated nature relative to other assets in the treasury, so we intend to keep the transferred stablecoins in stablecoins.

We recommend starting with $5M of USDC that will be deployed across various stable coins and multiple yield generating strategies of varying risk profiles. All of which will bein line with the Stable Coin Asset Management Guidelines. This IIP requests approximately half of the community’s stable coins be directed to the Investment Account, leaving the remaining ~ 50%for short to medium term Operational needs. The Operations Account, plus the remaining Treasury balance is sufficient to support short to medium term spend.

Motivation

Index Coop currently holds around $9.2M in the Treasury unproductively. Holding this capital unproductively has unrealized opportunity cost. Yields on Aave for the lowest risk, most liquid stable coins is 4% and that is relatively low compared to historical standards. With minimal risk, Index Coop can exceed this 4% interest rate and earn passive income for the community.

For Index Coop to realise the goal of becoming a sustainably funded DAO, our assets must be utilised to benefit the community. In this instance, the stable coin safety net that supports the community should be deployed to earn yield. If the DAO was able to earn 5% yield on the USDC balance in the Treasury, this would generate around $460K of income per year. Which equates to ~ 18.4% of total revenue for the last 12 months. . In the simplest framing, Index Coop is losing money by not actively deploying its capital.

Specification

Low vol stable coin assets held within the Investment account will be managed in line with the Stable Coin Asset Management Guidelines as part of a broader portfolio construct outlined by the Investment Account Strategy.

The Finance Nest will manage the funds in accordance with the two publications linked above. The performance of the portfolio shall be made readily available via a Dune dashboard and the community will receive frequent updates on the status / performance of the capital.

Capital will be deployed across multiple strategies with a long time horizon in mind. There may exist a more actively managed portion of the fund. This style of investment will be sized appropriately with a consideration of the holistic risk profile and with the overall goal of preserving community capital front of mind.

Voting

FOR:

DO transfer $5M to the Investment Account and endorse this capital being deployed productively in line with the published guidelines.

AGAINST:

DO NOT transfer $5M to the Investment Account and endorse this capital being deployed productively in line with the published guidelines.

Copyright

Copyright and related rights waived via CC0.

7 Likes

Hi @mel.eth, @sixtykeys, @Mringz,

Can we please have a IIP number assigned.

Hi @mel.eth, @sixtykeys, @Mringz. Would we be able to queue this up for snapshot today please, 29th November.

An IIP number 114 has been assigned to this proposal. Since it has spent the minimum 48 hours in the proposed state, this proposal will be queued for snapshot at the date called by the author.

cc: @mel.eth

This IIP has been queued on snapshot and is set to go live later today at 1800UTC.
Snapshot here

1 Like