IIPXX : Launch the $REAL Index

This is a very good idea, just important to ensure that potential investors are aware of the risks. It would be great to obtain some additional insights on the historical non-performing loans and realised credit losses incurred by the lenders which will be included within the index.

Additional insight into credit portfolio parameters will also assist which include limits based on industry, geography, single obligor etc.


Update :

V1 Composition is updated on a sheet here.

The pool composition is subject to change, as pools mature/get oversubscribed by the time $REAL is launched.

However, the risk profile, ie fund split between senior/junior tranches of each pool would remain close to 80:20 for the foreseeable future, to be reconsidered as RWA protocols on Defi mature.

cc @afromac @allan.g @overanalyser @JosephKnecht.

We are currently working on KYC/AML challenges in collaboration with the protocols as well external securities consultants.


@sidhemraj and @photonscapital , had a few additional thoughts/suggestions to share:

  1. I think this idea is definitely exciting in the sense that it could be the “gateway” for a lot of larger institutional TradFi asset managers looking to gain exposure to RWA DeFi (in TradFi structured credit this is often referred to as “dipping their toes” for an “information piece”).

  2. The 80/20 senior/junior split might not be optimal - given that the RWA DeFi space is still very new and ever evolving, there is still a long ways before credit transparency in this space gets on-par with credit transparency for investors in TradFi structured credit. To clarify, not saying that the credit is opaque either. That being said, I think what might make more sense is to start with an even lower junior allocation (perhaps closer to 10~15% vs 20%), then once the REAL index starts to gain size and traction and the credit transparency in the RWA DeFi space approaches the same degree of transparency in TradFi, to scale very quickly to 30-50% junior tranche allocations across multiple names. I think that diversification of junior tranches will provide some degree of offset to the inherent credit risks, and that increased diversified exposure to junior tranches would be in greater demand (vs diversified exposure more heavily weighted to senior tranches), particularly from these sort of TradFi asset managers looking to “dip their toes”.

  3. Put a hold on including Maple pools for now - currently, the existing Maple pools are lending almost exclusively to other crypto institutions (rather than real world assets). That being said, Maple should absolutely be on REAL’s radar - here is their signal post on the Maker forum, interacting with the Maker Real World Finance team: [Signal Request] Maker Accessing Pools of Institutional Loans Through Maple Finance - #16 by ElProgreso - Signal Archive - The Maker Forum
    I suspect they are looking to set up the funding infrastructure needed for an RWA-focused pool on their platform - if that is indeed the case, then such a Maple pool should absolutely be a constituent.

  4. Include TrueFi into the index list -
    TrueFi recently launched a pool lending to a Mexican fintech: delt.ai, Mexico’s corporate credit & spend management startup, raises $25M on the TrueFi blockchain platform
    I think this is just a start of their shift in strategy to bring more fiat-native TradFi asset originators to sources of capital in DeFi.

  5. Have a transparent strategy around how reward tokens will be managed/treated. A big part of the returns on these RWA DeFi opportunities are the reward tokens (CFG for Centrifuge and GFI for Goldfinch, etc) - I think it would be beneficial to be transparent around what will be done with those tokens. Selling reward tokens to reinvest back into more of the constituent deals would be beneficial in growing the REAL index itself, but could potentially add selling pressure on the price of the reward tokens themselves. Claiming the tokens and staking them for yields could also be attractive, but potentially a deviation from the core RWA strategy.

  6. Consider cross-chain investments - both Centrifuge and Goldfinch are operating on the Ethereum network (Centrifuge transitioning to Polkadot), but there are a few other platforms with interesting RWA projects, some of which are already active:

  • Credix on Solana - focused on lending to LatAm fintechs, already onboarded and executed transactions with a few Brazilian fintech companies
  • Apothio on Avalanche for an Initial Litigation Offering through Republic
  • Lofty.ai on Algorand tokenizing individual rental income generating residential real estate investments
  • I’m sure other platforms on other blockchains that I haven’t come across yet
  1. In your initial constituents list, you have both senior and junior investments allocated to the same issuers - it may be worth considering diversifying and avoiding concentration risk at the issuer level. In other words, instead of investing in both the senior and the junior for the same issuers, invest in the junior for the ones that have the strongest credit transparency/history/performance, and the seniors for the ones that are relatively not as strong on that front.

I’m new to this forum but I’ve been following Centrifuge, Goldfinch, Maple Finance and other protocols for a while now and also been discussing $REAL with @photonscapital and @sidhemraj

I currently work as a product lead at an institutional investment firm that manages $1+ Trillion with $500 Billion in fixed income investments. Structured products such as ABS, MBS, CMBS, CLO, etc. constitute approximately $30 Billion of the investments within fixed income at my firm.

Reading the posts on this forum, I agree with a lot of excellent points that have been made about the opportunity and potential for $REAL. I can’t stress enough the size of the opportunity here, so I wanted to share my thoughts, some of which have already been posted on the forum by others.

The structured products market is huge ($7+ Trillion) and plays an important role in the economy by packaging debt into investable securities with various return-risk profiles; this enables institutional investors such as pension funds to participate in AAA rated senior tranches of a structured product, and enables other institutional players such as hedge funds with a higher risk appetite to participate in junior tranches that are high yield securities.

Creating structured products is a long (3-6 months) and inefficient process with multiple players (lawyers, administrators, rating agencies, etc.) that each charge a fee for their services. Not much has changed in the securitization process since the first MBS was created in the 70s and the securitization of debt as CDOs started in the 80s. The creation of a structured product and administering is still a very manual process.

Institutional investors consider the structured product market to be:

  • Complex: these are securities that pool loans from multiple borrowers into a hierarchical structure with
    multiple tranches and follows a waterfall payment model for distribution of repayments.

  • Inefficient: this is a result of the complexity I mentioned in addition to the large amount of data required
    to analyze structured products. Valuation inefficiencies are also caused by the lack of a consensus
    method to value structured products. Rating agencies are not reliable in evaluating the risks of
    structured products. The financial crisis of 2008 is the strongest evidence of rating agencies not being a
    reliable evaluator of credit risk.

A complex and inefficient market is an opportunity for return alpha to institutional investors. Structured products also cater to the mandates of various institutional players by offering a tranche that fits their return-risk profile in a low yield environment.

Disrupting the structured finance and private credit market is a huge opportunity for DeFi protocols such as Centrifuge, Goldfinch, TrueFi, Maple Finance, etc. Simply put, these protocols are essentially creating structured products by leveraging the power of blockchain.

So, why create structured products on-chain? I believe there is a very good opportunity to simplify the securitization process, to efficiently manage and administer structured products and improve transparency by providing data that enables easier analysis of structured products.

Structured products and private credit funds are generally less accessible to individual investors and are currently almost exclusively marketed to institutional investors. I strongly believe that $REAL is an opportunity for individual investors to invest in stable, lower risk and higher yielding securities as an alternative to risky (volatile) investments in non-real-world digital assets and low yield traditional securities. As the volume of structured products created on-chain grows, I expect to see participation from traditional institutional investors simply because this is an efficient, simpler, transparent, and attractive alternative to traditional debt securities.

I’m super excited about the potential for structured products created on DeFi protocols and the opportunity for the $REAL token to generate attractive yields. With $REAL, we finally have an institutional grade product that is available to individual investors.