This proposal advocates for the allocation of a $549,933 surplus (details below) from the 2023 H1 (link) and H2 (link) Operational budgets, divided equally between establishing a cash reserve and initiating safe yield generation and investment strategies. The aim is to bolster the financial security and sustainability of the organization through prudent financial management.
Motivation
The surplus from the 2023 operational budgets offers an opportunity to fortify the organization’s financial standing and mitigate risks. Building cash reserves will create a buffer for managing emergencies and capitalizing on strategic opportunities. Meanwhile, investing in safe yield generation initiatives will diversify revenue streams and enhance long-term financial sustainability. Allocating the surplus funds proactively enables the organization to navigate uncertainties effectively and position itself for future growth.
Rationale
Cash Reserves Allocation (50%)
Transfer stablecoins to a multi-signature wallet with 2 of 3 signers, including a Foundation member, Director, and Autonomous representative.
This setup ensures security and accountability in managing the cash reserves, providing flexibility for timely decision-making in accessing funds for emergencies or strategic endeavors.
The main approvals needed for this proposal include:
Approval for the allocation of $549,933 surplus from the 2023 operational budget.
Endorsement for the establishment of a multi-signature wallet for cash reserves with designated signers.
Authorization for stablecoin conversion to USD through the Foundation’s OTC partner.
Approval for investing in the tokenized Treasury bill fund for safe yield generation.
Timeline:
Approximately 6 months to maximize yield generation through short-term T-bill investments. Yield is generated on a daily basis. There are no early liquidation fees, but the longer the funds are held the more yield is generated.
Costs:
OTC trades have a built-in trading cost and yield generating vehicles have associated fees. The Foundation has negotiated these fees and they are in-line with industry standards. The Foundation itself will not charge any fees for execution of the plan.
Thanks for the proposal @WildriRoodt Glad to see transparency on the 2023 budget surplus.
a. I wonder why these funds would sit in a separate multi-sig instead of just being returned to the DAO?
b. The current yield on short term tbills (at 5.24% ) is only 24 bps higher than DSR at 5% or much lower than supplying the assets into lending pool on AAVE V3 at 6%+ with a steadily increasing relative yield. I’d like to urge you all to weigh the risk adjusted returns (along with fees) of sending assets to an offchain third party when there are higher yields on highly battletested contracts onchain.
Thanks for the comments @jengajojo, please see our responses below:
As mentioned in the proposal, building cash reserves will create a buffer for managing emergencies and capitalizing on strategic opportunities. This will ensure that The Foundation does not loose out on any strategic opportunities that arises and will have enough funds at its disposal for managing emergency expenses that has a time sensitive component. Budgeted funds received from the DAO takes time being converted to stablecoins via OTC partners.
Thanks for the idea. We’re committed to safe, well-researched investment vehicles. We’ll look into this.
Following the thorough discussion in today’s delegates’ call, I am in favor of this proposal.
Recognizing that a significant portion of this surplus stems from the foundation’s strategic decisions is reassuring, indicating their commitment to the DAO’s well-being.
Moreover, easier and faster access to funds enhance the Foundation’s capability to seize opportunities effectively.
I’d also love to continue discussing more of @jengajojo 's ideas to start of a proper treasury diversification strategy.
Proper management of the budget surplus improves sustainability of Rari Foundation; utilizing cash reserves and yield opportunities (as well as mitigating the risks associated with it) is a prudent strategy to bolster the Foundation’s financial security.
The combined approach of a safe and an interest strategy sounds reasanoble
Although I support @jengajojo `s idea to check out other yield strategies, maybe diversify across different providers.
I fully support this proposal.
I think that sustainability of RARI Foundation is one of the most important aspects of development.
Similar solutions are found in other DAOs too.
I completely support this proposal. This is a sensible and balanced approach to ensure the Foundation’s financial health for its continued growth in the future. I also support @jengajojo recommendation of considering additional financial resources, such as conservative lending pools to diversify RARI’s investments.
