RRC-22 DAO Treasury Diversification Plan

Author: Autonomous
Reviewer: Jana Bertram

Abstract:

This proposal outlines a treasury diversification plan for the DAO aimed at strengthening its financial position and fostering sustainable growth. The plan involves reallocating a portion of the treasury into stablecoins and generating yield through safe investment vehicles, facilitated by the Rari Foundation.

Rationale:

Diversifying the DAO’s treasury mitigates exposure to market volatility and enhances financial resilience. By allocating funds into stablecoins and yield-generating strategies, the DAO can optimize returns while minimizing risk, ensuring a solid foundation for future initiatives.

Motivation:

The motivation behind this proposal is to secure the DAO’s financial stability and flexibility. Through strategic diversification and prudent investment, the DAO aims to generate additional income, reduce reliance on volatile assets, and position itself for long-term sustainability.

Steps to Implement:

Foundation Facilitation:

The Rari Foundation will execute treasury diversification on behalf of the DAO using its strategic partnerships.

Stablecoin Allocation:

  • Swap 10% of the DAO treasury into stablecoins over the next 12 months, utilizing the Foundation’s OTC partners and on/off-ramp solutions.

Yield Generation:

  • Invest stablecoins in carefully selected, well-researched yield-generating vehicles to maximize returns while prioritizing security and risk mitigation.

Risk Management:

  • Conduct thorough due diligence in selecting stablecoins and yield-generating options.
  • Monitor market conditions and adjust the allocation strategy as needed.

Transparency and Accountability:

  • Regularly communicate diversification progress and yield generated to the DAO community.
  • Establish a transparent reporting mechanism for the Foundation’s execution on behalf of the DAO.

Parameters

  • None of the investments to be locked for more than 12 months
  • Vehicles used will have no early liquidation fees
  • Funds can be requested from the DAO if needed

Examples

  • Treasury diversification is considered a prudent strategy in the ecosystem
  • Arbitrum
  • Gitcoin

Timeline:

Commence the treasury diversification process immediately, with the goal of completing the 10% stablecoin allocation within the next 12 months.

Budget:

The budget for this proposal includes the costs associated with executing the treasury diversification plan, such as fees for OTC trades and potential investment expenses.

Conclusion:

By entrusting the Rari Foundation to execute this treasury diversification plan, the DAO aims to optimize its financial holdings, reduce risk, and ensure a solid foundation for future initiatives. This strategic approach aligns with the DAO’s commitment to responsible financial management and transparency.

3 Likes

Thank you for the proposal @ChristineCoffey

  • On the day of this post the DAO treasury stands at $15.2M, with roughly (10%) $1.6M in stables. Is the suggestion to further increase the stables exposure to 20%?

  • The largest expense for the DAO is currently the foundations annual expenses at $1.6M. This gives the current treasury a runway of several years. Having 12 months of reserves in cash is a good strategy and I support this line of thinking.

It would be in the interest of the DAO to have a clear RoI for these swaps and to see that offchain swaps actually offer a better deal than transparent onchain ones. I’d like to see the final proposal include the exact number of tokens that will be swapped as well as the exact number of tokens that the DAO will receive in return.

I would recommend in leveraging the double digit onchain yields avaliable during the bull market for this.

Other consideration:

  • I would like to recommend the DAO to engage in providing onchain liquidity for the native token. This not only supports the price, but also allows the DAO to recapture some of its emitted token back from circulating supply. I’d be happy to draft a proposal for this.

  • In terms of OTC sales, I’d recommend prioritising swapping the native token as opposed to ETH or its derivatives which have seen consistent price appreciation and deep liquidity in the broader market.

  • Consider swapping a portion of the ETH into a basket of LSTs. This not only assists the diversification agenda, but allows the DAO to earn ETH denominated yield.

4 Likes

As I’ve stated before, I trust the efforts undertaken by the foundation, and I’m supportive of the overarching strategy outlined here.

Nonetheless, addressing this point raised by @jengajojo would enhance clarity and establish clearer expectations for the DAO.

2 Likes

Agree with Jengajojo about increasing exposure to even 30%
Market is ultimately cyclical and the next opportunity to diversify budget might come in 4 years only. I’d suggest a 4y runway target.
Also question - Should diversification process include opportunity for larger deals with discounts and lock-ups?

2 Likes

I fully support this proposal, as I supported it in Arbitrum.
We need to use treasury not only to keep but improve financial stability and flexibility.
The volume of the stabilization fund can be discussed secondly

2 Likes

Hey @ChristineCoffey, has there been any research done in terms of the best / most secure yield generation strategies for the RARI treasury? Is the intention to deploy the entire stablecoin allocation in the treasury or only a portion?

1 Like

Agree with the other comments. As far as I see, there’s currently 97% RARI in the foundations treasury (DeepDAO) and (even though it’s in the foundations interest to grow the token), it’s only natural to diversify this.

I would suggest 20-30% stables as well, but not necessarily agree with the yield / DeFi strategy. If the purpose is to stabilize and diversify the funds, it’s not really the goal to put them into high risk assets. Low-yield options are, in turn, negligible.

Maybe there are other tokens besides RARI that are worth to look into, like partner ecosystems.

Also interested in that question.