How I'm Using... dETF Management & Investment Diversification
Fund Management is Fun Management.
I am an applicant for Fund Manager at Kassandra DAO. If selected, I want to focus on revenue-generating and yield-generating funds, along with product integration within the ecosystem. Kassandra DAO builds index funds called decentralized exchange-traded funds (dETF). The dETFs I compose are designed to be built on top of and scaled within AVAX DeFi.
Composing a dETF is built on 3 main components: Assets Selection, Asset Utilization Strategies, and Weight. Each fund holds a specific purpose, to fulfill a potential gap or build out and diverse product. The main dETFs I’ll break down here are the Liquid Staking Decentralized ETF (LSD Fund), Revenue Generating Tokens ETF (rgtETF), and Layer 1 Balanced ETF (L1B ETF).
Revenue Generating Tokens ETF (rgtETF)
The Revenue-Generating Tokens ETF has the potential to be a powerhouse. With many yield-bearing assets, there are two main ideas. 1) weekly distributions of accrued rewards from the fund proportional to shares. 2) Autocompound all rewards back into index positions and allow users to withdraw bigger positions.
The second option is less of a securities risk and also allows for a great degree of capital efficiency. I would personally vote for the latter. However, structuring it like native YAK staking with a reward share farm + a separate auto-compounding farm is ideal. A structure like this could be beneficial for user choice. Flexibility and customization are keys to user retention.
Layer 1 Balanced ETF (L1B ETF)
For a more traditional investor, we see the need for diversification. If users wish to keep funds on AVAX but garner exposure to non-AVAX assets, the L1B ETF is a great option. This will be a highly managed fund as it requires updating yield strategies and managing impermanent loss. I would recommend less TUS at future times, but for starting the fund it could be higher as the market cap is very low (~388K USD). Another low-cap Layer 1s I’d be looking to add is Echelon via bECH, allocating maybe 5% to this token of the fund.
As the subnet thesis expands, a subnet-specific fund would be interesting. Automatically balancing and managing tokens in the fund based on usage metrics and other growth metrics for the individual subnets. This makes subnet gas tokens proxies for the performance of the underlying chain, an interesting thesis I’d like to apply to a future fund.
Liquid Staking Decentralized Fund (LSD Fund)
This managed fund for liquid staking derivates and yield will include a fifth asset pairing of AVAX/yyAVAX LP and a rebalancing of the LSD Fund will occur. This will provide optimal balance + yield using Moremoney and Yield Yak to stretch, stack, and accumulate yield for the fund participants.
Integrations & Growth
The LSD Fund, along with the other ETFs is envisioned to be integrated within AVAX Defi and cross-chain as well.
A basket of AVAX and yield-bearing derivatives provide the opportunity for collateralization in loan protocols such as Yeti Finance and Moremoney Finance. These ETFs would also be great candidates for capital markets such as Benqi Finance and Aave. Synthetics could be built on other chains to gain exposure to healthy, yield-bearing dETFs. These are all integrations and partnerships I’d be looking to seek out for my funds.
Each ETF offers a unique approach to balanced products that can be scaled within the ecosystem. As new yield farming strategies arise for the various funds, I will have the ability to move funds as needed.
Investor Personal Strategy
We can use each fund as a guide for how we can diversify our portfolios for both risk diversification and strategic capital deployment. The LSD Fund can be viewed as a means of spreading out risk for liquid staking platforms, though minimal risk for picking one provider, spreading AVAX into both is more risk-averse.
The L1B ETF can be viewed as a way to diversify funds across various individual blockchains with unique gas tokens. This allows you to capture value at all market cap levels. This can be done all on Avalanche C Chain thanks to bridged assets being supported by native DEXs such as Trader Joe and Pangolin.
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