[WIP #7] - TheSkyhopper+Bastion Treasury Management

Personally, I feel that if we’re going in this direction instead of a flat, predictable fee, the profit your services are based on should be the tangible profit you’ve generated for the holders.

I believe the profit should be based on what the holders are rewarded with through rev share, airdrops, or other actions that result in $$$ for the those holding wMemo and not simply the increase in the total treasury value; unless we have a mechanism to redeem our share of the treasury value based on the wMemo we hold. (Which would be closer to the parallel you draw to traditional markets.)

Example scenario: If your strategy manages to get us back to yield farming at 1M per day with our treasury, and it’s decided that a 70/30 split (70 to grow treasury, 30 to holder revshare) is the play for this month, that would mean, 270k per day for the wMemo holders and 30k per day for you and your team.

At this rate, getting us back to the same profitability we were managing with the Treasury under Sifu would net your team ~900k in a month. Considering your previous proposal was a flat fee of 100k - that feels like a big ask, all things considered.

Can you share what your definition of profits would be for this proposal?

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Yeah, would be a case of agreeing with SkyH what would be a reasonable benchmark return that WL should earn before any performance fee accrues to him.

I’m all for it. Do the best you can and see where we are. I accepted my losses so far. I see no better way of moving forward and putting some value back into Wmemo.

Sorry 10% is too much.

Looks good to me I am ready to vote. :slight_smile:

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The 2 and 20 model, where 20 is the performance fee element is it self only earned by the manager when a benchmark minimum return is earned for the fund first, eg the fund needs to earn X% profit first and the manager only earns 20% of the excess profit above the X% earned. They do not earn 20% of ALL profits generated - that is way to generous

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In my response below, I propose a two-tier benchmark rate before performance fees fully kick in; clarify how profit should be calculated for the purpose of measuring performance; and discuss the kind of investments the DAO ought to and ought not to undertake.

1. 10% Fee. I won’t quibble about what percentage of fees is owed, but instead I echo many of the voices in the discussion so far when I say that beyond a high-water mark which is a basic standard, there must be a benchmark that should be beat before any fee kicks in.

1.1 I think we can follow two basic tiers. Once the annualized profit of the entire treasury (measured by increase in backing) is at 10% APY, a 5% fee can be charged on any yield over that. Once 15% APY is hit, 10% can be charged on any yield above that. I think many will see these percentages as low goals when they compare to the yields found on anchor or elsewhere, but earning a high yield on hundreds of millions within months of onboarding, while maintaining security and juggling other matters is not simple.

1.2. At the same time, with stable yields from frax, curve, degenbox, stargate, platypus all remaining relatively high and accessible even for large treasuries, as well as even higher yields available on farming volatile assets or options vaults like dopex, there’s no reason to expect any less than 15% before the full 10% fee kicks in. Keep in mind, these are merely benchmarks and the incentive is always there to attain higher overall yields.

2. How “profit” is calculated. Profit should be calculated by reference to the increase in the liquid component of the treasury.

2.1. Whenever any seed investments or SAFTs are entered into in illiquid projects, such funds must not be counted as part of the treasury until profits from such projects are actually realised.

2.2. On a side note, the reason why I avoid calculating profit on the basis of increase in backing per token is that backing per token can effortlessly be increased through buybacks. Such profit is something that we could achieve on our own and as such, does not reflect the skill and expertise of a treasury manager – no fees should be allowed to be charged on profits derived from buybacks. The principle here is the same as the benchmark rate. For anyone that thinks this disincentivises TM from carrying out buybacks, that is simply not true. Any TM is well placed to personally benefit from buybacks themselves, there is no need to pay a fee on top of such benefit.

3. Directional Exposure. While my above two points are more objective, this point is more subjective.

3.1. In my view, I dislike Skyhopper’s mention of “DeFi 2.0 themed tokens” as well as “metaverse themed tokens”. Investments in projects with poor fundamentals should be avoided (at least on the secondary market, as opposed to seed investments which have a better R/R). This includes node projects, most of ‘Defi 2.0’ projects, or TOMB forks, among others. There will always be exceptions – for instance, Tomb itself is better backed since Harry Yeh backstops the TOMB peg, and so its not unreasonable to consider it as a potential investment.

3.2. DeFi projects that generate fees that can be termed ‘sustainable’ due to the creation of actual utility (GMX, GNS, Dopex, Platypus, Curve, Abra, etc) are the kinds of projects that I would consider rational and reasonable.

3.3. Any investments in GameFi or metaverse projects should only be carried out provided there is an understanding of the ponzi elements involved in any such project – ponzis are not bad, but where they exist they must be acknowledged in order to avoid being burned by them (even UST is a ponzi but its just a much more successful and potentially less overtly fragile one).

There will be many who disagree with the third paragraph since I’m sure many people believe in various metaverse/game-fi/tomb-fork/rebase projects. However, the third paragraph is slightly more subjective than my first two paragraphs which are also more important, so please prioritize discussion on those.

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everyone complaining about 10% obviously has no idea how institutional money managers get paid (2% of AUM + 20% of profits)…10% is a great deal

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If we wanted to estimate a reasonable benchmark that would have to be met before skyH earned his fee we could look at what is in the treasury now and at a minimum what could be earned on each coin in a yield-farm and then take a weighted average across all the coins = benchmark return. Once WL earns this benchmark return, skyH earns his [5/10%] performance fee only on the EXCESS return he earns above this benchmark return

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This is a fantastic set of recommendations

I’m actually not complaining about 10% - I’m fine with that percentage. I just think that we pay for performance, but it can’t be called ‘performance’ until the fund is earning at least market-rate yield. The idea of a benchmark is not new and it is the best way to ensure that we are aligning our interests with the TM’s interests.

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love this, let’s make it happen. 10% of profits sees very acceptable to me.

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I like the proposal, some solid, sensible ideas.

Having researched the guys at Bastion they seem to have some serious credentials, on the trading side, and I would be happy for them to run this.

When it comes to the VC aspect, they seem to be lacking experience, which explains this part:

“ I believe it makes sense to explore adding a dedicated New Project Analyst team to help screen, structure, and execute VC deals.”

They’re going to need support from a dedicated VC team, with experience in this area. Or even someone from an IBD background as all of the Bastion guys seem to be S&T.

Anyway. Overall I’m positive. I don’t think 3 months is enough. I’m also reasonably happy with the reward structure as I do think this team brings a lot of value with them.

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Since we are looking at a three month trial and then potentially extend could we also look at 5% on profits during first period and only consider 10% based on performance or some other metric? Maybe only do 10% if they meet a target?

It’s called Alpha, and it’s a portfolio managers bread and butter.

I think you’re right though, because a $250mm treasury will make money of it’s own accord, we need to differentiate between what the new team adds and what is intrinsic.

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yeah 10% for a trial seems fine

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I like the presentation, the proposal, @SkyH and Bastion Trading.
A 3 month trial period is usual and good to me.

I am not sure about the 10% commission.
It seems good to me, but I do not have the competences to judge whether is a lot or not.

Not sure if you’re misunderstanding or I am (probably me!) but it’s 10% on profits made I believe

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10% doesn’t seem to much. If the treasury makes $1 mill they get $100k. We want them to work hard right guys?!

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Why do I feel people are misunderstanding that this is 10% of profits he generates for us, sliding scale the more profit he makes the more he wins and the more we win…win win

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