Credmark Treasury Management Cycle I

Cycle

Deployment Date	TBD
Cycle Length	30 days

Capital Allocation

TOTAL (USD)	1,000,000
Low Risk	700,000
Medium Risk	200,000
High Risk	100,000

Risk and Yield Parameters

Risk Profile	Max VaR (Annual)	Yield Target (Annual)
Low Risk	1.5%	3%
Medium Risk	10%	20%
High Risk	25%	50%

Goal

For this first cycle we decided to keep things simple!

We only planned 3 activities:

1. Lending.

2. Holding volatile assets.

3. Providing liquidity to DEXes.

We chose these because we could:

1. easily compute the VaR on a portfolio basis using historical data, and

2. estimate yields based on current market conditions.

Details

Risk Profile	Target Capital Allocation (in $)	Actual Capital Allocation (in $)
Low	700,000	700,000
Med	200,000	230,000
High	100,000	70,000
TOTAL	1,000,000	1,000,000

Risk Profile	Target VaR	Projected VaR	Diff
Low	1.5%	0.74%	-0.76%
Med	10.0%	47.61%	37.61%
High	25.0%	52.96%	27.96%
Weighted AVG	10.2%	15.18%	4.98%

Risk Profile	Target Yield (Annual)	Projected Yield (Annual)	Diff
Low	3.0%	3.26%	0.26%
Med	20.0%	42.29%	22.29%
High	50.0%	70.26%	20.26%
Weighted AVG	10.2%	15.26%	5.06%

Risk Profile	Target Yield (Cycle)	Projected Yield (Annual)	Diff
Low	$1,726	$1,873	$147
Med	$3,521	$6,861	$3,340
High	$2,406	$3,174	$768
TOTAL	$7,653	$11,908	$4,255

Commentary

Asset Diversification

As part of this cycle we diversified $3,000,000 worth of treasury assets. This was intended to address concentration, protocol, and regulatory risks. It also sets aside tokens to cover transaction fees. This diversification has no material impact on the treasury management overall.

This is a summary of our closing positions:

Type	Asset	Proportion	Value
Stablecoin	USDT	20%	$600,000
Stablecoin	USDC	20%	$600,000
Stablecoin	TUSD	9%	$270,000
Stablecoin	DAI	20%	$600,000
Stablecoin	PAX	7%	$210,000
Gas	MATIC	1%	$30,000
Gas	Solana	1%	$30,000
Gas	ADA	1%	$30,000
Gas	ETH	6%	$180,000
Fiat	USD	15%	$450,000
TOTAL		100%	$3,000,000

VaR

All VaR figures were computed on a portfolio basis using one year of historical data. When an asset or position didn’t exist for that full period, we used proxies. All of the historical data used to compute our VaR figures can be found here.

The obvious thing to note in the tables above is how much more risk we were willing to take compared to the target. We discussed this at length.

We believe that our computed VaR values are greatly exaggerated. We used a year’s worth of historical data because that would be the norm in traditional finance. Traditional finance, however, doesn’t deal with the level of volatility we see in crypto. As an example, ETH increased in value 20x over the course of the year.

We considered shortening the historical data period but realized that it would not be conservative enough. In future we will likely move away from computing VaR using this technique.

Yield

We are projecting significantly greater yield from our medium and high risk positions than our stated targets. This is because markets are relatively frothy at the start of this cycle. Any downturn will bring us closer in line with our targets.

In future we will likely adjust yield projections using historical data.

Investment Positions

Investment position details can be found here in the “Investment Strategy” tab. Some of our decisions are likely to raise eyebrows. For example, why would we provide ETH/BTC liquidity if our projected annual return is 15% while our VaR is 79%? We reviewed the historical data and we believe the computed VaR is far too high given recent market conditions. We also believe that potential returns are significantly higher.

Looking at the “APR Source” column in the “Investment Strategy” tab, you’ll notice that “Research” is used for about a third of the positions. More information can be found in the “Investment Rationale” tab, but we have to confess that some of those values are the result of “educated guesses” after spending time with a variety of investment tools. We expect to provide more rigorous analysis in the future.