Strategy Report April 2024
The 512M DeFi High Yield Strategy is focused on yield generation and yield farming in decentralized finance. The strategy holds in principle, stable-coins, crypto assets pegged either by centralized institution with banked collateral or algorithmically operated decentralized autonomous organizations. These Stable-coins are contributed to Automated Market Makers such as Curve.fi among others, as liquidity providers to earn fees generated by these protocols. These fees accrued are represented as annual percentage yields, partially paid in base trading fees and partially in protocol tokens (E.G. CRV).
We engage in active strategy on recompounding protocol tokens back to base stablecoins, or holding for market exposures to have positive market beta and generate high yields in these risky assets as a liquidity provider. Our decisions on active strategy are reviewed daily, based on algorithmic analysis of core multiples in the DeFi sector, based on our proprietary analysis techniques.
Comments for April
After a pre-halving correction across the crypto market, performance in the month was below expectation due to the draw downs caused by price effects of the retained CRV token.
During this period we increased our harvesting of incentive tokens during what we believe to be a short term pull back across the market, with smaller cap incentives protocols such as Aura finance and Aerodrome finance, as we believe they may add additional performance benefits in a broader recovery.
We have doubled down on compounding our CRV positions, generating 629 CRV on average daily, with current holdings at 104,063 CRV token. With a return to local highs at $0.8637 would add a 3.368% performance lift to the strategy over all, and a return to its ATH at $6.80, providing a total return to 47.4% to the total strategy excluding inter-period yields on held token and additional incentives farmed.
We have diversified our allocations by chain to include base, from July 26th 2023 to today, it has grown in TVL from zero to $1.561 Billion, and as a Ethereum layer 2, benefits from adopting established protocols rapidly such as Uniswap and Aave, without major code edits that might compromise security, along with native USDC which by our own risk parameters scores as the highest rated stablecoin.
Base currently has $1.561bn in TVL with $257.6m in 24 hour volumes, Ethereum for fair example, has TVL of $55.38bn and 24 hour volumes of $1.54bn. There is a clear difference here in volume/TVL which directly translates into additional fees in the space, and we will continue to look into this chain to see whether these super nomal returns are maintained.
Performance Metrics
Return since inception: 40.29%
Annualized return: 26.99%
Annualized Volatility: 4.55%
Sharpe ratio: 4.91
YTD Performance: 8.39%
Bitcoin Beta: 0.0143
SP500 Beta: 0.0068
Historical Performance
Strategy Composition
Risk Metrics
512M Uses an internal risk scoring system for analysing its allocations for risk, scoring between 0 and 1, in the BPPA (blockchain, protocol, pool, asset) framework. We take these individual scores, and multiply them, to arrive at a final score, because in the world of DeFi, risk compounds aggressively.
We deposit assets in a pool, on a protocol, on a blockchain, and any point of failure in this chain, can create very large potential losses, using this multiple system and our own internal risk scoring both on qualitative and quantitative data, we avoid severely risky allocations and focus on high quality ‘blue-chip’ DeFi positions.
Internal risk score February 2024: 0.585
Target return for this risk score: 12%
Annualised returns YTD: 25.17%
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