Yield Strategy

Enclave Money employs a sophisticated yield strategy to ensure optimal returns for users. The strategy is executed through a combination of dynamic asset allocation and an advanced infrastructure for efficient fund management.

Asset Allocation Strategy

Our asset allocation strategy involves dynamic distribution of assets based on target weights for each protocol on each network. These weights are determined by:

• EMA of Historical Yield: We compute an Exponential Moving Average (EMA) of historical yields to identify trends and predict future performance.

• Fixed Costs: We consider fixed costs associated with smart contract execution, ensuring that yield generation is cost-effective.

• Risk Scores: Each network is assigned a risk score based on security audits and current Total Value Locked (TVL). This helps us manage risk and prioritize safer protocols.

• Markowitz Portfolio Allocation: We use a variation of the Markowitz portfolio allocation method to derive the optimal weights for asset distribution. This approach balances expected returns against risk, optimizing the overall portfolio performance.

Infrastructure

Our event-driven architecture and rebalancer service are crucial to executing the yield strategy effectively. The rebalancer service manages the redistribution of funds across sources and networks in two primary ways:

• Fixed Cadence Rebalancing: At fixed intervals, we redistribute capital based on the updated target weights. This regular rebalancing ensures that our asset allocation remains aligned with the latest strategy.

• Event-Driven Rebalancing: Capital is also redistributed in response to specific events, such as:

  • Threshold Change in TVL: Significant changes in TVL across networks trigger rebalancing to adjust exposure and optimize yields.

  • Threshold Change in Interest Rates: Variations in variable interest rates across protocols and networks prompt reallocation of assets to maintain optimal returns.