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Risk Scoring & Allocation
Every verified strategy enters the allocation framework, which governs how capital is distributed, how positions are sized, and how the portfolio responds to changing conditions. The goal is not to maximise headline APY — it is to maximise risk-adjusted, verifiable yield.
Risk scoring — five dimensions
Audit coverage and quality, upgrade policies, admin key configuration, and deployment age.
Withdrawal mechanics, queue depth, pool liquidity, and slippage at target size.
Incentive independence, utilisation sensitivity, and the underlying economic activity.
Return correlation with the existing portfolio; highly correlated strategies are weighted down.
Concentration to any single protocol, chain, or asset denomination.
Scores combine into a composite used alongside expected APY to rank candidates. The framework targets the highest risk-adjusted yield, not the highest yield.
Allocation rules
- ▪Concentration limits — single-vault exposure is capped, with hard limits that tighten as the portfolio scales. Not overridable for an attractive opportunity.
- ▪Strategy type diversification — exposure to at least three strategy types at all times (lending, funding arbitrage, options).
- ▪Chain diversification — single-chain exposure capped, tightening as the portfolio expands.
- ▪Asset denomination diversification — single-stablecoin exposure capped to reduce peg-risk impact.
Drawdown management
If a vault's share price drops beyond its defined threshold from entry price:
An alert fires to the strategy team
The position is reviewed within 24 hours
If unexplained by a transient event with a clear recovery path, the position is exited
The investment committee framework
Each allocation decision produces a documented specification — the permanent record of the decision. Decisions without a completed specification are not executed.