Arbitrum Treasury Management: Investment Policy Statement [Q4 2025]

DAO Programs & Initiatives Arbitrum Treasury Management Council
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Overview

Entropy is pleased to share the Arbitrum DAO Treasury’s Investment Policy Statement (IPS) for community review. This document establishes a comprehensive framework for managing treasury assets in multiple asset classes, with clear benchmark rates, allocation targets, long-term strategy goals, and various risk and decision-making criteria. The IPS was designed to provide transparency into processes and methodologies while also enabling efficient and effective allocation decisions to be made. Key categories covered in the IPS include:

  • Key Parties’ Roles and Responsibilities
  • DAO Long-Term Financial Needs
  • Investment Objectives by Asset Class
  • Current and Future Strategies
  • Performance Benchmarks
  • Rebalancing Guidelines
  • Risk Considerations
  • Reporting and Performance Review Cadence

The goals of the Arbitrum DAO Treasury are multifaceted and will evolve with time and changing circumstances, resulting in the IPS being designed with sufficient guiding principles to establish an operating framework while maintaining a level of flexibility to adjust to a shifting environment.

Entropy welcomes any and all feedback from the community.

Disclaimers

The Investment Policy Statement (IPS) and all related materials are provided solely for informational purposes. The statements and materials contained herein do not constitute financial, investment, legal, or tax advice, nor do they represent an offer, solicitation, or recommendation to buy or sell any product, service, or asset. The information presented does not provide any advice, representation, warranty, certification, guarantee, or promise relating to the subject(s) of such statements. No representation or warranty of any kind (whether express or implied) is given as to the accuracy or completeness of the IPS and all related materials, and no party should rely on these contents for making any decisions, whether financial, legal, or otherwise.

The information included has not been audited or independently verified, nor has it been reviewed, approved, endorsed, or registered with any regulator or other governmental authority. Any party relying on this information does so entirely at their own risk and shall have no right of recourse against Entropy Advisors, its directors, employees, professional advisors, or agents (collectively, the “Relevant Parties”), none of whom accepts any liability or assumes any duty of care to any third party in respect of this information.

The information herein should not be construed as a distribution, offer to sell, or solicitation to buy any products or services, and any past performance, projection, or forecast is not necessarily indicative of future results. The Relevant Parties undertake no obligation to update, supplement, or amend any statement that may become inaccurate or incomplete after the date of publication, and Entropy Advisors reserves the right to update, modify, or amend any information without prior notice.

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Next time, please allow the .pdf file to be downloadable from Google Drive.

Ideally, these files should always be hosted in an open and decentralized service like IPFS.

So, here is the report .pdf file, hosted on IPFS, for anyone that wants to download it:
https://emerald-repulsive-mollusk-473.mypinata.cloud/ipfs/bafybeibqclte2mkh5sfqqcwgzjoppfxcruy5wmzwxpb74rciwpktksrzhy

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I’m known for criticizing initiatives for insufficient communication and documentation (or a complete lack thereof), so it’s only fair that I give credit where credit is due. Having read Entropy’s Investment Policy, while I don’t necessarily agree with all of the goals and assumptions, I appreciate that we finally have a concrete design to scrutinize and discuss. I look forward to following its implementation and reporting.

After reading the document, I’d like to raise a few issues:

  • TM classification: Why is TM treated as a non-core business line? Imo, over the long term it should be considered a core function - especially in the broader sense.
  • AF operating costs: We shouldn’t exclude AF operating costs from the broader picture. Sooner rather than later, those costs will need to be covered by the DAO. It’s better to account for them now than ignore them and struggle later.
  • ARB price management: While ARB price action is considered in the runway analysis, the policy does not address active ARB price management. I view this as a significant oversight. Diversifying treasury assets is one approach, but not the only - nor necessarily the most important - one. If ARB goes to zero, we will not succeed even with hundreds of millions in the treasury; at that point, the treasury would likely need to be deployed to support the ARB price. The investment policy should acknowledge this.
  • Benchmark selection: Why use the USDC supply rate as the benchmark instead of, say, USDT, USDS, USDe, etc.? While USDC is the largest pool on Aave’s Arbitrum deployment, it isn’t the largest overall. Imo, the benchmark should reflect the broader crypto market, not only Arbitrum markets.
  • Reporting transparency: While some considerations may reasonably be confidential, it should always be explicitly stated when additional confidential factors exist - so readers don’t assume that missing items are omissions unless confidentiality is clearly indicated.
  • Execution timeline: What is the basis for the 14-day execution after OAT approval? That seems extremely inefficient, especially in crypto. We should aim for next-business-day execution (especially since the AF is already involved during the OAT acceptance phase; all the formalities should be handled in parallel if needed).

Overall, thank you to @Entropy for producing this material. I hope it sets a standard for what an AAE-driven initiative should provide in terms of design and an execution plan.

As a one last thing I’d like to agree with @paulofonseca comment that in the future we should aim for making such documents broadly available and downloadable. Paulo’s link helped me read this document offline.

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Thank you for the very detailed document.
I have several questions and suggestions regarding this framework:

  1. Why is the Treasury’s goal only to cover a portion of its expenses (not even taking into account the AF)? I believe it’s irrational to formulate a strategy that generates a deficit – it’s a dead end.
  2. Benchmark Rates talks about very limited investment variability.
    I don’t mean to sound rude, but such a complex ATMS structure isn’t necessary to implement such conservative strategies. I believe the Treasury should also allocate a portion for riskier investments. Just look at Morpho to see that there are very reliable strategies from reliable sources that can generate several times higher returns.
  3. Despite the fact that Arbitrum’s income is primarily in the ETH, the overwhelming majority of the Treasury’s portfolio is in the ARB. The majority of the strategy should be focused on the ARB. Also, based on the experience of other large projects, it’s necessary to develop a strategy to support and strengthen the ARB (this will yield the greatest impact) – I agree with L2Beat on this point.
    One of the most structured approaches is Sky, where each strategy’s risk is determined and investments are made accordingly – this experience is worth studying.
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