Centrifuge - Anemoy DeFi Yield Fund (DYF) STEP Application

Applicant information

Name: Centrifuge

Address (Headquarters): (k/f labs) Grafenauweg 8

City, State, Postal Code: Zug, 6300

Country: Switzerland

Website: https://centrifuge.io/

Primary Contact

Grayson Alto

Title: DeFi BD & Research

Country: United States

Email, Telegram, Forum, & other methods of contact

Telegram: @graysonalto
Email: grayson@k-f.co
Forum: @graysonalto
Twitter: @altograyson

Key Information

Expected Yield: N/A.

Expected Maturity: The fund is ongoing with no maturity date.
Underlying asset: DYF is a fund of funds. It holds an equal mix of private, market-neutral DeFi yield funds. At launch, the fund will include those of Re7 and Dialectic, and add other partners over time (target/maximum of 10).

Minimum/Maximum transaction size: 500,000 USDC/USD minimum investment.

Current AUM for project: Centrifuge - $287,981,546

Current AUM for issuer: Anemoy - $9,669,838

Volume of transactions LTM: Anemoy - $9,669,854 [first fund was launched in November 2023]

Source of first-loss capital: N/A

Basics and Background

  1. How will this investment improve Arbitrum’s RWA ecosystem?

Centrifuge was one of the first RWA protocols to support Arbitrum’s mission of supporting every corner of DeFi, including real-world assets.

Arbitrum Network Support From Day 1

In September of 2023, we launched Liquidity Pools on Arbitrum allowing investors to access Centrifuge pools directly from the Arbitrum network. Centrifuge has since been developing the ecosystem and demand for RWAs on Arbitrum, starting with a webinar with Offchain Labs co-founder Steven Goldfeder in November sharing the vision for bringing RWAs to Arbitrum. Centrifuge is fully operational on Arbitrum and ready to accept investments from day one. Centrifuge is multi-chain by design, meaning all of the liquidity and TVL will stay on Arbitrum.

Decentralization Is Our DNA

Centrifuge itself is a fully decentralized DAO, and comes with an active ecosystem and contributors. A partnership in this capacity would further the network effects of our relationship by connecting both ecosystems. The Centrifuge ecosystem consists of issuers and liquidity providers, which the Arbitrum ecosystem can onboard at any time.

TVL On The Most Trusted RWA Protocol

An investment through Centrifuge’s platform will bolster RWAs on Arbitrum by bootstrapping network liquidity for one of the largest RWA protocols onchain. The Stable Treasury Endowment Program was set up not only to improve treasury health, but to strengthen projects built on Arbitrum. Using Centrifuge will grow RWA TVL on the Arbitrum network on the most well-recognized RWA protocol. Bootstrapping liquidity on Arbitrum would also further the case for building DeFi primitives composable with our permissioned tokens on the Arbitrum network itself.

Introducing Anemoy

Anemoy is a web3 native asset manager built on Centrifuge. The Anemoy DeFi Yield Fund (DYF) is a regulated, fully onchain fund of funds for direct access to DeFi yields through centralized asset managers. The fund is approved and regulated by the BVI Financial Services Commission (BVI FSC).

Centrifuge proposes that the Stable Treasury and Endowment Program start allocating to DYF through Anemoy to further diversification of stable yields within the STEP program. DYF will give the foundation a passive way to benefit from high DeFi rate environments, without having to worry about the complexities of managing positions.

  1. Identify key management personnel and individual experience. Also, include third parties utilized for managing assets and their qualifications.

No third parties are utilized in managing assets as the Anemoy fund’s mandate is transparent and clear, to hold a diversified, stable mix of market-neutral DeFi yield fund shares (equally weighted between them). All fund investment management is handled within Anemoy by the team. More general third-party service provider details are listed later in the application, but here are some of the most relevant:

  • Banking: First Citizens Bank
  • Fund Admin: Trident Trust
  • Fund Auditor: MHA Caymans.

Core Team:

Lucas Vogelsang:

  • Lucas is the pioneer of Real-World Assets and the protocols that bring them onto the blockchain. His career has been dedicated to bridging the realms of technology and finance to upgrade our financial system. He’s co-founder and CEO of Centrifuge.

Cassidy Daly:

  • Cassidy is an experienced entrepreneur and Economist. She previously worked at the Federal Reserve on interest rate policy. Prior to Centrifuge, she founded and advised multiple companies in the blockchain space. She’s co-founder and CSO of Centrifuge.

Martin Quensel:

  • Martin is a serial entrepreneur with 30 years in the software industry. He co-founded Taulia (acquired by SAP) and Ebydos (acquired by ReadSoft). He’s the Director of Anemoy and Co-founder of Centrifuge.

Eli Cohen:

  • Eli is a corporate lawyer with 25 years of experience in commercial transactions, financial services and regulatory matters. He’s worked in Asia, Europe and the United States with companies such as the CME, Euroclear Bank, and SGX. He’s General Counsel to Centrifuge and Chief Compliance Officer of Anemoy.
  1. Describe any previous work by the entity or its officers/key contributors similar to that requested. References are encouraged.

Centrifuge is a decentralized RWA protocol with $570M worth of assets financed as of 4/29/2024, and $289M currently on the platform. Some relevant partners to Arbitrum include MakerDAO, BlockTower, Aave, Frax, and GnosisDAO. Centrifuge is happy to facilitate introductions between organizations as requested. Brief descriptions of our work are below:

MakerDAO:

In the summer of 2022, we proposed alongside institutional lender, BlockTower, to launch a $220M securitization pool on Centrifuge. The underlying assets were made up of senior loan positions in invoice financing, trade finance, or other short-term receivables. Today, BlockTower pools on Centrifuge have around $190M in assets. The BlockTower arrangement was the first time a credit fund’s operations had been brought onchain, requiring immense legal and operational work to bring to fruition. Much of our DAO protocol work since has taken learnings and structures from this arrangement to implement elsewhere.

Centrifuge began working closely with MakerDAO in 2020 when our first real estate credit pool was proposed with New Silver. Since then, New Silver has launched another pool with MakerDAO titled New Silver II, where they got a debt ceiling increase from $20M to $50M.

Aave:
The Centrifuge RWA Market on Aave was launched in 2021 marking the first institutional-grade RWA lending market. This allowed users to deposit stablecoins in return for senior or junior tranches of credit directly within the Aave application. The Aave DAO recently has approved to onboard the Aave Treasury into Centrifuge Prime, to allocate an investment into the Anemoy US Treasury Bill fund.

Celo:

Celo is another network using Anemoy on the Centrifuge platform to better their long-term sustainability for their treasury. They’ve invested in Anemoy’s LTF and have intentions to diversify into other assets including Flow Carbon’s offset pool. Centrifuge is live on Celo through Liquidity Pools, marking the first use case of our multi-chain product. TVL remains on the Celo network, akin to this proposal with Arbitrum.

GnosisDAO:
Some of our newest clients include GnosisDAO, who decided to allocate a portion of their treasury to Centrifuge Prime, mainly the Anemoy Liquid Treasury Fund. The GnosisDAO proposal includes $10M being allocated. Karpatkey is the financial service provider for GnosisDAO who is now managing the day to day operations of all investments including in RWAs.

Frax:
Frax is another DAO that recently decided to onboard the Anemoy Liquid Treasury Fund. The Frax treasury will be bringing $20M to RWAs as outlined in this recent proposal. This is a strong step in the direction of working towards long term sustainability of the DAO in light of ongoing liabilities and ecosystem development.

Web3 Foundation:

The Web3 Foundation, a not-for-profit organization that supports Web3 teams and open-source projects through funding, advocacy, research and collaboration, recently announced their investment with Anemoy on the Centrifuge platform. They are like the Arbitrum Foundation in that they were looking to protect purchasing power to support the long term vision of their projects through the already established legal organization.

  1. Has your entity or its officers/key contributors been subject to an enforcement action, criminal action, or defaulted on legal or financial obligations? Please describe the circumstances if so.

No.

  1. Describe any conflicts of interest for your entity and key personnel.

None.

  1. Insurance coverages, guarantees, and backstops Name of insurer or guarantor Per incident coverage Aggregate coverage

The Anemoy DeFi Yield Fund holds the underlying fund participations. Trident Trust provides the middle office service for the AUM (the underlying fund participations). They are responsible for the correct execution of investment and redemption transactions with the underlying funds and do all the accounting including the asset side. Leftover cash will be held at First Citizens Bank, covered by Federal Deposit Insurance Corporation (FDIC) for cash assets.

  1. Historical tracking error in your proposed product, or similar to that being proposed Product 2024 YTD 2023 2022 2021

The Anemoy DeFi Yield Fund (DYF) does not suffer from tracking error as the NAV from the underlying funds is shared monthly, while redemptions also take place monthly. Because there is no secondary market trading, the token price in which an investor redeems/invests never deviates from the underlying NAV.

  1. Brief reason for above tracking error

N/A.

  1. Please describe any experience your firm has in working with decentralized organizational structures

Centrifuge has successfully pioneered multiple use cases for RWA investments in DeFi. We successfully minted the first RWA with MakerDAO, created the first RWA Lending Market with Aave and built custom solutions used by leading DeFi brands including Frax, Gnosis, Celo and Web3 Foundation. For a complete list of the projects, see the question #3 above.

Centrifuge is well positioned to support Anemoy is building out the first DeFi Yield Fund of Funds to further pioneer another compelling use case for RWA investment and diversification.

Centrifuge itself is also a fully decentralized DAO, and believes in decentralization as proven by our actions. The Centrifuge DAO has control over protocol operations. The Centrifuge governance forum can be found here.

  1. What is your entity’s current assets under management, assets held in trust, total value locked, or equivalent metric for your legal structuring?

Current protocol TVL is $289M. Centrifuge over its lifetime has financed $570M in assets.

  1. How many of these assets held are present on Arbitrum One, if any?

Although we recently began supporting Arbitrum, no Arbitrum clients have yet deployed TVL.

Plan design

  1. Please describe your proposed product, including a description of the underlying assets and, if more than one asset, the proposed allocation among assets and general investment guidelines. Where appropriate, include targeted maturity mix and credit quality. Attach supplementary documents as appropriate.

Centrifuge is the tokenization platform connecting onchain capital and asset managers in an efficient, transparent, and programmatic way. All issuers must go through the Pool Onboarding Process (POP) via Centrifuge governance which consists of strong due diligence among the community. Centrifuge is open source and asset agnostic in nature, allowing a diverse set of funds and managers to come onchain to manage pools. As part of The Stable Endowment Treasury Program, the Anemoy DeFi Yield Fund, is a natural fit for the services requested.

Centrifuge is multi-chain in nature, and proudly supports Arbitrum. The TVL allocated would be directly on the Arbitrum Network.

Advantages of Centrifuge:

Transparency:

The Centrifuge app, such as the current Anemoy pool, provides unparalleled transparency, showing the individual T-Bill positions as held by the fund. Once the DYF fund goes live, the same utility would be live within the Centrifuge app showing individual fund shares. Subscriptions are done in USDC or USD. Investors have the ability to view their holdings, returns, and overall fund composition via Centrifuge in near real-time, which can be further verified offchain or onchain. Additionally, users can see all activities conducted by the fund including, redemptions, investments, asset transfers, and idle excess cash such as USD in the bank. Our partnership with Trident Trust enables us to accurately and efficiently publish an onchain record of portfolio data and net asset valuations.

Below is an example of a dashboard via the Centrifuge App that allows users to track their portfolio holdings, historical returns, as well as history of in and outflows into the pools.

Efficiency:

Asset managers on the platform have unique efficiency due to our fund management platform streamlining many back office operations. These efficiencies in reporting, operations, and programmability ultimately save money for the end investors through low fees charged by issuers on Centrifuge. On the asset management side, Centrifuge drives efficiencies in reporting allowing all the flow data to be aggregated and act as a single source of truth for back office purposes.

Diversification:

Onboarding with Centrifuge allows the Arbitrum Foundation to access a multitude of different asset classes once the program develops beyond stable yields in phae-1. All investments made through the platform can be managed within the portfolio management features on our application. Centrifuge is committed to furthering adoption of a multitude of asset classes onchain for all Centrifuge clients.

Below is a simple table representing further diversification opportunities:

Strategy Description Targeted Returns Liquidity Thresholds
Liquidity Lowest risk while maintaining US Treasuries, MMF, AA+ rated short term bonds 5-6% Daily
Preservation Investments in senior secured loans such as real estate, corporate bonds etc. 6-8% 3-6 months
Acceleration Trade finance, non-bank originators, emerging markets 8-20% 3-24mo

Institutional Grade Token Utility:

Centrifuge is bringing institutional grade utility to RWA tokens, not currently observable in the market. Current utility offerings around RWA tokens are insufficient for reputable institutions to interact with from a compliance perspective. We are actively working to integrate them into a few different use cases such as lending and other DeFi primitives. This happens in an institutional grade, permissioned environment by all parties interacting with the contracts and the contracts themselves.

About The Anemoy DeFi Yield Fund (DYF)

The Anemoy DeFi Yield Fund is planned to launch in the coming weeks, before any potential Arbitrum allocations take place in July. It was created for DeFi and TradFi investors to capture yields within DeFi from high quality institutional funds on public blockchains. The fund is attractive in all market environments. It is a fund of funds with a focus on private, market-neutral funds starting with Re7 Capital and Dialectic, and soon onboarding several more. The two underlying funds have a combined $140M+ in AUM at the time of writing.

The fund of funds structure for DeFi yields is unique in that it provides onchain investors ulta-safe access to DeFi rates in an actively managed manner, and offchain investors built in diversification with low fees. The fund of funds structure further abstracts away single protocol counterparty risks that all of the underlying funds already control for. The fund will start with an already committed investment of +$1M so that balancing portfolios is more seamless initially as the fund is being setup due to the minimum investments in the underlying funds . The underlying assets consist of market-neutral cash and carry trades, lending stablecoins in blue chip protocols (Aave etc), or LP’ing in stable AMM pairs.

Anemoy DYF tokens fully represent the BVI fund shares. They come with full legal shareholder recourse rights to the underlying assets under BVI law (shares are issued as tokens following BVI law). The token price directly reflects the NAV of the fund with fees already withheld from the price. As mentioned above, the NAV is updated monthly. Investors invest and redeem monthly based on the updated NAV. The token is not a rebasing token.

Benefits of the Anemoy structure include:

  • ‍Liquidity: The fund offers monthly redemption orders with 30-day notice. Quarterly redemptions and 60-day notice is common among private hedge funds.
  • Direct Ownership: The tokens serve as direct evidence of ownership of the fund shares, allowing cost-efficient redemptions and providing full legal claims on assets.
  • Investor Protection: Prospective investors must adhere to the Know Your Customer (KYC) and anti-money laundering requirements of a BVI-regulated professional fund, ensuring a secure and transparent investment environment well-protected from regulatory risk and sanctions enforcement.
  • Transparency: Centrifuge provides near real-time onchain visibility of holdings, returns, and tokenized private shares.

Why The Anemoy DeFi Yield Fund? Combine DeFi Yield With T-Bill Liquidity

The financial goal for the STEP program is to deploy Arbitrum Treasury Funds in stable, liquid, yield bearing assets. DYF represents yield that is not tied to U.S interest rates, as we expect most other STEP allocation to be. This allows for the Arbitrum Foundation to access uncorrelated yield furthering diversification, and benefit from safe yield opportunities in DeFi through externalized professional risk managers with a long track record in the space.

Stability:

In the 48 months (4-yrs) of data we have on the two funds, only three months out of the 48 had negative returns. For reference, this is considerably better than longer duration fixed-income instruments such as U.S Treasury Notes or Bonds. During this time, Notes 2-10 years, experienced many more negative returning months, and Bonds even more so.

Liquidity:

Liquidity is the area in which DYF is weakest for the purposes of the STEP program. The underlying funds are restricted to monthly redemption liquidity on the first of the month when requested at 30-days’ notice. We believe when mixed with lower-yielding, more liquid products, and inversely correlated assets, DYF is a very strong choice for a higher-yielding fund. It is important to note that monthly redemptions are relatively liquid for private professional funds. It is typical for traditional hedge funds to have quarterly redemptions with 30-60 days’ notice.

Yields:

DYF focuses on prestigious onchain capital managers running market-neutral strategies. The two initial funds have a history of top-tier risk-adjusted performance. The chart above shows the monthly and yearly returns for a 50/50 weighted mix of the portfolios. DeFi and TradFi rates have historically proven to be negatively correlated, furthering the case for DYF to be included in a T-Bill proxied portfolio.

DYF Underlying Funds Over The Past Four Years Shows Excellent Risk-adjusted performance, along with no/negative market risk:

Source: Deck

The above chart shows monthly correlations and return summaries for the entire history of the proposed fund of funds. It’s important to note that in 2020 and 2021, “DeFi summer” occurred leading to exceedingly high returns not feasible in DeFi markets as we know them today. This leads to the total historical volatility of DYF being misleading at 64%. The volatility of monthly returns annualized in 2023 for example was 3.2% post DeFi summer, more reflective of what DeFi rates look like today.

Over its history, the sharpe ratio of DYF, the excess returns divided by annual volatility, significantly outperformed other relevant benchmarks. The sharpe ratio is the golden formula in traditional finance for simply calculating risk-adjusted returns. The Sortino ratio does the same, except only looks at the volatility of returns less than 0%, as to not penalize volatility in the upward direction.

The correlations show that DYF is non or negatively correlated with other major asset classes, notably being negatively correlated with AAA corporate bonds, representative of the belief that DYF is a valuable asset in combination with T-Bill funds.

The above chart visualizes the sharpe ratio of DYF against both the S&P and Eth in 2023, which it significantly outperformed.

The above charts show DYF having exceedingly high annual alphas against both Eth and the S&P for both 1/22 to present, and 1/23 to present. Notably also, the beta shows DYF had near zero (or negative) systematic market risk tied to either Eth or the S&P for both timeframes.

A beta coefficient measures the volatility of an individual asset compared to the systematic risk of the entire market (in this case the S&P and Eth). Statistically, it’s the covariance of the individual asset returns and those of the market, divided by the variance of returns of the market. According to efficient market philosophy, investors are only compensated for systematic risk in a market, and any deviation from this is called ‘alpha’, which can be positive (good), or negative (bad).

DYF as shown as the y-intercept above, shows extremely high alpha over both timeframes. DYF historically has taken very little/no market risk, yet generated strong returns. This is mainly attributed to DeFi operating in somewhat of a silo, separated from traditional asset managers arbing the alpha away.

About The First Two Funds

Dialectic:

Dialectic is a premier, tech forward Zug based crypto asset manager founded in 2020. The firm manages four funds as seen on their website here. The funds include Resonance, an early venture fund, Moonphase, an ETH yielding fund, Perpetual, a late stage blue-chip asset fund, and Chronograph, a market-neutral high yielding fund. Anemoy is working with the Chronograph fund as it best fits the profile DYF is looking for. The target APY is 15-30%. The fund has been active since August 2021.

Below is a brief graphic of the underlying capital uses:

Source: Dialectic website

Re7 Capital:

Re7 Capital is a diversified institutional crypto firm across several areas. Re7 manages a venture fund, yield strategies, and liquid token strategies, as well as risk advisory services, research, and ecosystem design services. Some of the strategies include cash and carry and basis trades, yield by taking advantage of structural fixed yield for stablecoins in DeFi, and permissioned lending in RWA markets. The fund has been active since July 2021.

More details about the underlying funds can be shared with the committee as requested.

  1. Do investors have any shareholder, investor, creditor or similar rights?

Yes, investors have full legal shareholder recourse rights to assets of the BVI professional fund.

  1. Describe the legal and contractual structuring for your product including regulatory bodies overseeing your business and the product and identifying all legal jurisdictions interacting with your product. Attach supplementary documents as appropriate.

The fund is approved and regulated by the BVI Financial Services Commission (BVI FSC) as a professional fund. This is the same structure Blackrock chose for its ‘BUIDL’ fund.

The Certificate of Recognition can be seen below:

A high level graphic showing the advantages of our legal structure can be found below:

*Note: this graphic is repurposed from our LTF application, but the underlying structure is the same.

The graphic shown above summarizes why Anemoy’s chosen legal structure is the safest, most compliant structure for RWA products currently available. The graphic shown above can be found here.

  1. Would Arbitrum’s assets be bankruptcy remote from your own entity and its officers/key contributors? If so, please explain the legal and contractual basis. On a confidential, non-reliance basis, provide any third party legal opinions to support the conclusions.

Yes, Anemoy is established under BVI law as a segregated portfolio company. The assets held by the fund are exclusively owned by the shareholders that have purchased shares in the fund. Trident Trust provides the middle office service for the AUM (the underlying fund participations). They are responsible for the correct execution of investment and redemption transactions with the underlying funds and do all the accounting including the asset side. Leftover cash will be held at First Citizens Bank, covered by Federal Deposit Insurance Corporation (FDIC) for cash assets.

Under BVI law, the tokens themselves represent share ownership in the Fund in the same manner as a share certificate. As this is ownership of a segregated portfolio company, all of the assets in the dedicated portfolio (private fund shares) are by law owned by the fund shareholders. In case of bankruptcy, these assets would be liquidated and the proceeds would be distributed to tokenholders by operation of British Virgin Islands law. So from the start, the tokenholders have direct ownership of the portfolio assets. The fund administrator Trident Trust

  1. How are Arbitrum’s assets protected vis-a-vis the bankruptcy of the brokerage or applicable financial institution (e.g., bank deposit insurance, securities insurance, etc.)?

While a bankruptcy of an Anemoy service provider would not directly impact Arbitrum or its assets, the bank and custodian used by Anemoy are both covered under US government insurance schemes through the Federal Deposit Insurance Corporation (FDIC).

  1. Does the Issuer issue more than one asset? If so, what is the priority relationship between different asset classes?

At the moment, Anemoy only manages the Liquid Treasury Fund.

The DeFi Yield Fund will be launched in the coming weeks as a fund of funds to offer investors access to DeFi yields. The asset classes will complement each other, allowing investors to achieve a blended strategy with high DeFi yields and stable treasury rates.

  1. Provide a detailed cash flow diagram that shows the flow of funds from ARB/Fiat conversion, investment in underlying asset, payment of expenses, sale of underlying asset, and repayment (Fiat/ARB conversion), including the counterparties and legal jurisdictions involved.

The following graphic depicts the normal flow of funds and key third parties involved. The Anemoy fund can only be subscribed to using USDC/USD. It was conveyed to Centrifuge that the Arbitrum Foundation will do the swap from the ARB token to USDC.

Once the USDC (on the Arbitrum network) is received by Anemoy’s wallet, Anemoy can convert the USDC to USD via our Circle partnership, and deposit the USD in our bank account. Anemoy is then able to buy equal amounts of shares in the underlying funds. The process is simply reversed when redeeming shares from the fund.

Trident Trust provides the middle office service for the AUM (the underlying fund participations). They are responsible for the correct execution of investment and redemption transactions with the underlying funds and do all the accounting including the asset side.

Potential future fees are automatically withheld negating the need for other transfers on behalf of the Arbitrum Foundation.

  1. Describe anticipated tax consequences (if any) in transacting on the underlying and/or receipt of yield.

None. There are no corporate taxes in either the BVI or Cayman Islands.

  1. Describe the process and expected timeline for liquidation of assets, if given instructions to do so by Arbitrum governance.

Redemption requests are immediate and will be executed as soon as possible during redemption windows. In short, redemptions can occur on the first of each month, given 30-days notice prior. Investors can additionally notify and arrange redemptions with Anemoy via Telegram or email to ensure shortest possible processing times.

The redemption process follows:

  1. Investors need to submit a redemption request onchain using their Arbitrum wallet no later than 10:00am (US Eastern Time) on the Business Day falling at least 30 calendar days before the relevant monthly redemption date on the 1st of the month. The redemption request locks the number of DYF tokens (fund shares) they wish to redeem.

  2. The processing of a redemption request starts on the first business day of every calendar month (the “Redemption Day”).

  3. The processing of a redemption request includes

  4. Pro-rata redemption requests to the underlying funds

  5. The calculation of the redemption amounts of the underlying funds, which requires an update of the net asset value (NAV) of the underlying funds

  6. A calculation of the total redemption amount based on an updated NAV of the Anemoy DYF fund

  7. Finally receiving redemption amounts of the underlying funds and making the total redemption amount available to the investor

  8. USD wire: The USD settlement amount is wired from the prime broker account to the fund’s US bank account.

  9. USDC exchange: USD is exchanged to USDC via the fund’s Circle account.

  10. Withdrawal: The USDC is then immediately sent back to the foundation address.

  11. What amount of first-loss equity will Sponsor provide to ensure over-collateralization, how is the first-loss equity denominated, and what is the source of capital?

N/A. There is no need for first-loss equity.

  1. Describe the liquidity and stability of the proposed underlying assets, including anticipated settlement times from the sale of the underlying to the repayment of ARB.

The underlying funds do not trade on the secondary market in any form. The shares of them can simply be redeemed on a monthly basis with 30-days notice.

  1. If relying on the blockchain for any of the transactional flows, please describe any blockchain derived risks and mitigations.

The investment and redemption process, as well as the tokenization and origination process, is fully automated by smart contracts. This creates a transparent and auditable trail.

The flow of funds onchain is fully restricted through a combination of account abstraction and custom permissioning built into the Centrifuge protocol. Once stablecoins are moved into the pool contract, the asset manager can trigger a transfer only to the predetermined off-ramp, specifically the Circle wallet. Vice versa for repayments and redemptions, any on-ramped funds are directly moved to a wallet that can only be used to move stablecoins into the pool.

The contracts themself have been extensively audited, to reduce the risk of technical issues, by Spearbit, SR Labs, a Code4rena audit, and more. More recently an extensive invariant test suite has also been developed, in partnership with Recon.

  1. Does the product rely on any derivative product (swaps, OTC agreements?)

N/A.

  1. List all the third-party counterparties linked to your assets including and not restricted to prime broker if any, custodian, reporting agent, banks for derivatives or loans and provide primary contact details for the third-party counterparties

USDC On/Off Ramp - Circle:
Anemoy has an institutional account with Circle Mint to directly mint or redeem USDC with/for the underlying USD needed to buy U.S Treasuries.

Bank - First Citizens Bank:

Anemoy uses First Citizens Bank as our rail between USD received from Circle, to then buy private fund shares. USD Funds are immediately transferred during business hours when they are deposited.

BVI licensed Professional Fund Administrator - Trident Trust Company (BVI) Ltd:

Anemoy uses Trident as our Professional Fund Administrator. The administrator’s role is to provide financial, accounting, corporate, administrative, registrar, and transfer agency services. The Administrator also conducts AML and KYC checks on investors. The Administrator additionally runs the net asset value(NAV) calculations for Anemoy used for investing and redeeming shares.

BVI licensed Fund Auditor - MHA Cayman:

MHA Cayman is a specialist provider of audit services to the asset management industry, and has offices in London and the BVI. Anemoy works with MHA Cayman to provide annual audits to investors.

Legal Counsel - Ogier:

Ogier Advises Anemoy on BVI law issues and has prepared offer documents, corporate constitutional documentation and internal policies.

  1. Can you explain how is risk management (investment and operational) being done? Can you provide a copy of your risk management policy?

Anemoy sets a benchmark in financial security. Operational risk is minimized due to a highly simplified and streamlined process. Legal and regulatory risk is minimal as the fund is fully licensed under BVI law. The BVI Financial Services Commission is one of the world’s only regulators actively allowing and regulating funds such as the one being proposed. This allows Anemoy to not provide services in the gray areas of the law.

Trident Trust - the fund administrator - oversees meticulous KYC/KYB/AML protocols. Anemoy ensures stringent BVI compliance standards are met, safeguarding against illicit activities. Monthly NAV checks are completed and overseen by seasoned Professional Fund Administrators and reviewed by Trident Trust to maintain stability and integrity for the pool. Access to pivotal financial hubs like Circle, and bank accounts are prudently restricted, bolstering asset protection measures.

The Anemoy DeFi Yield Fund does intense research supported by independent subject matter experts to select funds with a minimum of 2-year successful operating history, a strong track record, and a proven market-neutral strategy. Further criteria are at least monthly NAV and redemptions with no more than 30-days for notifications. As a fund of funds, The Anemoy DeFi Yield Fund offers participation in the best market-neutral strategies.

Anemoy will start with two funds - those of Re7 Capital and Dialectic - and will further diversify to up to ten funds as the fund grows. The limitations of the underlying funds mean such a diversified portfolio can’t occur right from the start. For example, minimum investment sizes/redemptions make it impossible to support ten funds from day one. Anemoy has already selected and is in conversations with the next group of funds.

Performance reporting

  1. What are your proposed performance benchmarks? If this is substantially different from the underlying assets, please explain why

Anemoy’s DYF performance benchmark is to beat the AaveV3 USDC lending rate on Ethereum by at least by 2x, which at the time of writing would be 14% compared to 7% as shown on Aavescan. This rate approximates the risk-free/low-risk rate within DeFi lending (market-neutral) stablecoins. This underlying market strategy is not far from the type of yield strategies that make up the private funds DYF invests in. This specific market is also one of the biggest individual lending pools in all of DeFi.

  1. Describe the content, format, preparation process, and cadence of performance reports. This should include proof of reserves, if appropriate. Please include a sample report.

The Anemoy Liquid Treasury Fund is a regulated BVI professional fund (the fund or Anemoy DYF). The British Virgin Islands Financial Services Commission (FSC) requires fund administration by a licensed fund administrator and annual audits by a licensed fund auditor.

The fund admin has the continued responsibility to do administration and accounting of all assets under management (AUM), the Net Asset Value of the fund (NAV), cash reserve, and investor onboarding and reporting. Our fund admin, Trident Trust does these tasks daily. Investors can at any time check the Anemoy DYF token price, their DYF holdings, the fund NAV, and the AUM onchain on the Centrifuge protocol updated by Trident Trust. Trident Trust also sends monthly investor statements regarding the investors portfolio.

Please see an example monthly performance report shared privately with the committee as an example. This report is from Anemoy’s already active Liquid Treasury Fund - the format and process for conducting reports is the same.

  1. Who provides the performance reports in respect of the underlying assets?

The fund admin, Trident Trust, does monthly based on the NAV updates of the underlying funds. Investors can at any time check the Anemoy DYF token price, their DYF holdings, the fund NAV, and the AUM onchain on the Centrifuge protocol. Trident also sends monthly investor updates. Anemoy works closely with Trident Trust on all aspects of the fund.

“We’re excited to work with Anemoy to build one of the first tokenized, regulated funds that maintains an onchain record of portfolio data and net asset valuations. This increases transparency while streamlining typically burdensome reporting and reconciliation processes,” David Mungall, Trident Trust’s Head of Fund Administration for the Caribbean said in a recent press release.

  1. Describe any formal audit process and timing of such audits.

In addition to fund administration as a continued effort, a fund auditor does an annual audit and FSC reporting. Our fund auditor MHA Cayman will perform its first fund audit for December 31, 2024.

Pricing

  1. Provide a copy of your standard contract, or one similar to what is being proposed here.

Please see the Subscription Agreement and Private Placement Memorandum (PPM) shared privately.

  1. Fee summary: Inclusive of the full scope of services requested. Product Fee schedule If asset based Fee calculation for our plan if asset based Annual fee if flat fee Any other fees (including redemption or minting fees)

Management fees will be 100bps (1%). The management fee is charged daily onchain and paid out from the cash reserve in USDC with a direct impact on the NAV and DYF token price. Third-party service provider fees (wires, fund administration and audit) will be taken care of by Anemoy using the management fees.

The underlying funds have a standard 2/20 fee structure. This means they charge a 2% management fee annually, and a 20% performance fee on yields generated. The underlying fund fees are automatically withheld from the individual fund NAV/shares held by Anemoy, meaning the Anemoy NAV reflected on the Centrifuge app is accurate.

  1. Describe frequency of fee payment and its position vis-a-vis payment priority compared with other expenses (i.e., cash waterfall)

The fund administrator calculates fees. Fee calculations are part of the fund administration and reporting. The fees are calculated and charged with the NAV monthly and are included in the DYF token price.

Smart Contract/Architecture

  1. How many audits have you had and name of auditors? Please provide a copy of reports.

The Centrifuge protocol has received many audits over the years. The most recent audits were performed by Spearbit (via Cantina), SRLabs, and a Code4rena audit contest. The list of all Centrifuge audits including reports can be found here in our GitHub.

  1. Is the project permissioned? If so how are you managing user identities? Any blacklisting/whitelisting features?

Yes, Anemoy is KYC only and open to non-U.S professionals. User identities are stored in a database with our fund administrator.

Centrifuge is building towards adoption of institutional DeFi, and will always prioritize full compliance with Issuers on the protocol.

  1. Is the product present on several chains? Are there any cross chain interactions?

Centrifuge is currently available on Arbitrum, Base, Celo, Ethereum and our RWA L1, Centrifuge Chain. There are cross-chain interactions between the EVM networks and Centrifuge Chain, to maintain bookkeeping.

  1. Are the RWA tokens being used in any other protocols? Please describe the various components of the ecosystem

Anemoy tokens are currently not being used on other protocols. We are actively working to integrate them into a few different use cases such as lending and other DeFi primitives for our LTF tokens initially. See our recent proposal here on Centrifuge’s forum. This all would happen in an institutional grade, permissioned environment by all parties.

LTF tokens are a natural first place to start as the underlying NAV updates daily. Down the road, opportunities may arise to integrate DYF tokens as well.

  1. How are trusted roles/admins managed in the system? Which aspects of the solution require trust from users?

The Anemoy DeFi Yield Fund is a regulated BVI professional fund. The British Virgin Islands Financial Services Commission (FSC) requires fund administration by a licensed fund admin and annual audits by a licensed fund auditor. The fund admin has access to all third-party service provider accounts and does investor onboarding and reporting. Additionally, the Centrifuge protocol gives real-time onchain visibility of all assets, the NAV (including fees and cash reserve), and the DYF token price. The fund admin also makes sure that the real-world assets are in line with what is presented on the Centrifuge protocol contractually.

The Centrifuge smart contracts enforce rules around administration of the pool, ownership of assets from issuance to purchase by an investor, and permissions around who may access a pool.

Investors need to trust the regulatory and legal framework, which is common for institutional-grade asset management and also used by many other traditional financial institutions, for example, BlackRock for its BUIDL product.

  1. Is there any custom logic required for your RWA token? If so please give any details.

The tokens are ERC-20 standard compliant, with permissioning built in.

Supplementary

  1. Please attach any further information or documents you feel would help the screening committee or ARB tokenholders make an informed decision.

Please see the Anemoy Blended Yield Strategy deck here.

Exposure to on-chain and off-chain rates is something the committee should consider

I haven’t seen something in DeFi like this. I look forward to launch

Nice work Centrifuge!