Investment mandate will largely dictate the investment strategy and returns. ENS Endowment is designed as an ultra-conservative vehicle with a long-term horizon (perpetuity), and it is specifically mandated that all investments be deployed entirely on-chain. In terms of the mandate of the Endowment, the allocation is split into 2 primary categories: 1/ ETH-neutral assets, which are meant to remain neutral against ETH, and 2/ stable-neutral assets, which should stay neutral against stablecoins. While conservative stablecoin investments have recently been yielding above the T-Bill rate, conservative ETH investments are not on those levels, which has, in turn, impacted the overall APR. Additionally, since weâve been managing the Endowment for nearly two years, there was a significant period where stablecoin yields were much lower than T-Bill rates, which has negatively impacted the historical performance figures. Another very important consideration (constraint) is with regards to how various protocols align ideologically with ENS DAO.
For a more comprehensive view of our performance, I encourage everyone to look at the other DAOs we manage. In many cases, our mandate goes beyond simplistic treasury management. For each DAO we partner with, we develop a financial strategy tailored to its unique needs. For example, with Gnosis DAO, we strategically use funds to enhance on-chain liquidity, design incentives and buyback programs, foster partnerships, execute OTC deals, and more. We aim to bring this to Arbitrum DAO, helping it to thrive. As outlined in our proposal, our mandate is not just about achieving conservative yields but also about driving broader growth and success for the DAO.
Another thing we would like to highlight is that there would be a comprehensive mandate and IPS together with the ASTMG, which will clearly delineate objective benchmarks. The DAO Oversight Committee will judge the ASTMGâs performance against the benchmarks, and communicate this with the DAO should there be concerns with regards to underperformance, or misalignment of interests.
Thank you for the additional context. Is there a specific example where the asset management is likely similar to what would be done for Arbitrum? Highlighting relevant experience and benchmark to judge against would be helpful to get an idea of what to expect. Obviously youâd need to beat a benchmark by at least 1% to justify the fee here.
More broadly, do you agree this should be withdrawn and resubmitted as part of a competitive process?
It feels like we skipped several steps with this going straight to a poll. It would never have passed muster for STEP to just have one issuer submit directly to governance for a large allocation and no one specifically assigned to diligence the details or compare to alternatives.
Iâm really happy to see this proposal on Snapshot! I think that diversifying Arbitrumâs treasury is what is needed now and on the long-term too. Working on a solid strategy to manage the treasury is essential to prevent useful resources to be wasted, this is why Iâm voting in favor.
Implementing the Arbitrum Strategic Treasury Management Group is a proactive approach to ensuring the DAOâs long-term sustainability and growth. Allocating 250M ARB to a specialized group using advanced non-custodial tools, the proposal enhances transparency, accountability, and effective resource management.
Diversifying the ARB treasury is needed and a good idea to explore. I agree with most comments outlining the benefits of such a diversification. A proposal of this size and impact should be put to a broader vote to have other vendors compete instead of going directly to a vote for a specific company. Having a competition between different organizations will, in the worst case scenario, enhance this very same proposal we have here, or in the best case bring new ones that have more appealing terms. (for example, fees).
Also, I donât think having management fees instead of performance fees aligns vendor<>DAO incentives. We should propose performance fees instead of management fees. Voted against at this stage
Asset diversification can be beneficial but we also need to consider the impacts of other risk factors (e.g., on a risk-adjusted basis high concentrations of counterparty risk may be as detrimental to a portfolio as asset concentration).
Think an RFP process would allow others to propose asset diversification strategies and the DAO would benefit from competing ideas (e.g., lower fees, more/active management services).
Also agree with incentivizing alignment via performance fees instead of exclusively management fees. Would be interested in seeing a proposal with minimal management fees and a performance fee incorporated.
It makes zero sense for the DAO to pay a flat 1% management fee with no performance guarantee when there are many quasi-riskless strategies available on-chain (sdai, buidl, etcâŚ) with no management fee.
If karpatkey is confident in their ability to generate actual market return they should propose a performance fee compared to a benchmark strategy like sdai otherwise theyâre not bringing anything to the table.
Diversifying DAO assets is indeed important, but I donât consider it an urgent matter. ARB can effectively serve as the base asset for Arbitrum DAO. Moreover, 250M is an excessively large amount, and the 1% management fee is too high. This could lead to new issues, such as the management team focusing on their own income rather than the DAOâs interests. Therefore, I am inclined to oppose this proposal for now.
For the reasons outlined in my comment in July, Iâm voting AGAINST this proposal. Although I agree with the need to diversify the treasury and believe that @karpatkey is an excellent provider, I want to reiterate that the DAO requires a comprehensive plan that considers all expenses. We should avoid continuing to fund isolated proposals with different objectives and goals.
While we are actually quite supportive of the proposal and our experience with Karpatkey and Gauntlet across other DAOs has been very positive, we agree with other delegates that such an initiative should go through a more structured process to determine 1) the allocation size and 2) vendor selection.
I voted against it: I believe treasury management should not be managed by smaller groups/teams but should be a collective mission. I would however support the proposal to manage part of the treasury (like 10%) and see results after some time. If successful we could later agree to increase it.
Weâve had very great experiences with all parties involved here, however, seeing the forum and community response, regardless of how we feel, itâs probably best to rerun the vote with a $ amount and vender selection RFP.
Going forward, is it worth fleshing out how any such service provider proposal to the DAO is handled? Should we have a vender selection process for all vote? Any vote over $1m? $10m? It feels like the DAO historically has been more of a âgo getterâ DAO where teams that take on an initiative usually propose a vote directly for their services and not the RFP process that a lot of DAOs have indoctrinated in. This has allowed for both good and bad outcomes, but going forward, this might be worth hashing out when and where a RFP is expected.
I voted FOR this proposal at the temp check stage for the following reasons:
I think treasury diversification is essential for the ongoing sustainability of DAO operations.
I appreciate (and require) the proposed transparent, non-custodial implementation in oder to vote for asset allocation of this size outside of the onchain DAO treasury.
I like the secondary focus of fostering ecosystem growth.
Iâm comfortable moving forward at this stage, but would want to see a greater diversity of vendors and a broader process to approve additional funds in the future.
Voting in fovor! Implementing the Arbitrum Strategic Treasury Management Group is a crucial step towards ensuring the long-term sustainability of the DAO. By allocating 250M ARB to be managed by karpatkey, we can foster ecosystem growth and maintain transparency and accountability through well-structured treasury management practices. This initiative will not only strengthen Arbitrumâs financial foundation but also help in attracting builders and users, further solidifying the ecosystemâs position in the market.
Weâre voting for this initiative because itâs an important step in diversifying Arbitrumâs treasury and reducing the risk tied to ARB. While we acknowledge the benefits of a broader competitive process and prefer performance-based fees, we trust Karpatkeyâs expertise and believe itâs necessary to move forward now. We support this proposal and look forward to its development, with the potential for future improvements through community input.
While we believe that diversifying the DAOâs treasury is a prudent move, we have decided to vote against this proposal for several reasons.
While the proposal has merit, it appears somewhat siloed from existing initiatives. There are already ongoing programs, such as the STEP and RWA Innovation Grants (RWAIG), and itâs unclear how this proposal integrates with or complements those efforts. A more cohesive approach would ensure that all treasury diversification efforts align and work towards common goals.
Secondly, we believe the DAO needs greater oversight and control of the onboarding process for treasury management. We would prefer to see multiple vendors involved in a Request for Quotation (RFQ) process, allowing the DAO to evaluate various options and select the best fit. Additionally, we favor performance-based fees over management fees to align incentives better and ensure that the DAO receives value commensurate with the cost.
Lastly, while we trust and respect Karpatkey, we cannot support this proposal in its current form due to the concerns outlined above. We hope that future efforts will address these issues and present a more integrated and transparent approach to treasury management.
The Treasure ARC has voted against this proposal as drafted.
Rationale:
Proposed management fees are unreasonably high for the services being provided. We would like to see a materially increased level of proposed services or a significant decrease in cost. Additionally, we would like to see a de minimis management fee with a performance fee incorporated to incentivize and align the investment advisers with the success of the program.
At the proposed level of committed capital, we would expect to see an institutional quality, actively managed, diversified investment program (e.g., a number of sub-strategies, diversification of platforms and counterparties, periodic reporting obligations, audit partners, performance benchmarking, projections/models, a risk management framework, investment objectives, restrictions, and guidelines).
Diversifying assets and concentrating counterparties, in our view, is not a net benefit to the diversification of risk. As of August 20th, Aera had ~$42m TVL across the platform. As a matter of best practice and to reduce aggregate risk, we should seek to (i) diversify counterparties with defined maximum exposure guidelines (e.g., no more than 10% of AUM maintained on a single platform), and (ii) place restrictions on the percent of total counterparty TVL we are willing to occupy (e.g., capital commitment can be no more than 15% of counterparty TVL).
That said, we do think this is a needed initiative and the ARC is happy to work with karpatkey and any other parties to scope out and design an institutional quality investment management program for the DAO to benefit from.
After consideration, the @SEEDgov delegation has decided to vote âAGAINSTâ on this proposal at the Snapshot vote.
Rationale
As mentioned in our initial response, at SEEDGov we believe the proposal is well-directed, and we acknowledge Karpatkeyâs extensive experience in Treasury Management. We agree that the DAO needs to diversify its assets, rebalance the mix of its holdingsâby increasing liquidity and reducing non-liquid investmentsâand we particularly understand the urgency of addressing ARBâs liquidity depth issues.
However, there are several concerns that prevent us from supporting the proposal in its current form:
We have noticed that none of the extensive feedback provided by delegates has been incorporated. While the proposer is free to submit the proposal as originally written, itâs hard to believe that among all the comments, not a single modification was deemed necessary.
Like other delegates, we are uncomfortable with the fixed management fee. Despite Karpatkeyâs explanation, it seems evident that a performance-based fee would be better aligned with the DAOâs interests, especially given the total amount requested. We would also accept a mixed structureâwhere a base fee covers expenses tied to the proposal, while a performance-based fee acts as the vendorâs âprofit.â
We would have preferred more flexibility regarding the capital allocated to this proposal by adding options to the Snapshot vote. The same sentiment could apply to the fee structure.
Lastly, we emphasize our doubts about the programâs effectiveness unless the STMG administrator has oversight authority over the majority of the treasuryâs ARB expenditures. We believe that such an initiative should be part of a comprehensive treasury management plan, rather than an isolated proposal.
As echoed by previous delegates, we all agree that diversifying the treasury is crucial, and we believe that Karpatkey is an excellent provider with an impeccable track record.
However, this proposal lacks the necessary details and clear objectives. Given the importance and risk involved, itâs essential to have a proposal that includes the minimum required details for execution.
While I support experimentation, itâs key to have at least a discussion with delegate feedback and a detailed plan before moving forward.
Therefore, Iâll abstain from voting on this proposal.