Introduction
This post should be considered as an extension to the original roadmap for the Investment Hub of Nexus Mutual, with the difference that as we are proposing a budget (in a separate post), the approval for the Investment Hub will need to proceed to a snapshot vote.
The main ongoing goals of the Investment Hub are unchanged:
- maximise the return obtained on the assets in the Capital Pool,
- while minimising associated risk.
Nexus Mutual is in the unique position where its treasury is fully transparent, on-chain, and legally belongs to all members of the mutual. Therefore, we believe the investment selection and approval process should be as transparent as possible, with ultimate decision making power in the hands of the members.
Managing a pool of assets in these circumstances, especially given the risks involved in our space, is not straightforward and there is little to draw on in terms of best practice.
In the original roadmap, we proposed that all contributions to the hub would be on a voluntary basis, but the amount of planning, research, due diligence and coordination required have since made us revise this view and put forward an incentive structure for the contributions.
Activities of the Investment Hub
We intend for the members of the Investment Hub to perform the following activities on an ongoing basis. The list is not exhaustive and always subject to change as circumstances change.
Investment Philosophy
The Investment Hub participants aim to define and iterate on the Investment Philosophy of the mutual.
An opening philosophy has been put forward, and we are intending to use this document as a framework to evaluate potential investments, alongside any unique features specific to the potential investment.
The Investment Philosophy contains:
- The objective and main considerations of the philosophy
- A description of the risks to which the mutual is exposed when investing its Capital Pool
- A method for splitting investments into different risk buckets
- Specification of the intended allocation between those risk buckets (Risk Budgeting)
- Additional global constraints for investments
- The target return and risk tolerance threshold for the investments
- Benchmarks for the different risk categories and the mutual as a whole
As mentioned in the associated post, the Investment Philosophy is a living document which we expect to update and maintain over time as the circumstances of Nexus Mutual and the universe of possible investments changes.
Review of Performance
The Investment Hub commits to providing a periodic review of the Investment Philosophy, manager performance and its own set-up on an ongoing basis, proposed quarterly.
Some of the categories for review would be:
- Compliance with Investment Philosophy and identifying reasonable steps to rectify any non-compliance
- Overall risk exposure across the mutual’s assets and liabilities to specific protocols/assets
- Exposure to specific managers or strategies
- (If applicable) are external managers providing an adequate level of service and information
- Liquidity requirements and availability
- New strategies/products/providers we should explore (and are we doing this enough)
- The appropriateness of the reward structure and time commitments of the hub members
A more formal checklist/review process document will be produced.
We expect to communicate analysis and work done on behalf of the hub to the broader Nexus Mutual community for periodic review and feedback as part of these reviews.
Drafting, Submitting and Reviewing Investment Proposals
The members of the investment hub will also look to identify investments or managers that fit with the strategy of the mutual across the risk spectrum, perform due diligence and put forward proposals for investments.
However, the Investment Hub participants would not be the only source of investment decisions and we hope that members continue to actively seek out appropriate investment assets for the capital pool. The investment committee can then provide feedback and commentary on any investment proposals put forward by members.
We hope to be seen as the first point of call when members have a well thought out proposal for an investment that fits in with the strategy and are looking for advice, challenge and input before submitting the idea to the wider membership base.
Set-up of the Investment Hub
We propose starting the Investment Hub with a founding committee of 7 people. These are the initial members set up on the Coordinape platform with the ability to vote on and receive rewards, if they so choose.
For reference, the members are listed below, with bios in the previous roadmap and update posts.
- Rei Melbardis (@rei)
- Aleks Larsen (@aleks)
- Nico Santini (@nsantini)
- Guillaume (@osaat)
- (@Dopeee)
- Gauthier (@gauthier)
- Jacob Cantu (@JC1)
Interaction with the Core Team
The Investment Hub will liaise directly with Hugh to discuss proposals and opine on the viability of implementation, as well as aiding in translation of proposals into technical requirements for the engineering team. This has been established as an ongoing process over the last few months.
We expect to maintain a direct line of communication with the core team and other Hubs to both request their assistance and provide our skills on an ad-hoc basis as appropriate.
Review Period
This proposal will be up for discussion for the usual 7-day period before proceeding to Snapshot vote.