NMPIP 266 | Investment Cleanup and Simplification
Note that the figures in this post are as of various timestamps during 9 October 2026 and may not represent the current state.
Capital Pool Breakdown (9 October 2026)
The tables are provided as a reference for the discussion that follows.
Capital Pool Assets
| ID | Asset | Native amount | ETH value | % of pool |
|---|---|---|---|---|
| 3 | NXMTY (Enzyme vault) | 15,348.00 | 14,107.18 | 32.7% |
| 2 | stETH | 8,861.04 | 8,858.28 | 20.5% |
| 6 | USDC | 16,827,247 | 6,763.80 | 15.7% |
| 4 | rETH | 4,218.84 | 4,950.60 | 11.5% |
| 5 | NXMIS (Cover Re) | 4,824.20 | 4,824.20 | 11.2% |
| 0 | ETH | 3,538.95 | 3,538.95 | 8.2% |
| 7 | cbBTC | 3.88 | 126.55 | 0.3% |
| Total | 43,169.58 | 100% |
NXMTY (Enzyme Vault)
| Underlying | Balance | Price (WETH) | Value (WETH) | % of vault | % of pool |
|---|---|---|---|---|---|
| weETH | 8,051.54 | 1.105247 | 8,898.94 | 63.1% | 20.6% |
| steakETH | 4,951.90 | 1.052085 | 5,209.82 | 36.9% | 12.1% |
| Total | 14,108.76 | 100% | 32.7% |
steakETH (NXMTY’s Share)
| Collateral | Market LLTV | NXMTY’s share (WETH) | % |
|---|---|---|---|
| wstETH | 96% (82% of vault) and 94% (18%) | 5,199.03 | 99.8% |
| cbBTC | 92% | 10.78 | 0.2% |
| Total | 5,209.81 | 100% |
Summary
This proposal by the Investment Committee aims to simplify Nexus Mutual’s Capital Pool investments and realign them with Nexus Mutual’s exposure limits and Investment Philosophy guidelines, especially in terms of concentration risk and liquidity.
The proposal also includes an update to the Divestment Framework to allow for the repayment of the Aave Loan and the current rate of outflows via the RAMM.
Finally, it also proposes to empower the Investment Committee to make certain actions with regard to the Capital Pool by obtaining Advisory Board approval and without going through the full NMPIP process, making this part of governance consistent with the Optimistic Governance model.
We propose the following changes:
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Exit the Steakhouse / Morpho position into WETH within the Enzyme vault.
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Close the Enzyme vault, withdrawing WETH and weETH from the Enzyme vault into the Capital Pool.
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Exit the Rocket Pool ETH (rETH) position within the Capital Pool
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Allocate any spare ETH as a result of the above in the Capital Pool (beyond what’s required by the updated Divestment Framework) to stETH.
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Update the Divestment Framework
a. Remove the Aave Loan buffer requirement
b. Set the target amount of ETH in the Capital Pool to 6,500 ETH (RAMM liquidity + target cash)
c. Set the trigger for selling assets to replenish ETH in the Capital Pool to 4,000 ETH -
Formally empower the Investment Committee to take the following actions with only Advisory board approval:
a. Pick which investment assets to sell to replenish ETH in the Capital Pool per the Divestment Framework
b. Pick which assets to sell to obtain cover currencies to pay claims
c. Take emergency risk management actions as pertains to investment assets
Steakhouse ETH Position
We currently hold 4,951.9 steakETH worth 5,209.82 ETH within the Enzyme vault, representing 12.1% of the Capital Pool. This is the Steakhouse ETH Morpho V1 vault.
There are two main reasons why we propose to withdraw the position:
1. Concentration.
The total vault size is 9,718 WETH, which means our position is now 53.6% of the vault. We aim to be a maximum of 20% of any investment asset’s total TVL.
2. Performance versus underlying risk.
The underlying lending markets are 99.8% lent to wstETH. While there is some “buffer” in Lido-related risk absorbed by the borrowers before bad debt is incurred, the overall risk profile in extreme events is not dissimilar to the stETH we already hold in the Capital Pool. The vault also has Morpho, Steakhouse and liquidity-related risks that plain stETH does not.
However, over the period that we’ve been allocated to the vault, it has returned 1.86% per annum, compared to 2.41% for stETH directly.
Note that the Steakhouse Prime ETH vault on Morpho V2 has similar TVL, uses broadly the same underlying lending markets (and hence provides the same exit liquidity). Note that unlike our V1 vault, the V2 vault has 16% of it allocated against a weETH lending market. However, given our weETH position, the argument for risk v return given underlying exposure stands in full.
Enzyme Vault Withdrawal and Closure
As at time of writing, the Nexus Mutual Treasury Yield (NXMTY) vault on Enzyme Blue is the Capital Pool’s largest single allocation, with 32.7% (14,107.2) ETH of the Capital Pool deployed.
Enzyme Blue, since August 2022, has been a crucial infrastructure tool for Nexus Mutual to allow the Capital Pool to invest in more complicated DeFi instruments without having to build full integrations directly into the Pool contract.
The Mutual’s partnership with the Enzyme and Avantgarde teams has worked extremely well for the last four years, with Enzyme Blue’s infrastructure allowing the mutual to invest first into Maple Finance, then direct ETH staking via Kiln and Chorus One (through Stakewise). These positions required active harvesting and redeployment of rewards, which was not possible via the Capital Pool directly.
Reasons for withdrawal:
1. Shift to passive assets.
Currently the vault holds the Steakhouse ETH position described above, as well as 8,051.54 weETH worth 8,898.9 ETH. Neither of these positions require active management, and after withdrawing from Steakhouse, we would be holding only weETH in the vault.
As there are no more token incentives active on weETH, we are able to list and hold the weETH directly in the Capital Pool.
Based on the current DeFi landscape, we do not see significant risk-adjusted value in actively managing Capital Pool assets in the short term.
2. Concentration.
When we first allocated via the Enzyme vault, our position represented 10% of the Capital Pool. Currently, the position is 33% of the Vault, significantly exceeding Nexus Mutual’s usual 20% threshold for single protocol exposure.
We would like to stress that the proposed closure of the vault is entirely due to a change in investment priorities and asset mix. The Enzyme Finance and Avantgarde teams have displayed consummate professionalism and expertise throughout our relationship. We’d like to thank them for their continued support over the last four years and will continue to look for opportunities to work together again.
rETH Position Closure
The Capital Pool holds 4,218.8 rETH worth 4,950.6 ETH representing 11.5% of the Capital Pool.
Over its lifetime, since the initial deposit of 14,400 ETH in July 2023, the investment has yielded 2.7% per annum, earning the Capital Pool 1,106 ETH. Most of it has now been sold to fund RAMM redemptions as per the Divestment Framework.
We now propose fully exiting the rETH position, with the main reason being liquidity:
- rETH market liquidity has worsened steadily over the last year. Native protocol exits, which burn rETH for ETH at the contract exchange rate are effectively closed at our size.
- Capacity arrives in small amounts (typically under 25 ETH at a time) but quickly gets snapped up by arbitrage bots.
- Since mid-August, rETH has traded, even in small sizes, 20-40 bps below its redemption value. rETH supply has fallen by about 79,000 ETH (18%) in the past year, from 449,000 to 370,000 ETH.
- Any notable size (above 1000 ETH) has been difficult to fill without incurring significant price slippage from the market rate, leading to further discounts beyond the quoted market price vs the underlying NAV.
We propose that the remaining rETH is sold for ETH directly in the Capital Pool, with discretion over sale amounts and timings left to the Investment Committee and approved via the Advisory Board.
Further Allocations to stETH
If, after completing the withdrawals from Steakhouse, Enzyme and Rocket Pool, there is idle ETH still sitting in the Capital Pool beyond that required for the RAMM and cash buffer (see updated Divestment Framework below), we propose allocating it to stETH.
Remarkably, most of the rationale for investing in stETH in the original proposal over 5 years ago still holds. There is no other ETH-denominated asset that can claim to have the same mixture of liquidity, reliability, track record and widespread adoption.
Note, assuming instant completion of all proposed actions, this would make stETH approximately 35% of assets held in the Capital Pool. While this represents a meaningful excess over our typical 20% limit per protocol, we feel this would be justified for stETH due to the risk-return profile and its systemic importance to the ETH ecosystem as a whole.
Divestment Framework Update
The Divestment Framework has become outdated over the course of the last 2 years:
- The Aave Loan has been repaid, so the 3000 ETH buffer in case of ETH price drops is no longer required.
- RAMM outflows have slowed significantly from the maximum 3000 ETH per month and now average ~800 ETH per month.
As a result, we propose:
- lowering the target amount of ETH in the Capital Pool from 12,500 ETH to 6,500 ETH, consisting of 500 ETH cash buffer and 6,000 ETH liquidity for the RAMM, and
- lowering the threshold at which sales of investment assets for ETH are triggered to 4,000 ETH.
Investment Committee Powers
We propose to empower the Investment Committee to make certain choices regarding the assets in the Capital Pool without having to go to approval via the NMPIP process.
Investment Asset Sales for “Cash”
There are two scenarios where the mutual requires “cash” assets (ETH, USDC, cbBTC) to meet its obligations:
- paying claims
- providing ETH liquidity for exits via the RAMM
We propose that the Investment Committee, with approval from the Advisory Board, has the ability to pick which investment assets get sold to meet the Mutual’s cash obligations.
Emergency Risk Management Actions
In extreme scenarios, the investment assets held by the Capital Pool may need to be unwound without a public, forum-based approval process. The ability to act instantly is crucial when assets become distressed.
We propose formalising that the Investment Committee, supported by the Advisory Board and Engineering team, can take actions it deems necessary to protect the value of the Capital Pool with the aim of always maximising the “cash” value of its Investment Assets.
Note that any new investment asset choices would still be brought to the wider membership base as per the current process.
Technical Implementation Order
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If the proposal is approved, we will immediately request that Avantgarde (the nominated asset manager acting on our behalf within the Enzyme vault) withdraw the steakETH position to WETH within the Nexus Mutual Treasury Yield (NXMTY) Enzyme vault.
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Once Step 1 is complete, the Advisory Board will execute a withdrawal from the Enzyme Vault, redeeming our NXMTY tokens for the underlying weETH and WETH. The technical implementation details of the withdrawal are delegated to the Advisory Board and the Foundation Engineering team, but will require at least
- listing weETH as a Capital Pool asset, and
- a minor contract upgrade to allow us to withdraw the weETH directly from the vault to the Capital Pool.
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rETH will be sold for ETH via SwapOperator CoW orders at the discretion of the Investment Committee with execution of trades approved by the Advisory Board.
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Similarly, any allocations to stETH over the proposed 7,000 ETH minimum threshold would be at the discretion of the Investment Committee with execution of trades approved by the Advisory Board.
No immediate action is required for updating the Divestment Framework and the Investment Committee’s mandate.
Next Steps
This proposal will be open for member discussion here until 16th October before moving to a Snapshot vote as per the optimistic governance process.