Thank you, @kugusha, for this proposal!
I wanted to dive a bit deeper on the opportunity, compare the yield for these Morpho Vaults to our current investments, and highlight why diversification is beneficial for the Mutual.
Why Diversification Matters
Currently, Nexus Mutual’s Capital Pool holds 33,676.54 ETH (67.09% of the Capital Pool) in productive capital allocated to stETH, rETH, and eETH/weETH. The split between investments is as follows:
| Investment Asset | ETH Value | % of Capital Pool Holdings |
|---|---|---|
| stETH | 13,555.97 | 27.01% |
| rETH | 11,452.53 | 22.82% |
| eETH/weETH | 8,668.04 | 17.27% |
To ensure there’s sufficient liquidity for RAMM redemptions, the Mutual will diversify out of stETH and rETH over time, as needed, to stay within the previously determined target liquidity levels.
As the Mutual underwrites more cover and we launch the new Leveraged Liquidation Cover in early Q4 2025, our exposure to leveraged loops on LSTs and LRTs will grow. Keeping stETH and rETH holdings consistent within the 15%-20% of the Capital Pool range while meeting RAMM redemption liquidity levels will be important.
Exposure to eETH/weETH exposure will also grow through Protocol Cover, Fund Portfolio Cover, and Leveraged Liquidation Cover sales. To reduce concentration risk, it’s wise, in my opinion, to keep the Mutual’s eETH/weETH exposure at current levels. As curators and operators within Symbiotic and EigenLayer allocate to AVSs, the risk of slashing will also increase for LRTs like eETH/weETH, rsETH, etc. This will happen over time and will be a trend we on the Product & Risk team plan to keep a close eye on.
Given the above factors, it’s beneficial to diversify our investment portfolio outside of just LSTs and LRTs. The two Morpho Vaults in the proposal represent lower risk allocations since the underlying markets for both vaults accept blue chip collateral assets in isolated markets with robust oracles. Each underlying market the vaults allocate to are isolated from one another to limit contagion risk–one of the notable features of Morpho’s architecture.
Comparing Yields to Current Investments
| Investment | 30D Yield |
|---|---|
| stETH[1] | 2.82% |
| rETH[2] | 2.02% |
| eETH[3] | 3.06% |
| Steakhouse ETH Vault | 2.42% |
| Gauntlet ETH Prime Vault | 2.45% |
Both Morpho Vaults provide yield that is within a range of 40-60 bps of stETH or eETH, while they both provide an additional 40 bps beyond rETH’s yield. When demand for leveraged looping strategies on LSTs and LRTs increase, both vaults can provide yields that exceed the standard LST/LRT yield while reducing the Mutual’s direct exposure to LST/LRT assets, under the assumption that liquidations happen smoothly and effectively with no bad debt occurring. While bad debt could occur, the probability of loss is low for these specific markets given the extensive secondary liquidity available for Lido’s stETH/wstETH and Etherfi’s eETH/weETH and the oracles used within the underlying markets for these vaults.
Managed Assets in Enzyme Vault
Allocating 5,160 ETH to either of these Morpho Vaults from the capital held in the Mutual’s Enzyme Vault would be a prudent decision to earn yield to offset future claims and grow book value for NXM holders, while reducing exposure to the LST/LRT assets the Mutual already holds in the Capital Pool.
My preference would be an allocation to the Steakhouse ETH Vault. Steakhouse is allocating assets to the wstETH/WETH markets and wouldn’t increase the Mutual’s exposure to weETH, which, as I noted above, we expect to see higher weETH-related cover liabilities as we grow sales and launch the Leveraged Liquidation Cover product (protection against depeg events for leveraged positions for like-kind assets).
Fully in support of this. Thank you, @kugusha, for taking the time to put forward this detailed proposal.
30D yield figure sourced from the Investment Committee Newsletter - August 2025 ↩︎
30D yield figure sourced from the Investment Committee Newsletter - August 2025 ↩︎
30D yield figure sourced from DeFi Llama’s Yields page ↩︎