We’ve discussed the benefits of the Rally community wielding a robust Community Treasury warchest to fund its future growth and innovations. With the Community Treasury fundraise ongoing, substantial funds will soon flow into the treasury. It would be in the best interests of the Community not to let them remain idle, while striking the right balance of ensuring sufficient stability to avoid major losses.
This thread is intended to start a discussion around implementing a Community Treasury Management Policy - once finalized, we’ll post it to Snapshot for a community vote. A draft of a policy is presented below as a point of reference.
In summary, this policy:
- Provides the objectives for management and the approved asset categories and asset allocations for the Community Treasury funds.
- Authorizes the Rally Genesis Team to appoint a Treasury Manager to oversee the management of the funds in compliance with this policy.
- Sets up reporting requirements for the Treasury Manager to ensure transparency for the Rally Community.
As always, our community is breaking new ground, and while a fund management policy is nothing new, launching one through a community network is uncharted territory. Would welcome feedback and thoughts on the idea as well as the policy itself.
Community Treasury Management Policy
Purpose
This Community Treasury Management Policy (“Policy”) establishes management policies and guidelines governing all assets held by the Rally Network Community Treasury (“Community Funds”) on behalf of the Rally Network decentralized community (“Community”).
This Policy:
- Clarifies the delegation of duties and responsibilities concerning the management of Community Funds.
- Sets forth the objectives for management of the Community Funds.
- Provides the approved asset categories in which the Community Funds will be held.
- Identifies the target asset allocations of the Community Funds.
- Sets forth the rebalancing requirements for the Community Funds.
- Describes the reporting requirements to the Community relating to the management of the Community Funds.
- Establishes a process for delegating authority to the Treasury Manager (defined below) and sets the management fee.
Delegation of Responsibilities
Responsibilities of the Community
The Community is responsible for approving this Policy through Community vote. Through such approval, the Community authorizes the Genesis Team to take actions necessary to ensure oversight and management over the Community Funds, consistent with this Policy.
Responsibilities of the Genesis Team
The Genesis Team is authorized to delegate day-to-day supervisory responsibilities for the management of the Community Funds to a third-party service provider (the “Treasury Manager”). The Genesis Team shall be responsible for the selection, appointment, and removal of the Treasury Manager, and shall act as the Community’s agent to facilitate entry into a Treasury Management Agreement with the Treasury Manager within which the Treasury Manager’s roles and responsibilities with respect to the Community Funds are codified.
Responsibilities of the Treasury Manager
The Treasury Manager shall hold day-to-day supervisory responsibilities to carry out the management of the Community Funds pursuant to the terms outlined in this Policy. The Treasury Manager, and its directors, officers, employees, contractors, and agents, shall not be held accountable for performance results or less than desirable outcomes resulting from its management of the Community Funds. The obligation of the Treasury Manager is to fulfill its responsibilities with respect to the Community Funds pursuant to this Policy and the Treasury Management Agreement. In consideration of the foregoing, the Treasury Manager is responsible for the development, recommendation, implementation, and maintenance of all policies relative to the Community Funds and shall:
- Oversee the day-to-day operational management activities of all Community Funds subject to policies established by the Genesis Team or the Community.
- Develop and/or propose policy recommendations to the Genesis Team or Community with regard to the management of all Community Funds.
- Recommend long-term and short-term management policies and objectives for Community Funds, including the study and selection of assets, determining asset allocation ranges, and setting performance objectives.
- Recommend the retention and/or dismissal of consultants and/or other outside professionals; contract with and monitor any necessary outside service provider/consultant ensuring adherence to effective policies and contractual terms.
- Convene regularly to evaluate whether this Policy, treasury management activities, risk management controls, and processes continue to be consistent with meeting the goals and objectives set for the management of the Community Funds.
Policy Objectives
The objectives of the management of Community Funds are, in order of priority:
- Preserve principal
- Retain liquidity
- Maintain sufficient diversification to avoid material losses
- Achieve the highest rate of total return reasonably possible within the constraints set out in this Policy
Approved Asset Categories
The following assets are considered appropriate under this Policy:
- Stable coins: USDC, USDT, and DAI
- ETH; WETH
- BTC
- yTokens: yTokens received via yield delegation from Rally Yield Delegating Vaults
- Yield farming and yield earning vaults via DeFi projects including:
- yearn.finance
- Compound
- Uniswap
- Balancer
DeFi projects will be analyzed in real time and disqualified as appropriate if concerns arise for any particular project. Additional DeFi projects are permitted at the discretion of the Treasury Manager with strict adherence to the constraints set out in this Policy.
The Treasury Manager shall not enter into any asset category that has an average maturity greater than 90 days without prior approval from the Genesis Team or the Community.
Any asset category not expressly permitted by this Policy must be formally reviewed and approved by the Genesis Team or the Community.
Target Asset Allocation
The Treasury Manager will make reasonable efforts to maintain the asset allocation in adherence to the following asset allocation limits:
- Stablecoins: maintain a minimum of 80% of the Community Funds in approved stablecoins or stablecoin related activities via approved DeFi projects (for example, depositing USDC in yearn.fiance vault).
- Vault deposits should be maintained at a maximum of 25% of Community Funds.
- yTokens: should be maintained at a maximum of 20% of Community Funds
- Liquidity Provider Yield Farming: to be maintained at a maximum of 15% of Community Funds
- Other non-stablecoin cryptographic tokens and related yield farming and yield earning products to be maintained at a maximum of 15% of Community Funds.
| Asset Class | Minimum Allocation | Maximum Allocation |
|---|---|---|
| Stablecoins | 80% | 100%; Vault or similar yield earning deposits limited to a maximum of 25% |
| yTokens | 0% | 20% |
| Liquidity Provider Yield Farming | 0% | 15% |
| Other non-stablecoin cryptographic token and related yield farming/earning products | 0% | 15% |
Rebalancing Requirements
The Treasury Manager will evaluate the management of the Community Funds and rebalance to effective target asset allocation criteria, at least quarterly on a calendar year basis. If the asset classes deviate from the target asset allocation by more than 10% at any point before the next rebalancing, the Treasury Manager shall make reasonable efforts to rebalance below the threshold.
Reporting Requirements
The Treasury Manager will maintain a wiki with all relevant addresses/wallets holding the Community Funds. On a quarterly basis, after rebalancing, the Treasury Manager will report the performance of the Community Funds to the Community via the wiki.
Management Fees
The Treasury Manager will be compensated a management fee of 25 basis points (annualized) of USD equivalent Community Funds under management. This fee will be paid to the Treasury Manager in USDC on a monthly basis to an address provided by the Treasury Manager (By way of example: USD $10M under management yields a fee of $2,083 per month to the Treasury Manager). Any changes to the fee are subject to approval by the Genesis Team or the Community.