srRoyUSDC:

Strategy Description:

The vault is comprised of select Royco markets’ senior tranches to maximise risk-adjusted return on USD.

Risks:

1. Economic:
   • Underlying losses exceed the junior coverage.
   • Market impact upon exiting the tranche as a result of insufficient liquidity or duration risk of the underlying asset.
2. Smart contract.
   • Smart contract hack of Royco, Concrete, or the underlying strategy protocols.
   • Oracle malfunctioning.

Mitigants:

1. Economic:
   • The coverage ratios are based on historic drawdown analysis and market stress-testing; the underlying assets have been selected in a way that maximizes risk-adjusted returns.
   • Senior tranches have an in-built liquidation buffer to protect against market impact, there are no plans to have assets with a >30 days redemption periods.
2. Smart contracts:
   • Royco and Concrete contracts have undergone thorough audits by leading security firms.
   • The underlying markets selected are filtered through the proprietary framework that prioritizes lindyness (>6 months), smart contract quality, and economic sustainability.
   • In addition to this, the team has an active integration with Hypernative to monitor for suspicious on-chain signals and react automatically.

roywstETH:

Strategy Description:

The vault accepts wstETH as deposits, borrows stablecoins against wstETH at an optimal rate, and then deploys them into the senior stablecoin vault (srRoyUSDC).

Risks:

1. Economic:
   • Identical to srRoyUSDC’s with the addition of two others risks: liquidation risk and negative borrow rate risk.
   • Any losses in srRoyUSDC are more impactful on roywstETH due to the lower capital efficiency and additional borrow cost, which result in lower returns and longer times to break-even.
2. Smart contract.
   • Identical to srRoyUSDC’s with the addition of oracle risk and smart contract exposure in the borrow venue.

Mitigants:

1. Economic:
   • Liquidation alerts.
   • Active engagement with market curators to preclude interest rate spikes.
   • Actively-managed liquidity buffer sized to respond to historic and current volatility.
2. Smart contracts:
   • Identical to srRoyUSDC’s.

sroywstETH: