A portfolio manager (PM) is expected to adhere to a set of rules and regulations, which she have agreed to follow. Failure to comply with these rules may result in consequences such as being labeled as a scammer, cheater, or other derogatory terms.

last update: 2023/08/31

Contents

Memorandum Requirements

This memorandum serves as a detailed prototype for the programmable demonstration fund economy. Regulations are precise, unambiguous, and compatible with digitization or Boolean representation.

Underlying Settlement Asset

ETH is the underlying settlement asset. The PM’s objective is to increase the NAV, calculated in ETH. For reporting and benchmark comparison, asset valuation is also expressed in USD.

Decision-Making Rules

Fund management decisions are made by a committee of PMs, with a majority vote ruling. In case of a tie, a random method such as coin flipping is used.

Assets Storage and Transactions Regulations

Adhering to “Not your keys, not your money,” all assets are stored in PM-controlled wallets. Transactions are executed exclusively on decentralized exchanges. Usage of centralized platforms transfers risk responsibility to the concerned PM.

Replenishment of the Demonstration Fund

The fund follows a monthly DCA strategy, adjusted for inflation. Replenishments are made using any asset but completed by the month’s end. Pre-replenishment, the PM must calculate the current asset value and share price. The new shares are issued based on the formula:

Benchmark portfolios of equal value are also deposited concurrently.

Valuation and Accounting Rules

Assets are evaluated weekly on Monday at 10:00 a.m. EST. The valuation considers current balances, accumulated income, and fees. Prices are sourced from Osmosis DEX for Cosmos ecosystem assets, Coingecko for other chain assets, and Bloomberg for SPX. In the absence of market prices, the last known purchase or trade price is used. Adjustments are made for significant market movements or holidays.

Starting from 2022/01/08, when calculating the price dynamics of portfolio projects, the aquisition price of the asset is calculated according to the formula:

Before that date, the price dynamics were calculated based on the price at the time of investment.

Reporting Rules

Weekly and Semi-Annual Reports include updated data on share price, NAV, current portfolio, benchmark comparison, market sentiment, transactions, and upcoming tasks. Reports are published on the website.

Calculation of Share Price, Issue/Burning Rules

The weekly share price calculation coincides with the report publication. Emergency calculations follow valuation rules. Share transactions (issuance/burning) align with these evaluations.

Position Opening and Closing Rules

Opening: Compliance with fund criteria and portfolio committee audits are prerequisites. Selection is based on the highest Risk/Reward Ratio at decision time.

Closing: Triggered by divergence from criteria, risk event occurrence, or meeting a closing criterion. Includes transfer to the “Trashbag” fund for underperforming assets.

“Trashbag” Fund: Managed exits for assets that fail to meet expectations or diverge from their investment thesis.

Reinvestment Rules

Income from assets is generally reinvested in the same asset, barring alternative strategic decisions.

Rebalancing Strategy

Weekly rebalancing follows asset evaluation. Redistribution involves converting passive income to ETH. Liquidity rewards are allocated to the highest yielding pool. Small, non-profitable rewards are accumulated until transaction viability.

Key Storage and Security Regulations

PMs individually manage key security. Upon reaching a $100,000 fund size, enhanced regulations for key storage and asset transfer, including secure storage, backups, and multi-factor authentication, are mandated.

Policy on Unauthorized Income

Unauthorized income must be promptly reported. The PMs will determine the appropriate action, focusing on fund strategy alignment. Involvement in unauthorized income activities may lead to severe disciplinary actions.

Amendments to the Memorandum

Amendments are subject to a simple majority vote by the Board of PMs. Once approved, they are integrated into the memorandum and communicated to all parties involved.