Fund Management Guide

It is important to understand that in V1 it is the user’s responsibility to manage their liquidity mining portfolio. If a specific user has deposited into a vault that obtains 10% vROI and the following day the vROI drops to 5% due to some changes in the underlying pool/strategy being used in the vault, it is down to the user to make an assessment and decide whether or not it is viable to shift their funds to another vault offering a higher vROI or to stay in the same vault. It's completely down to the user’s discretion.

Now what could change the vaults vROI, well let's take a look at how the underlying pool/strategies APR is structured:

$$APR = \frac{(rewardPerSec * 86400 * tokenPrice) * 100 * 365}{TVL}$$

By observing this relationship, we can see that any changes in the TVL (increase or decrease) or any changes in the daily reward token emissions (increase or decrease) could impact the return for all users allocated to this pool by way of a Emplifai vault. If the price of the reward token changes that would also affect the return/APR. Now as a user, your yield generating portfolio may be such that:

1. All your funds are allocated to a single vault.

2. Your funds are split across multiple vaults.

In scenario (1) it would just be a matter of shifting 100% of your funds from one vault to another if you see a significant change in vROI. Not a difficult undertaking albeit the user should have enough knowledge to formulate a thesis as to why the APR of the underlying pool/strategy has increased or decreased and whether or not it is beneficial to move from one vault to another.

Some points to ponder on:

1. If you have a large deposit relative to the pool/strategies TVL you could crush the APR and thus the vault vROI such that it is no longer viable.

2. Are reward token emissions fixed or set to change over time?

3. Are you bullish on the reward token being harvested and compounded? Do you expect its price to increase or decrease?

4. If the APR of a pool/strategy has dropped due changes in the TVL and/or reward token price, is that due to some fundamental flaw or concern? Ie, FUD, exploit, etc.

Let’s imagine another Scenario (2), which is slightly more complicated.

In this scenario a user is depositing a relatively large some of funds in comparison to a vault with the highest TVL. Users need to try and optimize yield by choosing the right allocation to each vault such that their overall vROI is maximized. Let's say that vault (A) is giving 20% vROI but the TVL of the underlying pool/strategy is very low. By injecting 100% of your portfolio funds into this vault you may end up crushing the vROI to 5%. What if vault (B) is offering 8% with a high TVL and vault (C) is offering 10% with a moderate TVL. Injecting the majority of your funds into vault (B) would make most sense as it can absorb the most amount of liquidity without dampening the vROI, followed by vault (C) and then the smallest allocation could go towards vault (A) such that you can still pocket some extra APR. You can assess what will happen to the underlying pools APR and thus the vault vROI if you inject (X) amount of liquidity by doing the following:

$$newAPR = \frac{365 * d}{X + y}$$

Where d is; daily reward token emission in USD for the underlying liquidity pool and y is; USD value of TVL in underlying liquidity pool.

This will allow you to make comparisons between vaults based on liquidity injection into the underlying pool/strategy. (All things constant, i.e., token price etc.). Based on your assessment and how you plan to optimize your allocation in order to get the highest return possible, we can compute your portfolio vROI as follows

$$𝑃𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜 𝑣𝑅𝑂𝐼 = 𝑅_1(𝑣𝑅𝑂𝐼_1) + 𝑅_2(𝑣𝑅𝑂𝐼_2) + 𝑅_3(𝑣𝑅𝑂𝐼_3) +…….. 𝑅_n(𝑣𝑅𝑂𝐼_n)$$

Where (R) is a percentage or value between 0 and 1. It represents the ratio of Liquidity allocated to that vault with respect to the total portfolio liquidity available for use. ROI being the return on each vault.

It is important to note that the vault TVL is different from the pool/strategy TVL. The vault TVL represents the overall amount of liquidity locked in that vault and allocated to the underlying pool/strategy. Thus, it can be said that vault TVL should already be contained in the underlying pool/strategy’s TVL value.

The vault TVL and vROI is not what you should go by when making your assessment. The underlying pool/strategy’s TVL and APR is the metric that should be used in analysis and will be available in the analytics section. MRHB will also provide a ROI optimization tool for Gold Tier stakers as well as various other tools to help users make better investment decisions.