Welcome to The Hedge!
In this edition, we are focusing on the critical investment decisions that need to be made by the Nexus Mutual DAO this week. We also take the opportunity to recap the standard process for all investment-related decision-making and share more about our guiding philosophy.
Let’s dive in.
Capital Pool Growth through Investments
The Nexus Mutual DAO's Investment Committee recently requested feedback from mutual members like you regarding three outstanding investment proposals. The various proposals aim to maximize investment earnings for the Capital Pool, which is collectively owned by members. Investment returns contribute to the growth of the capital pool, providing an additional revenue source for members.
This enables the mutual to organically expand its cover capacity in line with the demand for coverage.
For more information about the significance of successful investments from the Capital Pool in disrupting traditional insurance models, please refer to this primer on the Nexus Mutual governance forum.
Call for comments on three investment opportunities this week
Before non-binding signaling votes for each RFC go live on Snapshot on June 26th, the Nexus Mutual DAO Investment Committee requests feedback from members on the following investment opportunities:
The Avantgarde Treasury team proposes deploying ETH (9% of the Capital Pool) to a diversified group of ETH native staking providers on Enzyme (Kiln and once their audit is complete, StakeWise V3). Their main objective in diversification is to reduce risk and enhance investment security. The Avantgarde team strongly believes that staking plays a crucial role as a fundamental pillar within the Ethereum ecosystem.
For further information, please review their proposal on the forum and their report on dynamic ETH staking.
Uisce.eth, a member of the Incentive Management Committee in the Rocket Pool Protocol DAO, suggests staking 14,400 ETH, which represents 10% of the Capital Pool, with the Rocket Pool protocol. Rocket Pool is a decentralized Ethereum staking solution that boasts more than 2,350 node operators. The protocol's ability to withstand different risks, such as regulatory and technical risks, is attributed to its extensive decentralization approach, where a diverse group of small operators stake from their respective locations. Additionally, rETH, the liquid staking token associated with the protocol, ranks as the third largest ETH liquid staking token in terms of Total Value Locked (TVL).
For further information, please review their proposal on the forum.
0xloth, a member of the Morpho Protocol team, suggests allocating 5% of the Capital Pool to the Morpho-Aave V2/V3 lending pools. This strategic move aims to earn interest while still maintaining a long exposure to ETH. It is worth noting that Morpho is currently the third largest lending protocol within the decentralized finance (DeFi) ecosystem. The protocol is built on top of Aave and Compound, leveraging their infrastructure and capabilities to improve lending services for both borrowers and lenders.
For further information, please review their proposal on the forum.
Investing from the Capital Pool
As members are encouraged to provide feedback on the different investment opportunities within the Capital Pool this week, it is an opportune moment to examine the structured decision-making process regarding investments driven by Nexus Mutual DAO members.
When putting forth investment proposals from the Nexus Mutual Capital Pool, proposers are required to furnish information from several perspectives: This includes providing a rationale for the investment, outlining the potential rewards, fees, and expenses associated with it. Additionally, proposers are expected to emphasize how the proposed investment aligns with the mutual's investment philosophy, ensuring a cohesive approach to investment decision-making.
If you are interested in acquiring more information about the prerequisites for submitting an investment proposal from the Nexus Mutual Capital Pool, I recommend reviewing the Investment Proposal Template post shared by Rei on the forum. This post provides detailed guidance on the necessary elements and structure to follow when preparing an investment proposal.
Risk and investment guidelines for Capital Pool investments
The decision-making framework of Nexus Mutual is outlined in its guidelines, which are regularly updated to accommodate changes in market dynamics. The most recent set of guidelines was published in the May 2023 forum post titled Investment Philosophy Review - 2023, authored by Gauthier.
To ensure alignment with the mutual's risk and investment guidelines, one of the key components in the decision-making process is the utilization of Risk Buckets. These buckets define different categories of risks and introduce the classification of lower, medium, and higher risk levels.
For more comprehensive information, I recommend referring to the Investment Philosophy Review - 2023 forum post, which delves deeper into these topics and provides a thorough understanding of Nexus Mutual's investment philosophy and decision-making approach.
Investment Committee’s priorities for potential investments
The Investment Committee at Nexus Mutual plays a central role in driving all investment-related decision-making processes. This committee dedicates a portion of its time to exploring various options for investing the Capital Pool of Nexus Mutual into productive assets. Their responsibilities encompass several areas, including refining the investment philosophy, establishing the risk and investment guidelines mentioned earlier, identifying investment managers, and providing support to these managers in submitting investment proposals for review by the Nexus Mutual DAO.
The Investment Committee acts as the driving force behind the investment activities of Nexus Mutual, ensuring a structured and well-informed approach to managing the Capital Pool. To learn more, please visit the May 2023 forum post Investment Committee Overview & Priorities by Rei, who also leads the DAO R&D efforts at the mutual.
An update from the Nexus Foundation Team
From the Community Call on 20 June at the Nexus Mutual Discord, Community Calls Voice Channel
Here are the key points from Hugh's update:
A smart contract upgrade has been shipped, incorporating numerous small-scale improvements across different sections of the codebase.
On the sales and growth front, the slashing coverage product continues to generate interest, with several deals in the pipeline nearing finalization. The sales strategy highly values ongoing partnerships, such as the one with Sherlock.
Hugh expressed his enthusiasm for the progress made on the Tokenomics project, which is being led by Rei. Look for regular tokenomics updates on the forum.
Governance forum discussions
We are excited to share the latest developments in the Nexus Mutual governance forum. Your feedback and engagement throughout this process are highly valued.
Cover product discussions
NMPIP ###: Update Protocol Cover wording: BraveNewDeFi has made a new forum post informing users about the transition of the ongoing discussion to the Nexus Mutual Protocol Improvement Proposal (NMPIP) stage. The NMPIP has been introduced on the forum, allowing users to review and provide comments until July 10th.
The forum's new cover products category facilitates member discussions on current and prospective cover product types. It encourages strategic discussions to increase cover sales and control product correlation. It also serves as a place for updates on new listings and fosters discussion on potential listings.
Tokenomics
Rei shared a Tokenomics project update, highlighting significant progress. Design details, including ratchet and liquidity mechanisms, were finalized successfully. System behavior meets expectations. Focus shifts to comprehensive testing through economic and technical assessments, audits, and simulations. Next steps involve finalizing technical specifications and moving towards implementation—look for a draft of the technical specifications later this week.
Review Rei’s update for more information!
The Last Week in Review | 12–18 June 2023
In the last week, the mutual sold $13.8m USD worth of cover and earned $36k USD in fees, as outlined below.
The weighted average expiry period is 65 days.
Active Cover as of 22 June 2023
Total active cover stands at $53.7m with active coverage by cover type and by staking pool as follows.
For more detailed information about active cover, see the DAO-created Covers dashboard on Dune.
Up Next
Don’t forget to follow the Nexus Mutual Twitter account and Nexus Mutual Lens account for regular updates and announcements from the mutual.
Join us for our next community call on Tuesday (11 July) in the Nexus Mutual Discord! We’ll share the latest updates and provide an open forum for members.
Have a great week!
Resources
Nexus Mutual is fully transparent. You can verify the information within this newsletter and learn more about the mutual through the resources below.
Nexus Mutual’s community is most active on Discord. You may reach our team with any questions through LinkedIn and Discord.