How does Yield App pay its APYs?
Yield App prides itself on paying some of the highest annual percentage yields (APYs) in the market. At the same time, we strive to be fully transparent as a company, and this involves sharing with our valued users how Yield App generates its returns and pays its annual interest rates.
We believe understanding the portfolios into which we deploy our assets empowers you to make the right financial choices, while helping us achieve our mission of facilitating this financial freedom. We have a strong focus on due diligence and diversification to ensure that you can sleep soundly, knowing your assets are safe with us.
What portfolios does Yield App offer?
Currently, Yield App offers returns across four base assets, giving users access to market-leading interest rates on BTC, ETH, USDC and USDT. We combine decentralized finance (DeFi) strategies with allocations to external liquid alpha market neutral fund managers to deliver fully diversified, risk-managed portfolios that are able to ensure we meet our obligations and provide secure returns to our users.
This strategy allows us to reduce the overall costs that an individual would incur trading on their own, and removes the complexities, risk and time involved in building your own portfolio. It particularly allows users to save on network (gas) fees, which can be a significant cost in a DeFi portfolio and even prohibitive for smaller-sized allocations, whilst combining the blended returns generated through market leading digital asset funds that are not typically open or available to individual investors.
Yield App has developed and established a broad network of specialist industry participants and is therefore able to curate bespoke opportunities in partnership with industry-leading quant funds, miners, market makers and other proven DeFi managers.
Our multi-strategy, diversified portfolio allocation model spreads risk and smooths interest volatility, allowing us to offer earnings that outperform other offerings available in the market, without compromising capital protection. As Yield App grows and our licensing objectives continue to be met, users will be able to access new products and services that meet their objectives and risk profile.
Utilizing a proprietary risk analysis model in conjunction with a best of breed, 24/7 data scraping tool, the DeFi portfolio team deploys capital into blue-chip yield generating protocols rapidly and without compromising the security of users’ assets.
We deploy capital to highly liquid systematic trading strategies utilizing different tenors and signalling mechanisms across a range of proven external managers with strong governance procedures in place.
Moreover, fragmented markets provide many opportunities for market-making and liquidity provision. With more derivative products being created, they introduce further arbitrage and relative value opportunities which contribute to our returns.
Who are the portfolio managers?
Yield App has a core team of experts, our Portfolio Managers, who work closely with our technology, risk and software engineering teams.
Our Chief Investment Officer, Lucas Kiely, manages the overall allocation strategy. Lucas has spent 25 years in financial services, initially designing and developing risk management and trading systems for two of the world’s biggest investment banks before moving into trading complex derivatives and managing quantitative investment strategies.
Yield App also works with established, trusted third-party service providers including research houses, smart contract auditors, risk modeling software tools, alongside licensed exchanges to deploy and manage assets. Our partnerships are driven by an emphasis on due diligence and risk management to identify suitable partners and opportunities. Working with advisors such as Kroll and Simmons & Simmons amongst many others, we pride ourselves on the attention to detail undertaken across all elements of our portfolio activities to ensure preservation of capital first and foremost.
Other advisors include:
- Top blockchain auditing and accounting firm Armanino, which produces independent audits of our balance sheet reserves.
- Decentralized risk modeling platform, Credmark, which helps us assess risk across opportunities in the marketplace.
Analysis and due diligence
The DeFi team uses a proprietary automated social media, sentiment and news capture/analysis tool, which provides what we are referring to internally as the “heartbeat” of DeFi. This aggregation of thoughtfully curated information has enabled our DeFi team to enhance operational agility, forecasting market saturation metrics, reward decay, governance proposals and more, well ahead of time.
In addition, we undertake extensive institutional grade due diligence on all of our external managers that provide a complimentary mix of market neutral quantitative trading, spread trading and basis arbitrage strategies.
We follow a five-pillar risk assessment strategy, which plots and scores dozens of key data risk points, taking account of:
- Smart contract risk
- Platform risk
- Counterparty risk
- Financial risk
- Credit risk
These are continuously regression tested to ensure that all protocols and pools that are analyzed by our portfolio managers meet our rigorous security and alpha generation thresholds. These are then approved by the investment committee and hard coded into our portfolio management system. We interact directly with whitelisted smart contracts, removing the need to utilise third party wallets.
As mentioned above, diversification is a key part of our strategy, allowing us to minimize volatility while protecting overall portfolio returns and our users’ assets. Our diversification strategy encompasses our DeFi allocations and our expanding third party external manager allocations, led by our CIO, Lucas Kiely.
The overall asset allocation weightings are continually reviewed to meet our investment objectives. Typically, our portfolios are spread across 20 to 40 positions and are further diversified within these exposures by the base assets. The benefits of this approach significantly reduces overall portfolio risk exposure into single points of failure.
In an effort to increase our transparency, we have introduced an enhanced portfolio reporting section in our quarterly reports.
During the third quarter the portfolio team:
- Allocated into and rotated positions across 18 approved DeFi market neutral pools
- Allocated to multiple liquid alpha strategies with approved external managers via in-kind subscriptions, comprising three different underlying base assets with a concentration risk ranging between 0.2% and 2.2%
- Delivered a high performance in terms of APY generation that allowed Yield App to raise the base rates on ETH and stablecoins to 6.5% and 10.5%, respectively.
How are the APYs paid?
Each user’s daily APY gains are calculated every 24 hours based on the value of their assets held on the platform. In Version 2 (V2) of our platform, users can choose whether they want these earnings to be paid into their Yield App wallets or auto-compound rewards, so they are automatically redeployed into the specific portfolio.
Our annual interest rates are regularly adjusted to reflect changing market conditions, with the maximum total APY available at Yield App now sitting at 18%. We will continue to adjust rates both up and down depending on market conditions to ensure that our annualized rates are sustainable, which remains our highest priority.
As our strategies evolve and expand, we will ensure we keep our users well-informed by providing timely updates on the performance and management of your assets. Diversification, thorough due diligence and comprehensive risk management will always remain the key pillars of our offering to ensure we bring market-beating interest rates to all our users.