DFP-16: Introducing variable / individual freeze times for funds invested in portfolios

|Header | Content|
|Author| Chris Bender
|Created| 2022-1-4|
|Status| in discussion

Motivation

Different investment or even strategies work in different time horizons.
Strategies that have a longer time frame need the capital invested for a longer time to be successful. it can be counterproductive if funds can be withdrawn at any given time from every portfolio.

Description

If investors are “d´accord” with the strategy, it should be possible to lock the funds for e.g. 1month, 6 months or 12 months. It also makes individual asset management easier, as one could serve different types of investors with different time frames easier. It also protects the asset manager (and the investor) from getting a good longer term strategy busted, if investors panic sells because of a short term market reaction or move.

Implementation

I suggest dHedge simply introduces the possibility to set the freeze / lock period for each portfolio - at least for private pools, where a strategy is started for an individual investor or a group that know that this is the start date and time+x is the locking period.

After investors fund the pool they know their assets is locked for period X. They can receive a prompt that this will be the case, before they confirm the transaction. The smart contract then records the date of the funding and sets for the first possible withdrawal date at “date time+x”.

With these features dHedge would become even more of a professional tool - a tool for professionals!

1 Like

Support you idea. Seems really good. lets do it

Thank you, i appreciate that! Together we can develop something really great here!

Please format using the guidelines provided here: DMP-2: DFP Purpose and Guidelines.

Otherwise, you can make a feature request at https://feedback.dhedge.org/.

It seems variable freezing, and adding other fees are different features, please split up this request into multiple DFPs.

And management fee is already a feature which passed governance, seen here: DFP-8: Add Streaming Fee Option for Pools.

@Elementleader nice suggestions.

Could you explain what you mean by variable freezing period for assets? (just so I understand)

As @edson mentioned, management fee will be added. How important is deposit and withdrawal fee for you? (Note that Defi can do better than traditional finance)

Regarding copy cats - if someone follows your trades, they might push the price up. Would that be good for you?

@ermin With “variable freezing” periods I mean the possibility to creata an individual time lock for a portfolio. Example: the portfolio manager can set the “freeze” to 240 hours (=10 days) or even 1 year or whatever.
At the moment there is no possibility to create an agreement to the likes as “investors lock their funds to work for the amount of x months / years”.

Deposit and / or withdrawal fees were only suggested as an option to be able to do everything if one wanted to - they can be scrubbed from my proposal.

Time lock possibility is my number one wish, to make the whole dhedge project even more professional and make it a real tool for portfloio managers.

Regarding Copy cats: pushing up the price by copying trades maybe works in small coins, but should not be a reason to make trades visible. Them simple possibility of “visible” or “invisible” by klicking the according box would suffice - every portfolio manager should be able to decide if yes or no and then it would be ok.

How can I edit the whole proposal now, so it fits into the official formatting?

@edson how do I format correctly? It seems I cannot change the original post anymore.

It should be the pencil icon underneath your post. If it’s hidden, press the 3 dots icon to see all icons.

Found it, thank you - and I re-formatted the proposal, I hope it is okay now!

@Elementleader Regarding the extended lockup, just wondering, what is the problem that this solves?
I could see an issue maybe with investors going in and out and affecting the pool composition. Have you had this problem?
In traditional hedge funds, the manager needs to exit positions to be able to accommodate investor withdrawals (which may not be possible to happen quickly). Hence there is a waiting period. No such issue here.

Regarding trade visibility: It’s possible to not show the portfolio on the dapp, but it’s still easily seen on the blockchain explorers. Have you seen any copycat pools? (There might be other solutions)

1 Like

Please also provide a Header, like seen in other DFPs.

@ermin
Pls apologize the late reply.

Extended lockup is to protect investors and fund managers from short-term changes of mind of the people (namely invetsors) involved. If investors change their mind e.g. due to short term market volatility, they could drain the portfolio, affecting the pools composition - even if it might have been “agreed” that the investment / portfolio has a time horizon of e.g. one year.

Code can just protect all participants in this case and therefore I think just having the option is a big plus.

Regarding copy cats: yes, in regard of the explorer you are right - for crypto natives it is not a problem, but for the 99% of the rest of the population that step is already advanced usage, preventing the copying.

I know people who think they are smarter than the rest and would enter an invest with small money, just to copy the manager and is know how without rewarding him foir his expertise / work.

I will write a proposal for that issue at another time maybe, the time lock / freeze option should be adressed first.

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@Elementleader thanks for clarifying. I think I can see where you’re coming from.

they could drain the portfolio,

Do you think investors would be happy to be locked in? How long for? DeFi capital moves fast.
What do you think should be the max lockup time?

affecting the pools composition

Yes you’re right. On deposits, it affects the pool’s composition.
On normal withdrawals the composition is unaffected. Eg. if Investor withdraws from a 50% ETH, 50% MATIC pool, the pool remains in the same composition.
However, if the Investor wants to withdraw just a Single Asset, then there is a fee that goes back to the pool.

1 Like

@ermin
Re: Do you think investors would be happy to be locked in?

I think investors should be able to choose - and Managers as well. It is better to have those options, than not having them. I would make a slider starting from 1 day to 365 days or 1 day to 30 days and then in 30 days increments.

On withdrawal: withdrawal should be in the currency the investor funded his investment in.
If he withdraws e.g. 50%, those 50% should be taken from all assets in the pool/portfolio, converted into the currency of his choosing OR into whatever he used to fund the investment and then paid out to him.