DeFi index Funds - Dec - Feb Review
A data-driven review of the four main DeFi funds live on Ethereum over three months from the 01st November 2020 to 31st January 2021.
I’ve been tracking the returns of 4 DeFi funds and their components since the 11th of October, This is mainly for my own interest to see how the different ones have performed over time. There have been a few changes in the last month, so I’ll start with those:
sDeFI from synthetics
For the first time since mid-October, the Synthetix DAO adjusted the weights within sDeFi (Figures 1 and 2)
DeFi+L from PieDAO
At the end of February DeFi+L migrated from a balancer pool to a PieVault (AMM structure to market cap). In addition, the underlying tokens were switched from native to income generating versions (crLINK, aYFI, cUNI etc). This captures some income for holders (more than pays for the annual fees). However, there are some downsides (Reduced liquidity for redemptions/arbitrage, looks more like a security) which may influence some potential buyers / use cases - many individuals won’t care and will welcome the income.
$DPI at the start of February MTA (MStable) was added to DPI with a low weight.
Over the last three months UNI has been the real star of DeFi growing by 500% in 3 months. The other components were more subdues with YFI only showing 20% gains.
Overall the $DPI fund recorded a 260% gain over the 3 months.
Is a synthetic fund created by Synthetix. As a synthetic product, it doesn’t hold any of the tracked tokens as collateral. The fund is based on the constant weights of the selected tokens as decided by Synthetix governance. Note that while sushi has gained an impressive 950% over the last three months, it has only been part of the fund since the 16th of February. Overall sDeFi returned over 230% growth over the 3 months.
$DeFi+L, DeFi+S, and DeFi++
In October 2020, PieDAO launched two funds targeting the DeFi sector. These are both 100% collateralised constant weight indices based on smart Balancer pools. On the 25th of February DeFi+L switched to a PieVault (Market cap structure)
Figure 7 presents the performance of $DeFi+L and the underlying components. As with the other two large-cap funds, SDeFI+L shows impressive growth, returning 200% gains in 3 months.
Figure 8 presents the performance of $DeFi+S and the underlying components. The smaller MCap tokens had a lower performance than the larger ones and this is reflected in the flat performance for this fund. All the smaller projects were positive over the period with PNT and REN providing the most growth. $DeFi+S achieved 160% growth over the last three months.
DeFi++is a new product from PieDao it is built on top of +L and +S using a Balancer pool with a split of 70 to 30 between the two. It was launched on the 6th November 2020. I‘m assuming a straight arithmetic split for performance.
Comparison between funds
Detailed comparisons between these funds could be considered an exercise in futility. They all work and capture the average price performance of the undying tokens. Any differences between them are due to the index structure and the weights of the components.
Figure 9 presents the overall performance of all four funds and $ETH and $BTC over the 3 months. Unsurprisingly the three funds focused on the larger cap tokens produced similar profiles with between 350 and 420% growth.
Over the 3 month time period, all four funds outperformed both Ethereum and Bitcoin at 150%.
Table 1 presents a summary of the individual components performance and their current weights within the five index funds. Overall the tracked DeFi performance has been dominated by the larger projects with UNI, AAVE and SNX leading. As $DPI is market cap weighed it has benefited from being more exposed to these tokens. (Note Sushi has only been included in sDeFi for a few days)
All five funds attempt to give the owner exposure to the average performance of the DeFi sector. All succeed with performance within the range of the underlying assets combined with protection against the downside of individual performance (as is expected for a diversified fund).
Disclosure and Disclaimer
I’m a long term investor in crypto currencies including DeFi. I am an active member of the INDEXcoop which manages the $DPI fund.
This is not financial advice, all investments are risky, crypto investments are more risky than most. Do your own research. Do not invest more than you can afford to lose.