DeFi index Funds - Nov - Jan 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.

Introduction

This is a landmark review. We finally have more than 3 months data for the 4 funds I’m looking at. Since November 2020 I’ve been doing these reviews with a common start data of the 11th October, and complaining that it’s really too too short to get a feel for things. So now we have 3 months continuous data!

As a DeFi user and investor, I’m also extremely happy with the performance of the entire sector.

$DPI

$DPI was launched on the 14th September and is a 100% collateralised, market cap, index following 10 DeFi governance tokens (Figure 1).

Since the DeFi doldrums in early November there was steady growth through to the end of December with AAVE and YFI leading the pack and $DPI producing 100% growth in 2 months. In January things kicked up a gear with LRC, AAVE, SNX and finally UNI showing fantastic performance. KNC was the only real laggard with 70% growth in 3 months, with BAL, MKR, YFI, LRC and COMP producing between 200 and 270% growth.

Over all the $DPI fund recorded a 400% gain over the 3 months.

sDeFi 

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 constant weights of the selected tokens as decided by Synthetix governance. Figure 2 shows the performance of sDeFi compared to it’s current components. Over the 3 months sDeFi returned over 370% 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.

Figure 3 presents the performance of $DeFi+L and the underlying components. As with the other two large cap funds, SDeFI+L shows impressive growth, returning 350% gains in 3 months.

Figure 4 presents the performance of $DeFi+S and the underlying components. The smaller MCap tokens had lower performance the the larger ones and this is reflected in the flat performance for this fund. All the smaller projects were positive over the period with LRC and BAL providing most growth.

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 (This is technically incorrect due to the rebalanceing within the balancer pool, but I think it’s good enough for now).

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 is due to the index structure and the weights of the components.

Figure 5 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.

Ethereum lagged behind the large cap DeFi at ~+250% and BTC followed at ~+150%.

The smaller DeFi in DeFi+S returned a comparability weak +120% over the 3 months. (+120% growth in 3 months is still pretty damned impressive).

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 AAV, UNI, CRV and SNX leading. As $DPI is market cap weighed it has benefited from being more exposed to these tokens.

Final Thoughts

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.

@over-analyser on twitter