Boys Club DAO: Treasury Management & Diversification Policy (V1)

Authors:

• Taylor Dunstan (Grants Program Lead, DAO-Ops Guild Contributor, Treasury Committee) / (Goldfinch Finance)
• Parker Jay-Pachirat (DAO-Ops Guild Lead, Treasury Committee) / (Fintech Collective, DeFi Fund)
• Marine Andraud (Events & Partnerships Guild Contributor, Treasury Committee) / (Lava Network)

Background:

In late August, Boys Club DAO passed the “Treasury Diversification” proposal, put forth by Parker Jay-Pachirat — a proposal calling for the diversification of the Boys Club Treasury, outside of solely holding the Ether asset. Following its approval, a small team organized on a voluntary basis to move the proposal from approval to implementation.

In its first meetings, this team — including Marine, Parker, and Taylor (amongst others) — identified several critical questions inherent to treasury diversification: What are Boys Club’s short-term financial needs and long-term investment goals? How should the treasury be diversified, across assets, strategies, and risk considerations? What is the path for implementation? And who will execute and manage the remaining work?

The team met consistently for several weeks — conducting independent research, consulting with external DAO finance experts, hosting opens calls, and sharing updates to the #treasury-diversification channel — to ultimately converge on the first iteration of Boys Club treasury management & diversification strategy.

Here, we present our first rendition of the (Minimum Viable) Boys Club Treasury Management & Diversification Policy.

While this policy is subject to change (and will remain flexible over time), our work here sets out to establish a strong foundation: laying the groundwork necessary for maintaining healthy and sustainable Treasury Management practices over time. In our work below, we aim to establish a “minimum viable” ethos, principles, and framework for approaching the present and future management & diversification of the BC DAO Treasury.

We’re excited about the formation of this policy as a step in the right direction for establishing robust, sustainable, and longstanding treasury-management practices within Boys Club DAO.

The following work sets forth our guiding “MVP” ethos, principles, and frameworks for managing Boys Club Treasury. It outlines objectives, approved and prohibited assets, marketability, reporting practices, and more.

Boys Club DAO: Treasury Management & Diversification Policy

Overview:

The Boys Club DAO Treasury currently sits at ~150 ETH, or ~$450,000 at the time of raise. All treasury funds to date were raised directly from our community-driven Zaddy NFT sale, backed by the likes of Framework Ventures, Bankless, Blockworks, FWB, Seed Club, DAOHaus, PleasrDAO, FireEyes, Poolsuite, Arkive, and Disco, amongst others.

Given Boys Club’s strong community-first ethos, interest from potential strategic sponsors, and capable and forward-looking contributor team, it is time for Boys Club to take further action with its treasury.

Implementing active treasury management, including diversification and risk management principles, is an important part of creating a sustainable and resilient DAO. This is critical to ensuring Boys Club is best positioned to maintain sustainable operations through volatile market conditions and to execute future initiatives.

Boys Club aims to follow best practices for DAO treasury management and increase financial transparency between the DAO and the wider community. In addition to developing, discussing, and approving treasury-related proposals, Boys Club will soon provide community members with consistent monthly & quarterly financial readouts, such as:

• A 1x/mo readout on DAO financial activity, including cash inflows, cash outflows, and expected expenses.
• A quarterly investment memo, based on the investment guidelines below, including a recap of active treasury diversification strategies, strategy & investment performance, learnings, and recommended adjustments moving forward.

Roles & Responsibilities:

Boys Club Crypto’s [Founding Team or Co-Founders] and the [Treasury Committee] will review Boys Club’s cash flow requirements and determine the amount of liquidity required for immediate working capital (6-month operating expense expectations).

Per the investment guidelines set forth below, immediate working capital will be invested in cash or money market funds (fiat) or in collateral-backed stablecoins (USDC); assets not required for immediate working capital will be invested across DeFi strategies with collateral-backed stablecoins and blue chip cryptocurrencies.

[The Treasury Committee] is responsible for executing the investment strategy and maintaining sufficient working capital, in coordination with the Boys Club multisig signers. The Treasury Committee will be providing both a monthly DAO financial readout and a quarterly investment memo to the rest of the community.

The Treasury Committee will hold an open call to review the investment policy biannually, including investment performance to properly adjust investments according to evolving market conditions & macro context. Boys Club Crypto may decide to outsource a portion of investment activities to a trusted third party (e.g. Registered Investment Advisor) consistent with the guidelines set forth below.

Investment Objectives:

Boys Club Crypto’s primary treasury management objectives are, in order of importance:

1. Operating Expenses: Maintaining 6-months worth of operating expenses in a highly liquid, highly secure stablecoin strategy or in a secure multisig wallet to meet cash flow requirements, such as compensating contributors, executing on-chain transactions, issuing grants, etc.

2. Investment Capital — Additional capital will be capitalized as follows:

• 2a. Stablecoin Reserves: Retaining revenue and bolstering capital reserves to sustain operations or accelerate critical goals, as needed
• 2b. Blue Chip* Cryptocurrency Reserves: Maximizing total return for 18+ month road map
• Blue Chip is defined as mainstream, institution-friendly assets: Bitcoin and Ethereum (source: Fidelity), as of November 2022

Initial Investment Guidelines:

1. Approved assets: the funds will be invested only in cash (USD), money market funds, collateral-backed stablecoins (e.g. USDC), blue chip cryptocurrencies (e.g. BTC, ETH), and Boys Club NFTs (Zaddy).
2. Prohibited investments: algorithmic stablecoins, non-collateralized or -asset-backed DeFi lending, and low-grade crypto assets.
3. DeFi investment strategies:

3a. On-Chain Lending: to keep risk relatively low while still generating passive interest and staking income to cover a portion of DAO expenses, any on-chain lending investments will only be done in approved assets and lent on vetted, relatively liquid (180 days or less lock-up period) collateralized lending protocols with zero history of defaults (e.g. AAVE).

3b. Staking: in order to keep risk relatively low while generating passive interest income, any staking participation will be done on establish PoS networks using blue chip crypto assets in exchange for rewards and generating passive income (e.g. ETH staking on Lido)

Diversification:

The goal of diversification into stablecoins and blue chip cryptocurrencies is to dampen total portfolio volatility and increase the resiliency of Boys Club Crypto during periods of market disruption. Accordingly, one asset should not exceed 30% of the market value of the portfolio. 1–1 Collateral-backed stablecoins are specifically exempted from this diversification restriction.

Marketability/Liquidity/Trading:

Positions in DeFi lending protocols will prioritize liquid lending options. No single position in a DeFi lending protocol will be locked up for more than 3 months or 90 days; at the time of investment, the final maturity of each lending investment will not exceed 6 months or 180 days unless determined by [Treasury Committee] to extend.

Performance Measurement:

The Treasury Committee will meet with the Boys Club Crypto community no less than biannually to review and measure investment performance. Quarterly, the Treasury Management Committee will provide an investment memo that may include statements of transactions and market valuation of portfolio assets on an asset-by-asset portfolio basis, such as:

• Balance sheet, income statement and statement of cash flow summaries
• Interest or APY accrual reporting
• Unrealized and realized gain/loss summaries
• Portfolio total return performance

Transparency and Verification:

Assets are to be held on a Gnosis Safe multisig or in a segregated third-party custodian account with a separate agreement executed between the custodian and Boys Club Crypto.

By way of conclusion, we’re excited about the formation of this policy as a step in the right direction for establishing robust, sustainable, and longstanding treasury-management practices within Boys Club DAO. Our work above aims to lay a strong foundation for the future of the BC Treasury — providing the necessary groundwork to establish a “minimum viable” ethos, principles, and framework for approaching and managing the Boys Club Treasury, at least to start. We intend for this policy to be flexible and subject to change over time, shaped in alignment with the ever-changing goals and needs of our community.

Questions? Concerns? Comments? Hit us up. As always, we’d love to hear your feedback.

XOXO,

— Boys Club

About the Authors / Contact Us:

• Taylor Dunstan (Grants Lead, DAO-Ops Guild Contributor, Treasury Committee) / (Goldfinch Finance)
• Parker Jay-Pachirat (DAO-Ops Guild Lead, Treasury Committee) / (Fintech Collective, DeFi Fund)
• Marine Andraud (Events & Partnerships Guild Contributor, Treasury Committee) / (Lava Network)