PIP 3 - AWP++DeFi

pip: 3

title: AWP++DeFi

author: Scoopy Trooples (@scupytrooples)

discussions-to: PIP 3 - AWP++DeFi

status: Draft

type: PIEs

created: 2020-03-10

Simple Summary

The Ray Dalio AWP is a historically high-performing portfolio that captures much of the gains of broad markets while offering safe hedges, such as gold and bonds in the basket. For only a small increase in risk, the AWP/DeFi basket would substitute much of the bond positions in exchange for interest-earning tokens in the DeFi ecosystem.

The AWP++ basket is an alternative proposed by PieDAO, which incorporates cryptocurrency into the basket to take advantage of the asymmetric upside they present. The main weakness of this portfolio is the heavy allotment of bonds, which are at near-historic low yields and could very well turn negative if central banks are asked to stimulate and prop up weakened economies. The AWP/DeFi basket would follow the AWP++ basket closely, and would consist of the following allotment:
-10% Crypto Basket
-6.75% Commodity, Broad Diversified
-6.75% Commodity, Gold,
-27% Equity, U.S., Large Cap
-10% Bond, U.S., Long-Term
-3.5% Bond, U.S., Long-Term
-25% DAI utilizing the DSR
-10% In a stable coin yield seeker, such as iearn.finance

These numbers are rough, and I may consider removing bonds completely, but remain for now as they are typically the safest hedge.


The motivation behind this is to create a slightly more risk-on basket in comparison to the AWP++. The main risks inherent in this basket are smart contract, regulatory, and or governance risks in the MakerDAO protocol, as well as any contract risk in the yield-seeking protocol. The benefits, however, are that DeFi interest rates are rising precipitously at the same time that bond rates are reaching historic lows. If current economic trends continue or worsen, then it is likely that interest and yield vehicles in the DeFi space will outperform bonds in the future as well.


I like it!

What do you think about replacing the 25% DSR allocation with the Cash++ portfolio?
This way it’s not over exposed to MakerDAO.


I’d like a size-able position to remain in the DSR because it is basically the most risk-free asset there is in all of DeFi. That said, adjusting the allotments and having cash++ take the place of the yield seeker allotment could be a good idea. I was thinking of using the ytokens pooled in curve (which are making an average of 13%+) as well.

1 Like

Apart from the strong US bet, I really like this pie as well. I shared my take and PIP, based on your draft. PIP 4 AWP+DeFI+EM Global

Hey all! Here some food for thoughts about the AWP++ PIE as originally conceived:

AWP ++
Name Ticker Initial Allocation
CRSP US Total Market Index CRSPTM 27.00%
ICE U.S. Treasury 20+ year Bond Index IDCOT20 36.00%
ICE U.S. Treasury 3-7 year Bond Index IDCOT3 13.50%
LBMA Gold price (3pm) GOLD 6.75%
S&P GSCI® Total Return Index SPGCCI 6.75%
Crypto Basket Crypto 10.00%

You can see in the spreadsheet enclosed a backtesting of this AWP++ portfolio from Jan 2019 'til mid March 2020, and a benckmark of its performance vs. the “original” AWP by Ray Dalio.
Furtermore, we did extend backtesting of the above to a scenario with annual rebalance occurred as of Jan 1st 2020. Under these conditions the AWP++ returned 28.38% as of March 15th 2020, despite the overall capitulation!
Total Return - Rebalancing effect
Below a recap of the findings

Portfolio Performance - Yearly rebalanced (Jan 2020)
AWP (Ray Dalio)_Yearly Reb AWP ++_Yearly Reb
Invested Balance $10,000 $10,000
End Balance $11,280 $12,838
Return - March15 2020 12.80% 28.38%
Stdev 5.31% 23.04%
Portfolio Performance - No rebalance
AWP (Ray Dalio)_No Reb AWP ++_No Reb
Invested Balance $10,000 $10,000
End Balance $11,151 $12,170
Return - March15 2020 11.51% 21.70%
Stdev 5.23% 22.97%

Looking forward to getting your thought on this!