Author: @adapt3r
Summary:
Adapt3r Digital seeks to help streamline the fund launch process for future Portfolio Managers coming to TrueFi by creating a comprehensive set of templated fund formation documents built specifically for RWA issuers on TrueFi.
Introduction:
We are Adapt3r, the manager of the Adapt3r Short-Term U.S. Treasury Bill Fund
(“ADAPT I LP” or “tfBILL”). We have a long-standing relationship with TrueFi DAO and key contributors (specifically Wallfacer Labs and Archblock). Our mission since inception has been expanding access to compliant, on-chain products while lowering the cost of capital for traditional financial institutions and emerging issuers to launch products on TrueFi’s protocol infrastructure.
Our mission began in mid-2022 when we began working with the DAO, Wallfacer, and Archblock to bring community bank loan participation on-chain. We later pivoted to bringing US Treasury Bill yields to TrueFi after the previous manager with whom Archblock was working with (a large, well-resourced fund) decided to forgo their efforts due to the challenges we outline below. We felt that with the treasury yield trajectory at the time and competing protocols beginning to foray in treasury bill offerings, it was imperative that TrueFi have a competing product, and thus our journey to launch ADAPT I LP began.
The experience we’ve gained from the past two years working together with the DAO, Wallfacer, and Archblock has taught us invaluable operational and logistical lessons about the specific challenges facing fund managers looking to launch new funds on TrueFi’s infrastructure.
After spending over $150,000 in legal fees and 6+ months of intensive discourse with our retained counsel, we’re proud to finally be launching tfBILL on TrueFi and couldn’t be more excited to help revitalize the protocol’s ecosystem. Our biggest takeaway has been that launching and running a globally compliant fund on decentralized infrastructure like TrueFi is hard and expensive (as detailed below) and presents a number of unique regulatory, counterparty, and legal structuring challenges. In setting up ADAPT I LP, Adapt3r’s new US Treasury Fund on TrueFi, we’ve experienced firsthand just how deterring these challenges can be for prospective managers - no matter the size and sophistication. This is a hidden existential risk to all lending marketplaces, not just TrueFi. While a challenge, we believe there is an opportunity to create a strong competitive moat in attracting the strongest managers as fast as possible with as little token dilution as possible – a recipe to win in this space.
If the DAO wishes to attract the best managers and products in the future, we believe it must provide robust support to these managers, not only through its best-in-class technology infrastructure, but also by providing the kind of comprehensive operational and fund formation support that a traditional fund platform would offer. At the heart of this operational support is the legal framework required to compliantly launch funds on TrueFi.
Proposal:
We request a total of up to $125,000 USDC from the TrueFi treasury to Adapt3r Digital for creating a comprehensive legal structure template for TrueFi’s managers. We believe that, by offering these templated documents and structuring guidelines, it could save $50-80k and 3-4 months of legal work for every new manager coming to TrueFi.
Adapt3r will continue to work with industry-leading law firms Nelson Mullins and Campbells, the firms we have worked closely with over the past year on the successful structuring and launch of ADAPT I LP, on this templating work. Adapt3r will also work closely with Archblock and the Wallfacer team. This proposal outlines the specific documents we propose that would streamline and secure TrueFi’s unique operations.
Given our strategically aligned interests with the DAO, we are happy to accept TRU token as payment, but given market conditions we would need a larger allocation than would be the case in USDC due to recent and ongoing market volatility (e.g. approximately 26% in price movement last week alone). For this reason, we would request a TRU-denominated total of 4,000,000 TRU, and we intend to both immediately return any TRU in excess of $150,000 upon the vote closing, in addition to returning any TRU not used to pay for templatizing the docs.
Motivation:
Enhancing investor confidence, ensuring compliance, and facilitating smoother onboarding for managers within TrueFi’s ecosystem can be achieved by templating essential legal documents, subsidizing much of the upfront cost and time that new managers would otherwise have to spend when launching new funds on TrueFi. The inspiration for this approach comes from similar proposals at DAOs like Goldfinch, as referenced in GIP-45, Centrifuge’s partnership with Aave, as well as our own experience setting up tfBILL. By open-sourcing and templating our fund structure and docs, we believe we can save new managers on TrueFi considerable time and expense, greatly enhancing unit economics and thus the attractiveness of the platform. This templated fund structure and the accompanying legal documents will help address key challenges faced by managers coming to TrueFi.
Specification & Requirements:
Adapt3r will provide the following:
| Document Name | Description | Purpose | Est. Time (Saved) | Est. Expense (Value) |
|---|---|---|---|---|
| Limited Partnership Agreement | Legal agreement between the fund manager and limited partners | Defines the roles, responsibilities, and rights of the parties involved | 30-60 days | $$$ |
| Private Placement Memorandum (PPM) | Detailed disclosure document provided to potential investors | Outlines investment strategies, risks, fees, and other relevant information | 45-75 days | $$$ |
| Subscription Agreement | Contract between the investor and the fund | Confirms the investor’s commitment to invest and specifies terms | 10-20 days | $$ |
| Investment Management Agreement | Contract between the fund and investment manager | Outlines the manager’s duties, compensation, and performance benchmarks | 20-40 days | $$$ |
| Guide on Entity Domicile, Formation and Registration | Comprehensive outline of how all documents come together into a compliant legal structure. | Provide an easily understandable guide on recommended compliant structures and best practices | 60-90 days | $$ - $$$ |
| Outsourced Vendor List with Contact Information | Provide leading blockchain-friendly vendors/service providers including law firms, brokerage accounts, custodians, data providers, fund auditors, and more | Streamline sourcing of vendors/service providers and save significant time/cost involved in sourcing and onboarding | 60-90 days | $$ |
Additionally, the Adapt3r team will make itself readily available to new prospective managers and the TrueFi community at large to help answer any ongoing questions, clarifications, or general advice regarding launching new funds on the protocol.
Cost: The total cost for these services is capped at 4,000,000 TRU. Any unused budget will be returned to the TrueFi treasury.
Reporting Expectations:
We will be creating a Telegram group, that anyone can join and get direct access to members of the Adapt3r team. More details on this to come.
Benefits:
- Clarity and Transparency: Clear legal pathways for all participants.
- Investor Confidence: Professionally drafted documents ensure investor understanding.
- Regulatory Guidance: The informal guide assists in compliance without being overly formal or expensive.
- Efficiency: Streamlining various processes for current and future scalability.
Next steps:
We plan to move to a Tally vote on 10/9/23.
Conclusion:
This proposal offers a comprehensive and cost-effective approach, aligning with TrueFi’s debut of Asset Vaults. It is an essential step towards growth and stability, leveraging Nelson Mullins’ expertise across every new manager that onboards going forward.