Benchmarks and performance attribution for DAO treasuries
Original Publication by adcv (Steakhouse Financial) Sonya Kim (Steakhouse Financial, Programd Capital) aaaaaaaaaa (Dialectic AG) Meph (Dialectic AG) • March 11, 2024
Can we learn from investment performance evaluation in traditional finance to help DAOs make better decisions?
Introduction
The literature and practice for investment performance evaluation in traditional finance is extensive. However, the on-chain world has few proxies that could provide DAOs or on-chain investors with the necessary tools to make quantitative investment allocation decisions. There are many ways of conducting portfolio performance attribution analysis, each with its own tradeoffs. However, it all starts and finishes with the benchmark that a portfolio aims to track. In the absence of a benchmark, no performance attribution is really possible.
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TLDR:
- DAOs have limited scope to do complex things with respect to allocating their treasuries
- We propose simple methods borrowed from traditional portfolio management to help DAOs make decisions more clearly
- The following frameworks can help communities:
1. Set a benchmark
2. Weigh risk to help select between alternatives
3. Do performance attribution analysis to see if active decisions add or detract value
Other references that could be useful: