Discretionary Perp Vaults

1. Venue & Protocol Risk

• Smart contract / code risk on the respective perp DEXs

• Matching engine or risk engine failures

• Governance or operational incidents at the venue

• Cross-venue incident risk (issues at any one venue can impact the vault’s performance)

2. Market Risk

• Extreme price moves can lead to LP drawdowns if trader PnL is strongly positive against the pool

• Changes in market structure can alter the long-term PnL profile of LPs

• Correlated risk across venues during broad risk-off regimes

3. Discretionary / Strategy Risk

• The curator’s allocation choices may underperform a single-venue approach in certain regimes

• Rotation timing risk (changing allocations too early/late)

• Divergent venue mechanics (each LP product can respond differently to similar market conditions)

• Risk framework limits may constrain the strategy during rapidly changing markets

4. Liquidity & Withdrawal

• Withdrawal speed and sizing depend on HLP/LLP/eLP/DLP liquidity and any venue-imposed constraints (e.g., cooldowns, queues)

• In stressed conditions, exiting a large position may take longer or be more costly

• Multi-venue allocation may require staged unwinds across venues before final settlement

5. Borrowing & Collateral Risk (Where Applicable)

• A sharp decline in the collateral asset can reduce collateral health

• Rising USDC borrow rates can reduce or negate net yield

• The vault may need to deleverage during adverse conditions, which can impact returns

• There is potential liquidation risk if market moves are extreme and rapid

6. Operational Risk

• Dependencies on off-chain monitoring, risk dashboards, and allocation systems

• Execution risk during rebalancing, particularly in high-volatility periods

• Reliance on venue APIs, indexing, or other supporting infrastructure used to manage exposures