Where yield comes from
A vault earns a result from the positions it holds. Depending on its strategy, this can include interest from lending, changes in the redemption value of yield-bearing assets, or changes in token value. Costs and losses reduce that result.
The vault does not create income simply because you deposited USDC. Income depends on the underlying positions and their ability to perform and return value.
From strategy result to your result
The vault recognises a net result: gains after relevant execution costs and losses. Senior and Junior receive different portions of a positive result. Negative results are absorbed Junior first.
Your return depends on your tranche, when you entered, the price at which you received shares, and the price at which those shares are later funded for withdrawal. A strategy’s gross rate is not automatically your net rate.
What the displayed rate means
APY expresses a return on an annual basis, including a compounding assumption. APR usually expresses an annual rate without compounding. Sources can use different assumptions, so compare both the period and what is included.
Expected rates use available source rates and the tranche split. A rate based on target allocations describes an intended portfolio. Actual holdings can differ, including a large idle cash balance. A label such as planned or expected is meaningful.
A current market rate is a snapshot, not the return earned since launch. Historical booked gains describe past results, not a guarantee of future performance. A short positive period annualised into APY can look large without being repeatable.
Why the rate changes
- Borrowing demand and available liquidity change underlying lending rates.
- The vault’s actual allocations change.
- Idle cash can dilute the yield of invested positions.
- Coverage, Junior's share of the vault, changes the premium between Senior and Junior.
- Fees, trading costs and adverse events change the net result.
How you receive the result
Booked results change the value backing your shares. Your share count usually stays the same while you hold them. For example, 1,000 shares at 1.02 USDC per share represent about 1,020 USDC of value before the applicable exit pricing and costs.
This is an illustrative valuation, not a promise that 1,020 USDC is immediately withdrawable. Share pricing and liquidity explain the difference.
For formulas and recovery priorities, read yield allocation. Check fees before comparing the displayed rate with another product.