Excellion Finance and Arkis Achieve 32.6% APR in 91 Days with DeFi Strategy

In the ever-changing landscape of decentralized finance (DeFi), achieving consistent and predictable yields remains a significant challenge for investors. Traditional DeFi strategies, such as liquidity provision and lending, often fluctuate with market conditions and lack the predictability that many investors seek. However, a recent collaboration between Excellion Finance, a DeFi hedge fund, and Arkis, a private credit platform, has demonstrated a novel approach to generating stable yields in this volatile environment.

According to a recently published report, the partnership between Excellion Finance and Arkis implemented an investment strategy that delivered a net annual percentage rate (APR) of 32.6% over a 91-day period. This strategy leveraged Principal Tokens (PTs) and private credit to achieve a fixed yield, providing a more stable investment option compared to traditional DeFi strategies.

The strategy involved several key components. Principal Tokens (PTs) are created through a process called yield tokenization, which separates a yield-bearing asset into two distinct components: the Principal Token (PT) and the Yield Token (YT). PTs are redeemable 1:1 for the underlying asset at maturity and typically trade at a discount, allowing holders to access a predefined, fixed yield if held until maturity. For example, a PT offering a 10% APR over a one-year term would allow the holder to redeem the token at par value and realize the yield implied by the initial purchase discount.

Arkis, on the other hand, is a digital asset prime brokerage credit protocol that facilitates interactions between institutional borrowers and lenders in a zero-trust environment. Arkis provides fixed-term credits to finance DeFi strategies with up to 5x leverage and accepts a wide range of collaterals. By utilizing private credits from Arkis, Excellion was able to significantly boost income for investors and realize complex DeFi strategies with attractive yield opportunities.

The strategy was executed through a series of steps. Excellion identified eUSDe Principal Tokens (PTs) as an opportunity, which offered an implied fixed APR typically ranging between 7% and 10%. Credit was structured via Arkis with terms that included up to 3x leverage and a 12% fixed borrowing rate. PTs were used as collateral within a smart contract framework operating on whitelisted protocols. Borrowed capital was then used to acquire additional eUSDe PTs, increasing exposure to the fixed-yield position. The position was held over a 91-day term, during which performance and risk metrics were continuously monitored. At maturity, PTs were redeemed at par, the credit facility was repaid, and net returns were calculated based on the spread between the fixed yield earned and the borrowing costs.

The strategy, based on modeled assumptions, aimed to achieve a net annualized return (APR) of approximately 30.6% over a 91-day term. Modeled outcomes indicated relatively low volatility during the holding period. The return profile, if realized as projected, would compare favorably with yields reported in certain DeFi and fixed-income strategies over similar timeframes.

Risk management considerations included a fixed borrow rate, which eliminated exposure to interest rate volatility and the risk of position liquidation. Asset-backed collateral ensured that yield-generating assets (PT tokens) were used as collateral. The maturity lock maintained yield predictability by holding PT tokens until maturity, in accordance with the terms of the fixed-rate structure. Counterparty risk was mitigated through Arkis' zero-trust institutional environment, minimizing credit risk. Credit was opened via a special smart-contract where borrowers could only trade with whitelisted tokens on whitelisted protocols.

The collaboration between Excellion Finance and Arkis represents an effort to explore structured strategies that apply fixed-yield instruments and private credit mechanisms within a DeFi context. The model is designed to enhance capital deployment efficiency and seek yield stability, potentially aligning more closely with fixed-income characteristics than traditional variable-rate DeFi strategies.

Excellion Finance specializes in market-neutral crypto investment strategies designed to deliver consistent yield while minimizing risk. Their approach is built on institutional-grade security, robust risk management, and advanced trading strategies, ensuring stable and sustainable returns regardless of market conditions. The collaboration with Arkis highlights their commitment to innovation and their ability to adapt to the evolving DeFi landscape.