Strategy
Margin and borrowing. Two facilities, mutually exclusive.
Margin is leverage applied to the positions inside the basket. Borrowing is a USDC line drawn from an on chain pool against the token itself. They are different products with different mechanics and different counterparties. A position uses one or the other, never both.
Background
Stacking external borrowing on top of internal leverage compounds losses in stress and makes liquidations cascade. RWY treats the two as separate products with separate counterparties, and the protocol gates the borrow facility to the unleveraged share class so the stack cannot form.
Margin. Leverage inside the basket.
Applied at the wrapper level by the allocator, not by the holder. Holders buy the unleveraged or leveraged share class. Each leg uses its own venue and methodology.
- Public stocks. Alpaca margin under Reg T. House maintenance set tighter than the regulatory minimum.
- Private fund tokens. Ravariant Labs in house methodology. Per token advance rate priced from underlying NAV, issuer liquidity sleeve, per position hedge cover, and historical proxy correlation under stress. Refreshes as hedge and proxy data change. More conservative than a flat haircut.
Borrowing. USDC line against the token.
On chain USDC pool lends against RWY at a per asset weighted advance rate, priced from the same Ravariant Labs methodology applied to the basket's weighted holdings. SBLOC equivalent: cash without redemption, position stays open, distributions keep accruing.
Available only against the unleveraged share class. A leveraged share class already runs at the basket's internal margin limit; lending more on top would stack leverage outside the wrapper on top of leverage inside it. That is the cascade the design avoids.
How the line works
Deposit RWY, draw USDC up to the advance rate. Interest accrues in USDC against the borrowed balance, set by pool utilization. A maintenance threshold triggers top up or partial repayment if NAV falls. Liquidations hit the basket's liquid sleeve at prevailing NAV, never the private sleeve. Per asset weighted advance rate updates as the basket rebalances.