Infrastructure

What can go wrong, and how each is mitigated.

Every product carries risk. RWY is designed to mitigate risk across the categories that matter most for a hedged basket of tokenized assets.

The risk register

Three risk domains: the underlying assets, the on chain infrastructure, and the hedge program. Each category is named with its mitigation.

1. Basis risk

The publicly traded counterpart will not perfectly track the private fund. In normal years, divergence is small. In stress, divergence narrows because correlations move toward one. Each pairing is selected for high historical correlation under stress and continuously monitored. Pairings whose stress correlation degrades trigger a hedge instrument review.

2. Manager risk

A single private fund manager could underperform or fail. Position sizing limits exposure to any one manager. Rules based exit signals trigger reduction or removal. The basket is structurally diversified across managers, vintages, and strategies.

3. Custody risk

Underlying assets are held by qualified custodians under independent administration. Smart contract risk is mitigated through audits and multi oracle NAV verification. The issuer does not also custody the assets.

4. Liquidity risk

The basket maintains a cash sleeve and a daily liquid public sleeve to fund routine redemptions. The private sleeve is illiquid by design and is never used to fund redemptions. Exits beyond what the liquid sleeve can absorb pay a redemption fee that compensates remaining holders.

5. Oracle risk

NAV is verified through multiple independent oracles. NAV consumers (the lending pool, the redemption queue, the token itself) pause if the oracles diverge above threshold.

6. Tail event risk

The tail overlay provides convex payoffs in systemic stress. Per position hedges absorb the average case. The overlay catches the tail. A 2008 scale event would draw against the overlay before any position level hedge breaches its sized strike.

7. Hedge counterparty risk

Hedge instruments are executed through qualified counterparties. Counterparty exposure is limited per position. Where possible, hedges are diversified across counterparties to avoid single point failure.

8. Regulatory risk

The basket is structured under Reg D 506(c) and Reg S. The token operates within the tokenization platform's regulatory perimeter. Verified holders only. Changes in regulatory treatment of tokenized funds, private fund interests, or on chain lending pools could affect the structure.