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Documentation Index

Fetch the complete documentation index at: https://kamino.com/docs/llms.txt

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This section sets out the risks associated with depositing into the Institutional Yield vault.

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Unsecured loan to the SPV

The depositor’s legal relationship is with the SPV. The Loan Agreement characterizes this loan as unsecured. The depositor does not have a direct legal claim on the collateral held at qualified custodians — that collateral secures the loans between the lending operation and its institutional borrowers, one level below the depositor. The depositor’s economic exposure is to overcollateralized lending. The structure ensures that there will always be sufficient collateral to cover the outstanding debt under normal market conditions. The loan is unsecured in the legal sense because the depositor’s claim is on the SPV’s available assets — which are primarily composed of those overcollateralized lending positions.

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Lending operation risk

The lending operation is a regulated entity, but regulation does not eliminate risk. Possible failure modes include:
  • Operational failure — errors in loan origination, collateral monitoring, or margin call execution
  • Failure to liquidate — if a borrower defaults and the lending operation does not act promptly, collateral may decline further before liquidation occurs
  • Regulatory action — the FMA could suspend or revoke the lending operator’s license, potentially freezing operations

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Liquidity risk

Capital deployed into active loans cannot be retrieved prior to loan maturity. There is no early redemption mechanism. While the vault maintains an instant liquidity buffer, withdrawals exceeding that buffer enter a FIFO queue and are resolved only as underlying loans mature and principal is returned to the vault.

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Not a deposit or insured product

Participation in the Institutional Yield vault does not constitute a bank deposit and is not covered by any government-backed deposit protection or insurance scheme. The yield generated by the vault is not guaranteed, and the value of your deposit may go down as well as up.

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Custodian risk

Collateral protection relies on the integrity and proper functioning of qualified custodians. While custodied assets are bankruptcy remote, the process of recovering assets from an insolvent custodian could take time.