Benchmarks and performance attribution for DAO treasuries

Can we learn from investment performance evaluation in traditional finance to help DAOs make better decisions?

Introduction

The literature and practice for investment performance evaluation in traditional

finance is extensive. However, the on-chain world has few proxies that could

provide DAOs or on-chain investors with the necessary tools to make quantitative

investment allocation decisions. There are many ways of conducting portfolio

performance attribution analysis, each with its own tradeoffs. However, it all starts

and finishes with the benchmark that a portfolio aims to track. In the absence of a

benchmark, no performance attribution is really possible.

- DAOs have limited scope to do complex things with respect to allocating their treasuries

- We propose simple methods borrowed from traditional portfolio management to help DAOs make decisions more clearly

- The following frameworks can help communities:

1. Set a benchmark

2. Weigh risk to help select between alternatives

3. Do performance attribution analysis to see if active decisions add or detract value

Other references that could be useful:

Spreadsheet with example calculations