Interest Rate Risk

The Fund’s investments in U.S. T-Bills will change in value based on changes in interest rates. If interest rates rise, the fund’s portfolio value and correspondingly the TBILL token price may decline – and vice versa.
Changes in the Mark-to-Market value of the Fund’s U.S. T-Bills portfolio will not impact the cash income of the portfolio, as U.S. T-Bills are zero-coupon bonds. Also known as accrual bonds, zero-coupon bonds are purchased at a discount to their par value, allowing the portfolio to earn the interest income as a profit when the bond redeems at par at maturity. In theory, if the interest rate curve remains constant, then the Fund’s TBILL Vault portfolio should increase in value every day, as the price of U.S. T-Bills increases daily and converges to par at maturity.
Bonds with longer maturities generally are subject to higher interest rate risk and greater fluctuations in value. Therefore, the interest rate risk of a portfolio of U.S. T-Bills can be mitigated by limiting the maximum weighted-average maturity and duration to less than 6 months. Given a shorter weighted-average maturity and duration, the U.S. T-Bills portfolio could track prevailing interest rates more closely as U.S. T-Bills mature and get reinvested over a shorter period of time. The Fund may experience a heightened level of interest rate risk due to changes in central bank monetary policy and the unpredictability of such changes.

Market Liquidity Risk

During periods of heightened volatility in the U.S. T-Bills market, Investors may face market liquidity risk if the Fund is forced to sell its U.S. T-Bills holdings below the mark-to-market price to service large redemptions. To mitigate the impact of interest rate-induced price volatility, the Fund will diversify its holdings across different maturities. In addition, the Fund’s target weighted-average maturity of less than6 months reduces the sensitivity of its portfolio to any large redemption of U.S. T-Bills before they mature at par.

U.S. Sovereign Credit Risk

The Fund’s investments are subject to the risk that issuers will fail to make payments when due or default completely. The value of the Fund’s investments may also be adversely impacted if any of the issuers are subject to an actual or perceived deterioration in credit quality. Credit spreads can widen, which may reduce the market values of the Fund’s securities.
U.S. T-Bills are securities issued by the U.S. Department of the Treasury and are backed by the “full faith and credit” of the U.S. Federal Government. Therefore, should the credit risk of the U.S. government rise, then so will the volatility of the Fund’s portfolio value and, by extension, the TBILL token’s price.
The U.S. is highly-rated by all major credit rating agencies which makes it one of the safest assets in the world. As a result, the interest rate on three-month U.S. T-Bills is often taken as the risk-free rate by U.S. investors.
Rating Agency
Fitch Ratings*
Standard & Poor's
*As of 1 August 2023
**As of 10 November 2023

Transactions Risk

The Fund might face losses, and its ability to convert securities into cash could be hindered when selling assets to fulfil redemption requests. The risk of incurring losses becomes greater if the redemption requests are exceptionally large or frequent or if they happen during periods of market turbulence or falling prices. Similarly, substantial subscriptions made into the Fund can have a negative impact on its performance, especially if there are delays in deploying the new capital, leading to a need to maintain a larger cash reserve than typically required.

General Market Risk

The increasing interconnectedness of economies and global financial markets heightens the likelihood that events or conditions in one country or region can have adverse effects on markets or issuers in other parts of the world. Securities held in the Fund's portfolio may perform poorly compared to those in general financial markets, specific financial sectors, or other asset classes due to various factors. These factors include inflation or expectations of it, deflation or expectations of it, interest rates, global demand for specific products or resources, market instability, financial system instability, debt crises and downgrades, embargoes, tariffs, sanctions, and other trade barriers, regulatory events, government trade or market control programs, and geopolitical events. Moreover, global events such as war, terrorism, environmental disasters, natural disasters, political instability in countries, and infectious disease epidemics or pandemics can negatively impact the value of the Fund's investments.

Smart Contract Risk

Smart contracts are inherently a new form of financial settlement technology, which makes their code base vulnerable to hacks and exploits. While these risks exist, the TBILL Vault smart contract is developed on the back of established code standards that have been battle-tested and widely adopted.
For instance, the main Vault smart contract is adapted from the EIP-4626 Tokenized Vaults standard – the industry standard for Ethereum-based vaults. The EIP-4626 standard includes an extensive list of key security considerations, which have been reviewed and adhered to by the OpenEden team during the development of the Vault smart contract.
Apart from maintaining good smart contract development and security practices, the TBILL Vault smart contract has been formally audited by Verichains for any potential security flaws. The following are the smart contract audit reports for the TBILL Vault smart contract:
While every effort has been made to ensure that the TBILL Vault smart contract abides by the highest standards of security at the time of deployment, there is no guarantee that new attack vectors will not arise in the future, as smart contract technology is continuously evolving. Therefore, the OpenEden team will endeavour to be in compliance with the most updated security practices, as well as keep abreast of new security exploits. Furthermore, liquidity reserves of the Fund are held off-chain as USD fiat instead of being held as USDC on-chain in the TBILL Vault thus mitigating the impact of any smart contract breaches.