# RWA Risk

Ledgity’s yield is primarily generated through Real-World Assets (RWA) managed by the SARR Fund, a regulated investment vehicle. The objective is to produce stable, recurring cash-flow–based returns while minimizing capital and liquidity risk.

The strategy is built on **short-duration, high-transparency credit exposure**, without leverage or speculative instruments.

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#### Asset Selection

The RWA portfolio only includes assets that meet the following criteria:

* Short maturity and predictable repayment schedules
* Clear and auditable cash flows
* Verified and financially credible counterparties
* Senior or secured position in the capital stack
* Fully traceable through regulated intermediaries

If an asset category introduces long-term lockups, mark-to-market uncertainty, or opaque valuation, it is excluded.

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#### Explicitly Excluded RWA Categories

To avoid liquidity mismatch and valuation risk, Ledgity does **not** invest in:

* Real estate development or renovation loans
* Long-duration bonds with multi-year duration
* Structured or tranche-layered credit products
* Synthetic or derivative-based yield
* Any collateral dependent on speculative market conditions

This approach eliminates the failure patterns observed in many RWA protocols (frozen redemptions, repayment gaps, pricing opacity).

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#### Portfolio Construction

* Diversified across multiple issuers
* Short-duration repayment cycles to support ongoing withdrawals
* No leverage and no rehypothecation
* Yield is generated by contractual repayment, not token incentives

The priority is **capital stability**, not maximizing APY.

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#### Counterparty Monitoring

Each portfolio exposure undergoes:

* Business and financial due diligence
* Creditworthiness and repayment analysis
* Legal enforceability review
* Continuous monitoring during the entire lending period

Risk scoring is updated as cash flows occur, not only at onboarding.

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#### Liquidity Alignment

The RWA portfolio is structured to align **repayment frequency** with **on-chain withdrawal expectations**.\
Short-duration cycles ensure capital continuously returns to the vaults.

This prevents the liquidity mismatch that occurs when long-term assets are used in products with daily withdrawals.

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#### Reporting & Transparency

The SARR Fund provides periodic reporting and reconciliation, allowing the protocol to align:

* RWA yield performance
* Vault PPS (Price-Per-Share) growth
* Liquidity planning for withdrawals

Yield observed on-chain is directly supported by real, documented economic activity.