Summary

DeFi startup, Hedget, is launching a new product to help traders hedge against Uniswap impermanent loss.
The product will use a combination of options and futures contracts to help traders protect their profits.
Hedget is aiming to provide a more efficient and cost-effective way to hedge against Uniswap impermanent loss.

MEV Capital, a DeFi-focused institutional investment manager, is introducing a new product to protect investors from impermanent loss on Uniswap yields. According to a source familiar with the matter and marketing materials obtained by Blockworks, the product is being offered to limited partners via separately managed accounts (SMAs).

The product works by providing downside protection through exotic, short-dated crypto options, while generating returns on DeFi yields via Uni v3. MEV has tapped Singapore-headquartered OrBit Markets, which specializes in sector derivatives and structured products, as a counterparty, the source said.

MEV’s Chief Investment Officer Laurent Bourquin, a veteran of French bank Societe General’s investment banking division, said the product is designed to provide a complete hedge against impermanent loss. “It’s not a full cover,” he said.

MEV has an additional, undisclosed counterparty, the source said, who is an established commodities market maker with growing digital assets interest.

The product works by locking down initial returns from yield generated from capturing “organic trading volume” on the DEX, according to MEV’s investor documents. Then, options are deployed to provide downside protection against impermanent loss. The options are settled over the counter, and capital is dispersed accordingly.

MEV has been designing DeFi plays since the summer of 2020, when it first started allocating capital. The firm’s flagship fund focuses on stablecoin yields, and the operation in May of last year introduced an Ethereum strategy.

MEV is betting that its product will help investors capitalize on dislocations between on-chain assets and options exercised on them. “What we saw was unique: to be a mercenary in DeFi now,” said MEV’s Chief Operating Officer Gytis Trilikauskis.

The product is being offered to limited partners via separately managed accounts (SMAs), which provide instantaneous liquidity measures. The setup has been favored by both crypto native limited and general partners, as well as their Wall Street counterparts.

MEV is hoping that its product will help investors capitalize on the opportunities in the “short-to-medium-term” in terms of cashing in on dislocations as off-chain options “become more competitively priced.”