> For the complete documentation index, see [llms.txt](https://docs.sierra.money/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.sierra.money/sierra/reserve-strategy.md).

# Reserve Strategy

SIERRA is the flagship LVT issued by the Sierra Protocol. SIERRA's [Reserve Management Strategy](/building-with-sierra/reserve-management-strategy.md) is designed to allocate to institutional-grade RWAs and DeFi strategies, as well as using overcollateralized lending on Morpho and AAVE to generate competitive risk-adjusted returns while maximizing liquidity that supports expedited redemption capabilities.

### Guiding Principles

The four guiding principles applied to SIERRA's Reserve Management Strategy are:

* **Maintaining Liquidity:** Always holding 1-5% of reserves in a liquid buffer of USDC to support immediate redemptions, alongside deploying reserves into short-duration, highly liquid instruments such as commercial paper and AAA-rated CLOs
* **Risk Diversification:** Reserves are spread across yield sources, spanning institutional-grade RWAs and blue-chip DeFi
* **Duration & Maturity Management:** Reserves are deployed into short-duration, liquid assets to match to the immediate redemption capacity
* **Yield Enhancement:** Achieved through allocating to basis, lending, commercial paper and AAA-rated CLOs

### Whitelisted Yield Sources

<table><thead><tr><th width="125.25390625">Yield Source</th><th width="111.41015625">Vault Name</th><th width="390.16015625">Description</th><th>Maximum Portfolio Allocation</th></tr></thead><tbody><tr><td>Prudential AAA-Rated CLOs</td><td>xUSCLO</td><td>Backed by AAA-Rated Collateralized Loan Obligations through Prudential's PAAA ETF</td><td>       35%</td></tr><tr><td>Investment-Grade Commercial Paper</td><td>xIGCP</td><td>Backed by a portfolio of commercial paper issued by Investment-Grade corporate entities with 30-60 day maturity, managed by Five Sigma Finance</td><td>       35%</td></tr><tr><td>Morpho Gauntlet Prime Vault (Base)</td><td>xMorphoGPUSDC-Base</td><td>Backed by overcollateralized lending against blue-chip cryptoasset collateral like cbBTC and wsETH</td><td>       60%</td></tr><tr><td>TradeFlow Trade Finance</td><td>xTradeflowCEMP90-USDCAva-1</td><td>Backed by Obligate eNotes, which lends capital to the TradeFlow Capital Management's CEMP USD Trade Flow Fund</td><td>       15%</td></tr><tr><td>OpenTrade Stablecoin Staking Yield </td><td>xSOLY</td><td>Backed by a basis strategy that is generated from Solana (SOL) staking rewards and SOL perpetual futures funding rates. The strategy is delta-neutral to mitigate price volatility of SOL</td><td>      20%</td></tr><tr><td>FalconX Prime Brokerage Lending</td><td>xDLF</td><td>Backed Pareto's vault that lends to FalconX through an SPV to facilitate financing to end-counterparties (Trading Firms, Hedge Funds etc.) while being backed by layers of structural protections, including an equity tranche, transaction-level collateralization, and real-time risk engine</td><td>      20%</td></tr></tbody></table>