DeFi Hedge Fund Delivers 32.6% APR Through Principal Tokens and Private Credit Strategy

Excellion Finance, a DeFi hedge fund, has partnered with Arkis, a private credit platform, to implement an innovative investment strategy that generated a net annual percentage rate (APR) of 32.6% over 91 days. The approach leverages Principal Tokens (PTs) and private credit to offer predictable yields in an otherwise volatile decentralized finance market.

Principal Tokens, created through yield tokenization, separate yield-bearing assets into two components: a Principal Token redeemable at par value upon maturity, and a Yield Token that captures the asset's yield. PTs often trade at a discount, enabling fixed-yield opportunities for holders until maturity. This structure provides a compelling alternative to traditional DeFi strategies like liquidity provision, which remain vulnerable to market swings.

The collaboration highlights growing institutional interest in structured crypto yield products. Arkis, functioning as a prime brokerage credit protocol, facilitates the leverage required for such high-efficiency strategies. While the report underscores the potential for fixed-income solutions in DeFi, it also raises questions about scalability and risk management in private credit markets.