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How It Works — Ondo I LP

Ondo I LP — the fund entity that issues the OUSG token — follows a standard fund structure with a limited and general partner and third-party service providers, including qualified custodians where all assets are held, a fund administrator who is responsible for the fund's accounting and investor reporting, and a financial auditor. We've summarized the main parties involved below, as well as provided an outline of the subscription and redemption process.

Parties Involved

  • Ondo I GP: The general partner (GP) who instructs the service providers and manages the fund.
  • Ondo Capital Management: The investment manager (Ondo IM) who, alongside the GP, provides management services for the fund.
  • Ondo Finance Inc.: The technology services company that assists with the tokenization of the fund.
  • Ondo I LP: The Delaware limited partnership to which investors contribute capital and also holds the fund assets, e.g. the ETF shares.
  • OUSG: Tokens representing ownership in various share classes of the fund. Each share class is a segregated strategy, and holds its assets in a separate sub-account at the custodians.
  • Qualified custodian: A qualified custodian is a type of institution approved by regulators to hold assets on behalf of clients. Qualified custodians maintain client funds in separate accounts for each client under that client's name.
  • Clear Street: The securities brokerage and qualified custodian that will hold off-chain assets and execute trade orders for the fund (e.g. buying & selling ETF shares).
  • Coinbase: The crypto custodian and brokerage that will hold on-chain assets (e.g. USDC).
  • NAV Consulting: The independent fund administrator responsible for accounting and reporting (e.g. calculating daily NAV prices).

Investment Workflows

The workflows described below assume an investor wishes to contribute stablecoins, but fiat is also supported.

Subscription

  1. Inquire with Ondo to complete our KYC/AML process as an individual or entity. You'll need to provide certain documents (e.g. a government-issued photo ID) and pass automated screenings (e.g. OFAC sanctions).
  2. Review and sign the fund documents (e.g. Limited Partnership Agreement and Subscription Documents).
  3. Provide an Ethereum wallet address to be whitelisted on-chain for the fund. You'll use this wallet to make your subscriptions, receive fund tokens, and eventually make redemptions.
  4. Subscribe by sending USDC to the fund's smart contract.
    • The transaction will fail if you haven't been whitelisted yet.
  5. The smart contract logs your subscription request and atomically (immediately) transfers the USDC to the fund's account at Coinbase Custody.
  6. Ondo IM will convert the USDC into USD at Coinbase, who will then wire the USD via one of their partner banks to the fund's cash account at Clear Street.
  7. Once the fund administrator computes the next daily NAV and your subscription request is accepted, you'll be issued OUSG tokens representing your shares in the fund.
  8. Ondo IM will use the USD at Clear Street to purchase the ETF.
  9. When the ETF pays out a dividend, Ondo IM will purchase more of the same ETF with the dividend proceeds. The fund itself does not pay out a dividend, but accumulates in value as the dividends are reinvested. Investors can schedule auto-selling if they want regular liquidity.

Redemption

  1. Submit a redemption request by sending OUSG tokens to the fund's smart contract.
  2. The smart contract logs your redemption request.
  3. Once the fund administrator computes the next daily NAV and your redemption request is accepted, Ondo IM will sell enough ETF shares at Clear Street to cover your redemption (assuming there is not sufficient cash from very recent subscriptions to service your redemption).
  4. Clear Street will wire the resulting USD to Coinbase, who will convert it to USDC.
  5. Ondo IM will complete the redemption request and distribute the USDC to your wallet.