Sierra is the issuer of SIERRA, the first dynamically rebalancing Liquid Yield Token (LYT) on Avalanche, designed to make earning yield simple, transparent, and fully permissionless. The dynamically-rebalancing portfolio blends investment-grade real-world asset (RWA)-backed yields with blue-chip DeFi protocols to deliver the best user experience for holders.

Behind the scenes, Sierra’s reserves management strategy is powered by OpenTrade — an institutional-grade “yield-as-a-service” platform for DeFi and RWA-backed stablecoin yield products. Backed by investors including a16z Crypto and Circle, OpenTrade provides Sierra with enterprise-level infrastructure, legal safeguards, and bank-grade asset management that powers its dynamic reserve management. 

The result is a token that starts earning yield the moment you hold it without any lockups, hidden fees or staking required which makes SIERRA the simplest, most seamless way to grow your wealth.

In this article, we’ll take you inside Sierra’s reserve strategy to show how Sierra and OpenTrade work together to manage the reserves backing SIERRA.

Why Reserve Management Matters

Liquid Yield Tokens should be viewed differently from stablecoins. 

Liquid Yield Tokens aren’t pegged to USD or any fiat currency. Instead, they derive their value from a portfolio of yield-generating assets and strategies. Sierra takes a step further by combining backed by investment-grade real-world assets (RWAs) and blue-chip DeFi protocols to make sure holders get the most diversified, best risk-adjusted yield dependent on current market conditions.

But building a transparent Liquid Yield Token isn’t simple. 

To keep it safe, liquid, and consistently growing, Sierra had to build a reserve management strategy that tackles three big challenges at once: ensuring a sufficient liquidity layer for users to redeem anytime, managing risk and diversification across asset classes, and portfolio optimization for yield generation.

Core Principles of Sierra’s Reserve Strategy

At the heart of Sierra’s reserve management is OpenTrade’s infrastructure which works like the engine that ensures accessibility and performance is all carefully balanced for its token holders. 

To do this, Sierra’s reserve strategy is built around four key principles:

1. Maintaining Liquidity:

   
   

A significant portion of Sierra’s reserves is held in lower-yielding, highly liquid assets to ensure the protocol can meet redemption requests at any time, day or night. 

These liquidity-optimized allocations include money market fund and commercial paper–backed vaults, as well as select DeFi strategies such as AAVE and Morpho, all managed through OpenTrade's yield infrastructure.

2. Risk Diversification

   
   

SIERRA’s portfolio of reserves is diversified across yield sources, asset classes, counterparties, and smart contract platforms to help mitigate downside risk and create the highest risk-adjusted blended yield. 

All RWA-backed yield is collateralised by assets rated investment-grade by third-party institutional rating agencies.

3. Duration & Maturity Management:

   
   

SIERRA's portfolio of reserves is designed to maintain a low duration across yield sources, which reduces sensitivity to interest rate changes and allows for rapid rebalancing in response to changing market conditions or redemption requests. 

Additionally, there is limited maturity transformation between SIERRA's reserves and the corresponding yield sources which helps to ensure SIERRA can always meet redemption requests as they arise.

4. Yield Enhancement:
   
   

After accounting for liquidity, diversifying risk and managing asset and liability maturities, the reserve strategy aims to enhance overall yield generated through higher yielding sources to help boost the blended yield of the portfolio.

All of these principles are tracked and monitored through the Sierra Transparency Dashboard enabling token holders to see Sierra’s exact reserves allocation and how the portfolio is performing in real time.

Who Oversees Sierra Reserves 

The strategy doesn’t just run on autopilot.

All of the core principles outlined above are governed by Sierra Foundation’s Advisory Council, which ensures every allocation and adjustment is reviewed with institutional-grade sophistication.

This means holders have the confidence that Sierra’s Advisory council, composed of specialists in stablecoins, DeFi, traditional finance, and risk management, oversees all major decisions, from setting risk limits to continuous assessment of yield opportunities and evolving market conditions. This structure ensures Sierra’s reserves are managed with professional rigor, oversight, and full accountability to token holders.

What Makes Sierra Reserves Management Unique 

Most protocols either focus on yield or safety, but Sierra is designed to balance both. 

What sets Sierra apart is the dynamic rebalancing of its reserves. Every allocation follows clear, rules-based principles and is supported by OpenTrade’s institutional-grade systems for reporting, risk management, and compliance. These allocations are then updated daily based on real-time market conditions, and each yield source is continuously monitored for changes in risk, liquidity, or performance.