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

# Portfolio Allocation

Nara’s portfolio is designed to balance liquidity, yield generation, diversification, and capital protection. The portfolio may include liquid reserves and short-duration PayFi assets. Liquid reserves support redemptions and operational flexibility, while PayFi assets are intended to generate returns from payment financing opportunities.

The allocation between liquid reserves and PayFi assets may change over time based on market conditions, redemption activity, borrower demand, risk limits, and treasury policy.

### Portfolio Components

| Component                            | Purpose                                                                  | Key considerations                                                                 |
| ------------------------------------ | ------------------------------------------------------------------------ | ---------------------------------------------------------------------------------- |
| **Liquid reserves**                  | Support redemptions, liquidity management, and operational flexibility.  | Asset quality, availability, liquidity depth, custody, and on-chain accessibility. |
| **Short-term financing assets**      | Generate returns from short-duration payment financing opportunities.    | Asset quality, tenor, repayment performance, concentration, and legal structure.   |
| **Insurance or protection reserves** | Help absorb certain losses before they affect other parts of the system. | Funding source, current balance, coverage rules, and loss waterfall design.        |


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