# Asset Reserve Fund (ARF)

The **Asset Reserve Fund (ARF)** is Lendr’s capital buffer—standing ready to absorb unexpected shocks such as custodian failure, hedge slippage, or oracle malfunction..

***

### 1 Target Size

* **3 % of total protocol TVL** (aggregated across all chains).
* Held in highly liquid **USDL / USDC** so it can be deployed instantly.

***

### 2 How the ARF Is Funded

| Source              | Share                                   | Flow                                                                                                                     |
| ------------------- | --------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ |
| Performance fees    | **10 %** of every vault’s positive P\&L | Auto‑routed by the **FeeRouter** until the 3 % cap is reached.                                                           |
| Emergency RWAL swap | Governance‑approved only                | If ARF falls below 1 % TVL after a payout, xRWAL holders can authorize a temporary RWAL‑to‑USDL auction to recapitalize. |

When the ARF ≥ 3 % TVL, its 10 % fee share is re‑routed to xRWAL stakers; it re‑activates automatically if the balance dips below target.

***

### 3 When the ARF Can Be Used

| Scenario                         | Trigger                                                            | Disbursement Process                           |
| -------------------------------- | ------------------------------------------------------------------ | ---------------------------------------------- |
| **Custodian default**            | Verified asset shortfall after audit                               | Multisig releases funds to the affected vault. |
| **Hedge loss > draw‑down limit** | Vault draw‑down exceeds its maxDrawdown and governance vote passes | ARF tops up the vault to restore NAV.          |
| **Smart‑contract exploit**       | Confirmed exploit & independent audit                              | Emergency payout after a 48 h timelock.        |

*A super‑majority Snapshot vote (≥ 66 %* RWAL *quorum) is required for any ARF withdrawal.*

***

### 4 Transparency & Oversight

* **On‑chain addresses** — `0xArf…` (per chain) visible in real time.
* **Monthly report** — balance, inflows, outflows and scenario stress‑tests.
* **Auditability** — ARF contract included in every external security audit.

***

### 5 Replenishment & Growth

If a payout reduces the ARF below its 3 % TVL target:

1. The **10 % performance‑fee share** automatically resumes flowing to the ARF.
2. Governance may temporarily direct *all* fees to the ARF until the target is restored.
3. As a last resort, xRWAL can approve an RWAL‑for‑USDL sale to recapitalize the fund.

> **Goal:** protect user balances first, with minimal dilution to fee shareholders.

***

#### In Short

The Asset Reserve Fund provides a clear, on‑chain safety net so that unforeseen losses are covered by the protocol—not by individual depositors.


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://whitepaper.lendr.fi/how-it-works/asset-reserve-fund-arf.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.