Summary
LlamaRisk supports onboarding HINC to Aave Horizon as collateral. HINC gives Horizon exposure to a high-income credit portfolio managed by Neuberger Berman, tokenized and administered by Securitize, with the underlying assets held in custody at BNY Mellon and a daily NAV published through RedStone. We recommend an initial supply cap of 10,000 HINC, an LTV of 55%, a liquidation threshold of 67%, and a liquidation bonus of 8%, together with a GHO E-Mode at 57% LTV and 69% liquidation threshold. The full basis for these parameters is set out in Sections IV and V below.
Two points remain outstanding before the listing proceeds. The MASTER address that authorizes upgrades of the HINC token and its DS Protocol services has no onchain timelock, which is a prerequisite condition under the Aave Risk Framework. The liquidator capacity indications from KPK, Lhava, and Fission are not committed HINC facilities and carry no response-time or settlement SLA. Securitize has committed to placing the MASTER role behind a TimelockController and is formalizing liquidator SLAs. We will verify the timelock deployment, its enforced delay, and its coverage of every relevant proxy onchain, and confirm the SLA terms, before the asset is activated on Horizon.
I. Legal Risk
1.1 Jurisdictional Compliance
Neuberger Securitize High Income Tokenized Fund Ltd. (the “Fund”; token “HINC”) is a British Virgin Islands business company recognised as a Professional Fund under the Securities and Investment Business Act, 2010 (“SIBA”), whose participating shares are issued and transferred as permissioned ERC-20 tokens on Securitize’s DS Protocol. The Fund pursues a high-income credit strategy — a majority in high-yield bonds, with the balance in collateralized loan obligation (“CLO”) tranches and leveraged loans — under the discretionary management of Neuberger Berman Investment Advisers LLC (“NBIA”) as sub-adviser, with Securitize Capital LLC as the (exempt reporting) investment advisor and holder of all voting shares. Custody of the underlying portfolio sits with The Bank of New York Mellon; fund administration, transfer agency, tokenization and placement are all performed by Securitize affiliates. The Fund is recognised by the BVI Financial Services Commission as a “Professional Fund” within the meaning of SIBA and is offered only to “professional investors” on a private basis (PPM, p. 5; M&A, Mem. §27 / Art. 211, pp. 6, 42). The cover legend states plainly that the Fund “IS NOT SUBJECT TO SUPERVISION BY THE FINANCIAL SERVICES COMMISSION” and that recognition “does not involve any examination of the merits” (PPM, pp. 5–6, 118). A professional investor is a person whose ordinary business involves such investments or who declares net worth exceeding US$1,000,000 and consents to the treatment (PPM, pp. 10, 34). Shares are offered to U.S. persons under Section 4(a)(2) and Rule 506(c) of Regulation D, and to non-U.S. persons under Regulation S (PPM, pp. 2, 117). The Fund relies on Section 3(c)(7) of the Investment Company Act, so every holder must be a qualified purchaser under Section 2(a)(51), and each investor must additionally be an accredited investor under Rule 501(a) (PPM, pp. 2, 34). The Investment Advisor expects to rely on the CFTC Rule 4.13(a)(3) de minimis exemption from commodity-pool-operator registration (PPM, pp. 7, 45). The Fund treats EU and UK “institutional investors” under the Securitisation Regulation as ineligible, and expects to hold CLOs that are not compliant with EU/UK risk-retention and transparency requirements, disclaiming any commitment to remediate (PPM, pp. 34, 75–76). The PPM treats the shares as securities offered under exemptions and states that “the Tokens are not intended to be a security separate from the Shares” (PPM, p. 14), repeatedly describing them as “digital securities” whose regulation “remains uncertain in many respects” (PPM, p. 117).
1.2 Bankruptcy Remoteness and Asset Segregation
The Fund has separate legal personality and perpetual existence (M&A, Mem. §23, p. 5), and shareholder liability is limited (M&A, Mem. §§21–22, p. 5). That separateness protects shareholders from Fund-level over-liability in the ordinary way. There is no statutory cell wall between share classes. The internal “Investment Account” segregation the Articles create is contractual and accounting-based — “assets held in each Investment Account shall be applied solely in respect of” the relevant class (M&A, Art. 78, p. 24) — and is not enforceable as statutory ring-fencing against third-party creditors of the company as a whole. In response to inquiry, however, the issuer confirmed that the Fund has only a single share class and does not expect to create additional classes (Issuer response, July 2026). On that basis the inter-class segregation concern does not presently arise: with one class, neither the Article 78 cross-class application nor the directors’ power to “transfer any assets to and from Investment Accounts… as a result of a creditor proceeding” (M&A, Art. 77(g), p. 24) has a separate class against which to operate. Decisively, the Articles expressly authorise the directors to “transfer any assets to and from Investment Accounts if, as a result of a creditor proceeding against certain of the assets of the Company or otherwise, a liability would be borne in a different manner” (M&A, Art. 77(g), p. 24). In other words, the very mechanism a collateral holder would rely on to keep one class’s assets away from another class’s creditors can be overridden by the board in a creditor scenario. The directors may borrow and “mortgage or charge” the company’s undertaking, property and uncalled capital, and issue debentures, without limit and without shareholder consent (M&A, Art. 140, p. 31), and the statutory protection requiring member approval for a disposition of more than half the company’s assets (section 175) is disapplied (M&A, Art. 133, p. 31). The Fund states it does not intend to use leverage (PPM, p. 9). At the asset level, the PPM acknowledges that custodial segregation is not absolute: fund assets “should… be segregated from the custodian’s proprietary assets… However, there can be no assurance that such segregation will be fully effective in all jurisdictions” (PPM, p. 63). Separately, the PPM describes BNY Mellon as “regulated by the Federal Deposit Insurance Corporation” (PPM, p. 35) - a description that is incomplete rather than inaccurate. In response to inquiry, the issuer confirmed that the Custodian is a New York state-chartered bank and a member of the Federal Reserve System, subject to regulation, supervision and examination by the Federal Reserve, the FDIC and the New York State Department of Financial Services (Issuer response, July 2026). On deposit protection, the issuer confirmed that FDIC insurance reaches only eligible deposits at an insured institution, up to US$250,000 per depositor, per insured bank, per ownership category, and that securities and other assets held in a custodial or safekeeping capacity are not FDIC-insured; it further acknowledged that, given the size and institutional nature of the Fund’s balances, “the Fund should not expect all cash balances to be fully protected by FDIC insurance.”
1.3 Title and Ownership
The Transfer Agent’s “register of members constitute the official shareholder records for the Tokens and govern the record ownership of the Tokens in all circumstances” (PPM, p. 27), and “all transfers of shares must be recorded in the list of shareholders… maintained by the Investment Advisor” to be effective (PPM, pp. 6–7). A party holding the token on-chain — including a liquidator who has seized it — does not thereby hold recognised legal title until the off-chain register reflects the transfer, which in turn requires advisor approval and eligibility. The token is “designed as a permissioned token”; only assessed and approved customers may purchase it, and transfers between approved wallets “implement Know Your Transaction (KYT) mechanisms that prevent parties on international sanctions lists from being party to transactions” (PPM, p. 93). “Tokens may only be sold or transferred to people or entities on the whitelist, unless otherwise approved by the Investment Advisor” (PPM, p. 15). This is enforced at the contract level, so a transfer to a non-whitelisted address is expected to fail on-chain rather than settle and be unwound. The whitelist/KYT/DS Protocol enforcement lives entirely in the PPM’s narrative. The Memorandum & Articles contain no reference to DS Protocol, blockchain, smart contracts, on-chain transfer, or any token mechanics whatsoever, and the Subscription Agreement likewise never names the Transfer Agent’s powers or defines the whitelist. The binding constitutional hook for on-chain control is therefore the general transfer-refusal and compulsory-redemption machinery described in §§1.5 and 1.7, not a documented smart-contract control that a lender could inspect. The Investment Advisor “shall have the authority to cancel and/or replace the Tokens, including… in the event of theft, at any time and without notice to the Shareholders,” and holders have no right to object or seek compensation (PPM, pp. 94, 96). The PPM itself acknowledges that “the cancellation and replacement of Tokens could have unforeseen consequences for Shareholders who have pledged, transferred, or otherwise dealt with their Tokens” (PPM, p. 96). Blockchain selection is likewise in the advisor’s “sole and absolute discretion… without the consent of Shareholders” (PPM, p. 39). The underlying portfolio securities and cash sit with BNY Mellon, replaceable by the Fund “in its sole discretion” (PPM, p. 35), while the tokens are “held in self-custody by each Shareholder in a digital wallet… approved in accordance with the Fund’s whitelisting procedures” (PPM, p. 94). The Fund also flags smart-contract implementation risk (“implemented as an ERC-20 token”), theft/loss risk, total dependence on the Securitize platform (“no alternative operational infrastructure”), and stablecoin de-peg risk in the liquidity pool (PPM, pp. 92–95).
1.4 Issuer Structure
Almost every function other than sub-advisory management, custody and audit is performed by a Securitize affiliate. The Investment Advisor (Securitize Capital LLC), Administrator (Securitize Fund Services LLC), Transfer Agent (Securitize Transfer Agent LLC), tokenization platform (Securitize / DS Protocol) and placement agent (Securitize Markets LLC) are all within the Securitize group (PPM, pp. 1, 11, 14, 24, 35; DDQ tables). The two independent external checks of substance are NBIA as discretionary sub-adviser and BNY Mellon as custodian, with Withum as auditor and Walkers as BVI counsel. This concentration is disclosed. The board comprises two directors, Francisco Flores (CFO of Securitize Inc.) and Jason Fightmaster (Head of Fund Operations, Securitize Capital) (PPM, p. 11). The PPM candidly concedes the consequence: because the directors are Securitize employees, “the Board cannot be expected to provide meaningful independent oversight,” and there is an express “Absence of Independent Directors” risk factor (PPM, pp. 38–39). The Investment Advisor also holds all 100 voting Management Shares (PPM, p. 13), so shareholders — including any tokenholder-lender — have no voting mechanism to check the board. Per the PPM disclosures, the affiliated administrator calculates the NAV that drives the management fee, with “no independent valuation agent… engaged on an ongoing basis”; an affiliate may act as “Secondary Buyer” setting the buyout price “in its sole discretion”; and the sponsor selects the blockchain and technology (PPM, pp. 38–40). The Fund has “not adopted formal key person provisions” (PPM, p. 39), and neither the Fund, the advisor nor the board “intends to conduct investment or operational due diligence with respect to the Subadvisor” (PPM, pp. 2–3, 37). An optional Independent Fund Representative may be engaged to consent to conflicts but is itself replaceable “at any time in its sole discretion” (PPM, pp. 32–33).
1.5 Subscriptions, Withdrawals, and Redemption Mechanics
Investors onboard through the Securitize portal, clear KYC/AML/accreditation, and are added to the whitelist; the minimum initial contribution is US$100,000 and subscriptions cut off at 2:00 p.m. ET on a business day (PPM, pp. 14–15). A 24-hour lock-up applies: no shareholder may withdraw “until 24-hours following the date on which such Shareholder makes the Subscription or Additional Subscription,” waivable by the advisor (PPM, p. 16). Note that the lock-up runs from each subscription, so an additional subscription arguably re-starts a 24-hour clock on the incremental position. The Subscription Agreement states that resales are “significantly restricted by the M&A, including for a period of 12 months from the date of issuance” (Subscription Agreement, cl. 4.7(iii), p. 5). In response to inquiry, the issuer clarified that this clause is intended to reflect the resale restrictions applicable under the securities laws governing the offering, not to prohibit transfers between eligible holders during the first twelve months; the twelve-month reference concerns transfers to purchasers who are not already eligible participants, after which transfers may be made in reliance on Rule 144 where available, subject to its requirements and the Fund’s transfer procedures (Issuer response, July 2026). The issuer’s explanation is consistent with the PPM statement that transfers between Whitelisted Accounts will generally be permitted at any time, subject to the Fund’s transfer procedures (PPM, p. 27). The Subscription Agreement retains the twelve-month wording; this review does not treat an amendment as completed. Redemptions are requested via the portal or by sending tokens “to the redemption wallet designated by the Fund and managed by the Transfer Agent,” with a 2:00 p.m. ET redemption cut-off (PPM, p. 25). The Fund targets T+1 settlement “however, actual settlement may occur on a T+2, T+3, or longer timeframe,” with “no guarantee that any particular settlement timing will be achieved,” because meeting redemptions depends on the sub-adviser liquidating illiquid portfolio holdings (PPM, p. 25). Proceeds are generally paid within two business days after the Fund receives proceeds from the portfolio (PPM, p. 25). Redemptions may be paid in cash, in stablecoins, or — at the directors’ discretion — “in kind,” in assets that “may not be marketable or otherwise freely tradable” (PPM, pp. 25–26, 37–38). A 2% Liquidity Pool Fee may be charged on redemptions met from the liquidity pool, and liquidity-pool redemptions are “limited to both the size of the Liquidity Pool and the discretion of the Investment Advisor” (PPM, pp. 9–10, 13). The directors’ omnibus suspension power is trigger-less and time-unlimited: they “may declare a suspension of (a) the determination of Net Asset Value and/or (b) the subscription… and/or (c) the redemption… and/or (d) the purchase… and/or (e) the payment of any amount to a redeeming Shareholder… in such circumstances as the Directors may determine” (PPM, p. 26; M&A, Art. 68, p. 23), and a suspension “shall remain in effect until the Directors… declare the suspension to be at an end” (M&A, Art. 69, p. 23). Independently, the Fund “may at any time compulsorily redeem any or all of a Shareholder’s Shares for any reason or for no reason” (PPM, p. 26; M&A, Art. 66, p. 23).
1.6 Investment Program and Yield Accrual
The Fund invests “the majority of its investable assets in high yield bonds… collateralized loan obligations (CLOs), and leveraged loans,” with excess cash in a Liquidity Pool of Treasuries, commercial paper, repo, money-market funds, tokenized cash and fiat-pegged digital assets (PPM, pp. 9–10, 13). NBIA has discretionary authority within investment guidelines set by the advisor (PPM, pp. 9, 12). The Fund “does not intend to utilize leverage,” but discloses that CLO positions “may be materially larger than the portfolio average… during the… initial ramp-up period” (PPM, p. 9). The underlying credit risk is below investment grade, and the PPM’s risk section (pp. 49–84) details default, subordination, structural-subordination, liquidity, and distressed-debt exposures. No distributions are anticipated; income “will be reinvested,” so return is expressed purely as NAV/token-price accretion (PPM, p. 17). Net Assets are determined “as of 4:00 p.m. Eastern Time” each Valuation Day, and “promptly published on the Portal as the Token price until the next Valuation Day” (PPM, p. 18). The valuation rests on the affiliated Administrator’s figures, cross-checked against the Custodian, and “absent bad faith or manifest error, the Investment Advisor’s valuation determinations are conclusive and binding” (PPM, pp. 18–19, 90). The Articles reinforce this with a discretionary fair-value override where the directors decide a valuation “does not fairly represent market value” (M&A, Art. 87, p. 26), and permit suspension of NAV determination itself (M&A, Art. 68(a), p. 23). The management fee is 0.5% per annum of Net Assets; the total expense ratio is expected to be approximately 0.60% per annum; the sub-advisory fee of 0.2375% is borne by the Investment Advisor, not the Fund; and a 2% Liquidity Pool Fee may apply on liquidity-pool redemptions (PPM, pp. 9–10, 24). These are consistent with the issuer’s DDQ. The fee load is modest at the fund level, though holders indirectly bear CLO-level management and incentive fees (PPM, pp. 71–72).
1.7 Transfer Restrictions and Secondary-Market Enforcement
Shareholders “may not transfer (or pledge) Shares without obtaining the prior written consent of the Fund, which consent may be conditioned, withheld or granted in the sole discretion of the Directors” (PPM, p. 27). The Articles reinforce this at the constitutional level — “no Shares may be transferred… without the prior consent in writing of the Directors… which may be withheld in their absolute discretion” (Art. 37), the directors “may… decline to register any transfer… without assigning any reason” (Art. 39), and “registration of transfers may be suspended” (Art. 40) (M&A, pp. 18–19). A transfer must be evidenced by a written agreement executed by transferor, transferee and the advisor (PPM, p. 27). In response to inquiry, the issuer explained that the Articles’ written-consent and written-agreement language is boilerplate BVI drafting, and that in practice consent to a transfer is treated as given at onboarding — when a Whitelisted Account agrees to the fund’s terms — with the recording of the on-chain transaction serving as the notification of the transfer (Issuer response, July 2026); this is consistent with the PPM, under which “transfers of Shares between Whitelisted Accounts will generally be permitted at any time” (PPM, p. 27). Whitelisted-to-whitelisted transfers therefore do not require a separately executed transfer agreement at the time of each transfer, and the blockchain transaction is the transfer record. Beyond consent, the token can only move between whitelisted accounts, with KYT screening blocking sanctioned counterparties (PPM, pp. 15, 93). A holder “will continue to be subject to the terms of the Subscription Agreement even if… no longer holds Tokens” (PPM, p. 14), though the Subscription Agreement itself provides that its reps survive only “for so long as the Subscriber holds a Share” (Subscription Agreement, cl. 18.5, p. 18) — a tension addressed in this section. The “Restricted Person” regime in the Articles requires a holder who becomes ineligible to redeem or transfer out (M&A, Arts. 29, 63, pp. 18, 22). The issuer’s DDQ describes the Transfer Agent as retaining “freeze / seize / seize-and-redeem powers” exercisable on sanctions hits or court order. The reviewed constitutional and subscription documents do not grant discrete, named “freeze” or “seize-and-redeem” powers to the Transfer Agent. What the documents actually provide is a functionally similar toolkit assembled from other provisions: on-chain whitelist and KYT blocking (PPM, pp. 15, 93); compulsory redemption “for any reason or for no reason” (PPM, p. 26; M&A, Art. 66); token cancellation and replacement “at any time and without notice” (PPM, p. 94); per-holder AML/sanctions suspension of redemption rights (PPM, p. 26; M&A, Art. 70); refusal to make any redemption payment on AML suspicion (PPM, p. 116); and an irrevocable power of attorney appointing each director as attorney to transfer a “Defaulting Shareholder’s” shares to a purchaser or to redeem them “in accordance with the Articles” (Subscription Agreement, cl. 9, pp. 10–11). At launch the shares are “not… available for trading on any… ATS,” and while the Fund is “in discussions with several ATSs” there is “no assurance” one will be available (PPM, pp. 27, 92). An affiliate may act as a “Secondary Buyer” at a price it sets “in its sole discretion,” with selling holders required to “waive any claims against such Secondary Buyer” (PPM, pp. 27–28, 39). For collateral purposes there is presently no reliable secondary venue in which a liquidator could sell the token; redemption through the permissioned channel is the realistic exit.
II. Market Risk
2.1 Issuance and token supply
On September 2, 2026, Ethereum showed a supply of 6,231.84 HINC. At RedStone’s published value of $1,002.11 per token, that supply would be worth approximately $6.24 million. The Form D filed on August 18 reports $5.1 million sold to two investors as of the first sale date.
2.2 Historical Performance
HINC is newly launched and has no meaningful performance or redemption history. The Form D reports a first sale on August 18, 2026, while the public ARFC gives July 20, 2026, as the Fund’s commencement date.
2.3 Liquidity and Redemption Mechanics
Redemption requests are subject to a 2:00 p.m. ET cut-off. The PPM targets T+1 settlement but permits T+2, T+3, or longer and does not guarantee a settlement date. It also states that sales of high-yield bonds and CLOs are generally expected to settle on T+2 or T+3 and that redemption proceeds may be below the NAV at which the request was submitted.
Securitize separately stated that underlying redemptions of up to $500 million are targeted for T+1 settlement in USD or USDC. It reported no daily or weekly gates and no fee for a standard redemption. On September 1, Neuberger said it expects to meet ordinary redemptions from the high-yield sleeve rather than by selling CLOs.
The directors may suspend NAV calculations or redemptions and may compulsorily redeem a holder. In addition to the direct redemptions, liquidator-capacity indications are discussed in §4.3.
Exhibit 1
2.4 Redemption Buffer
Securitize stated that no instant redemption Liquidity Pool will be live at launch. The PPM permits the Investment Advisor to establish one later, subject to available pool capacity and advisor discretion, and permits a 2% Liquidity Pool Fee that the advisor may waive. Securitize has described the potential pool as up to 5% of AUM. Until that pool is enabled, there is no dedicated cash sleeve that can pay a redemption immediately, in full or in part. A Horizon liquidator or user must use the ordinary permissioned redemption path described in §2.3.
2.5 Fee Structure and Cost Transparency
HINC’s recurring Fund expenses are a 0.50% management fee and an expected total expense ratio of approximately 0.60%. Other costs depend on the redemption route or arise within the underlying CLO holdings.
| Item | Rate | Treatment |
|---|---|---|
| Management fee | 0.50% per year of Net Assets | Borne by the Fund |
| Expected total expense ratio | Approximately 0.60% per year | Includes the management fee and other Fund operating expenses |
| Sub-advisory fee | 0.2375% per year of Subadvisor Assets | Paid by the Investment Advisor, not the Fund; potential future Liquidity Pool assets are excluded from the fee base |
| Standard redemption | No fee | Based on Securitize’s operating statement |
| Liquidity Pool redemption | 2% of redemption value, if enabled | Borne by the redeeming holder; the Investment Advisor may waive it |
| CLO-level fees | Not charged as a separate Fund line item | Borne indirectly through the economics and valuation of the underlying CLO holdings |
The Tearsheet reports the same 0.50% management fee and approximately 0.60% total expense ratio. The Investment Advisor may waive or reduce the management fee for a holder, or increase it with that holder’s approval.
2.6 Multi-Chain Availability
Securitize’s public HINC feed lists deployments and redemption wallets on Ethereum, Avalanche, Solana, and Sui. On September 2, 2026, Ethereum, Avalanche, and Solana each reported a supply of 6,231.84 HINC; no Sui supply exists at the time of writing.
2.7 Issuer Maturity
HINC combines an established credit manager with a vertically integrated tokenization and fund-services platform. Neuberger Berman Investment Advisers LLC is the Fund’s discretionary sub-adviser and an SEC-registered investment adviser. The manager aggregated approximately $567 billion in group-wide AUM as of March 31, 2026. This figure describes the broader Neuberger Berman platform rather than HINC fund AUM.
Securitize Capital LLC is the Investment Advisor and holds all 100 voting Management Shares. Securitize affiliates also provide fund administration, transfer agency, tokenization, and placement services, and both Fund directors are Securitize employees. The resulting operational concentration is assessed under Issuer Structure in the Legal section. HINC itself has only weeks of operating history, as discussed in §2.2.
| Role | Entity | Jurisdiction |
|---|---|---|
| Portfolio sub-adviser | Neuberger Berman Investment Advisers LLC | United States |
| Investment Advisor and voting shareholder | Securitize Capital LLC | United States |
| Administrator | Securitize Fund Services LLC | United States |
| Transfer Agent | Securitize Transfer Agent LLC | United States |
| Tokenization and DS Protocol | Securitize platform | United States |
| Placement agent | Securitize Markets LLC | United States |
| Custodian | The Bank of New York Mellon | United States |
| Auditor | Withum | United States |
| BVI counsel | Walkers | British Virgin Islands |
Sources: PPM dated July 17, 2026; issuer DDQ tables; ARFC dated August 18, 2026.
2.8 Whitelisted Issuance
HINC issuance, transfer, and redemption are permissioned. The Transfer Agent’s register determines ownership. Tokens are issued through the DS Token Issuer under the ISSUER role, and only registered wallets may receive them. As of September 8, 2026, six addresses hold the ISSUER role on Ethereum. Four are Securitize DS service contracts, among them the Token Issuer, and two are EOAs. All issuance to date has been executed by a single Securitize operational EOA, and a separate master EOA can add or remove issuers at any time.
Transfers are subject to the same restriction. A transfer to a wallet outside the registry is expected to fail onchain.
Redemption occurs through the Fund and Transfer Agent rather than an onchain burn adapter. A liquidator must therefore be eligible to hold HINC and complete the permissioned redemption process.
2.9 Portfolio Characteristics
The PPM describes HINC as a high-yield credit fund. Most investable assets are expected to be high-yield bonds, with additional exposure permitted to CLOs, bank loans, and similar instruments. The Fund does not intend to borrow at the Fund level. Income is reinvested and reflected through NAV; no distributions are anticipated.
The issuer-provided portfolio holdings report dated August 28, 2026, shows 86.7% in high-yield bonds, 7.8% in BB CLOs across three E-tranches, and 5.5% in cash. The high-yield sleeve had a 7.37% yield, a 295-basis-point spread, and an interest-rate duration of 3.27 years. The report describes a 30% maximum CLO allocation at purchase, but the current investment guidelines do not establish an ongoing hard cap. This review therefore treats that 30% figure as a portfolio-management assumption rather than an enforceable, continuously maintained limit.
Exhibit 2
Credit-quality results vary by rating source. ML/ICE classifies 14.4% of the Fund, or 16.6% of the high-yield sleeve, as CCC or below. The corresponding measures are 12.1% under S&P, 19.1% under Moody’s, and 19.6% using the worst rating assigned by the three agencies.
Exhibit 3
Compared with the illustrative stress portfolio, the live portfolio has less CLO exposure, more CCC exposure, and longer high-yield duration. The differences affect distinct risk channels: BB CLO tranches add structural leverage and tail sensitivity, while CCC bonds increase default, downgrade, and secondary-market liquidity risk. The stress analysis therefore retains the more conservative 30% CLO allocation and assesses the live portfolio’s CCC exposure separately.
In the observed August 28 portfolio, CCO Holdings was the largest corporate issuer at 1.86%, telecommunications was the largest sector at 8.5%, and the largest credit position was a CLO at 2.61%. These are point-in-time portfolio observations, not issuer or sector concentration limits.
Exhibit 4
2.10 Stress Testing
The August 28 holdings report provides a snapshot of the Fund’s portfolio on that date. To assess the stress implications of a 30% BB CLO allocation, the analysis uses the issuer-supplied illustrative 70% high-yield / 30% BB CLO mix as a conservative sensitivity case. The model shows the loss sensitivity of that mix but it does not assume the Fund will move to it. The illustrative portfolio has a 63.12% BB / 30.00% B / 6.88% CCC-or-below rating mix, a 7.62% gross yield, a 335-basis-point spread, 3.86-year spread duration, and 2.52-year interest-rate duration. The CLO sleeve is floating-rate but structurally leveraged: its BB tranches absorb losses after the equity and more-junior debt beneath them are impaired.
Exhibit 5
The issuer’s July 15 deck reports a 3.86-year spread duration for the illustrative 70% high-yield / 30% BB CLO portfolio. It estimates that a 200-basis-point widening in credit spreads would reduce the portfolio by approximately 7%-9%, and a 400-basis-point widening by 14%-18%. This review uses the middle of those ranges, 8% and 16%, as hypothetical mark-to-market shocks. At the reported spread duration, those shocks imply first-order losses of approximately 7.7% and 15.4%, consistent with the stated ranges. The issuer notes that its estimates do not capture defaults, rating migration, worsening liquidity, changing correlations, convexity, or active portfolio changes.
The supplied 70/30 historical benchmark lost 18.25% during March 2020. Separately, a public 70% HYG / 30% JBBB proxy lost 13.40% from peak to trough between January 12 and September 30, 2022. It is notable that the proxy is used only to observe market-loss speed and does not represent HINC’s holdings or NAV process.
Exhibit 6
Liquidity under stress
Neuberger expects ordinary redemptions to be met by selling high-yield bonds before the CLOs. On August 28, the portfolio was 86.7% high-yield bonds, 7.8% BB CLOs across three E-tranches, and 5.5% cash. The PPM says that sales of high-yield bonds and CLOs generally settle on a T+2 or T+3 basis and may take longer in stressed markets; it also permits holdbacks, in-kind proceeds, and suspension of redemptions.
March 2020 is a useful market reference for that exit route. SEC data show high-yield effective bid-ask spreads widening from about 25 basis points in January and February to nearly 125 basis points in mid-March, while high-yield option-adjusted spreads rose from roughly 350 to 1,087 basis points. FINRA reports that average daily par traded across all corporate TRACE bonds rose from $40.7 billion in February to $49.2 billion in March.
A Federal Reserve study of TRACE-reported Class E CLO tranche-days found average transaction prices falling from $95.69 per $100 face before March 1 to $72.08 afterward. The standard deviation of observed prices rose from $4.90 to $14.87.
Under a static 20% redemption sensitivity, 16.7% of the high-yield sleeve would be sold if reported cash were used first, and 23.1% if cash were retained. In either case, the CLO sleeve would account for 9.74% of the remaining fund.
Exhibit 7
Sources: SEC, U.S. Credit Markets (2020); FINRA TRACE Monthly Volume Report; Foley-Fisher, Gorton and Verani, FEDS 2020-088, Table 1; HINC August 28 holdings report.
Stress references
Exhibit 8
Source: issuer illustrative-model presentation dated July 15, 2026; issuer-supplied constant-weight March 2020 benchmark.
2.11 Looping Sensitivity
At 55% LTV, recursive borrowing gives a borrower 2.22× gross exposure for each dollar of initial equity. An 8.0% or 16.0% hypothetical portfolio shock, or the 18.25% March 2020 historical reference, would reduce initial equity by 17.8%, 35.6%, and 40.6%, respectively, before interest, oracle movement, liquidation, and execution costs. Section 4.2 addresses when a decline reaches the liquidation threshold and the collateral remaining at that point.
Exhibit 9
The carry model begins with the illustrative portfolio’s 7.62% gross yield and deducts the Fund’s expected 0.60% expense ratio, producing a modeled net yield of 7.02%. That yield applies to total HINC exposure, while borrow interest applies to the recursively borrowed amount.
Exhibit 10
At 55% LTV and 2.22× target leverage exposure, modeled carry on initial equity is 11.93% at a 3% borrow rate, 10.71% at 4%, and 9.49% at 5%. HINC reinvests income into NAV rather than distributing cash, while protocol interest accrues to the stablecoin debt. The borrower therefore receives the return through HINC’s value but must ultimately repay the debt in the borrowed asset.
III. Technological Risk
3.1 Onchain footprint
HINC is a six-decimal permissioned ERC-20 deployed on Ethereum through Securitize’s DS Protocol. The protocol separates token balances, wallet registration, transfer eligibility, token locks, and issuance across a set of supporting service contracts.
| Component | Address | Function |
|---|---|---|
| HINC token | 0x015C477A4E2881C4B3bB8999f59ee4A04e812344 |
Records HINC balances and routes transfers through the DS Protocol compliance controls |
| Trust | 0xd4a303fDF4696284bB75601e6F9657C74b30B1b1 |
Administrative roles and service configuration |
| Registry | 0xEfD8Ea8C9af77edCA3aa69380C44cBa2e6FFCd96 |
Investor and wallet registration |
| Compliance | 0xdecde49100092a1c9B574aA9AA333C7a44346E1c |
Transfer eligibility |
| Wallet Manager | 0x6349dB0f8Db546867aa000725C14B79789BD81fC |
Special-wallet controls |
| Lock Manager | 0xA468A86A680969b651fDF57968dAe99a5b34c439 |
Subscription and transfer locks |
| Compliance Config | 0xbc3D91B12D8BB98017e706aC9470a5CdD1012b5c |
Parameters used by the Compliance service |
| Token Issuer | 0x6a7FFbeeC6046f3Fb6dDAfBFc5eDa3cfC3cD3ab0 |
Token issuance |
| Wallet Registrar | 0x826720e0e60d489c2008ad891bc131049064E2B5 |
Wallet registration |
| Transaction Relayer | 0x6545bC8b3A6604fb9C840eD31865efe22721c117 |
Relayed transactions |
| Rebasing Provider | 0xE68ED7fE4f381D22b64A770fb389Fc4810BB5a76 |
Share-to-token multiplier |
3.2 Upgrade architecture
The HINC token and its active DS Protocol services are deployed as ERC-1967 proxies using a UUPS upgrade path. Their EIP-1967 admin and beacon slots are empty, so upgrades do not pass through a separate ProxyAdmin.
In the public DS Token v4 source, _authorizeUpgrade is restricted by onlyMaster. The HINC token’s owner() resolves to 0x59c1eAcEc450c57Dcb9b8725d0F96635C2b676Ee, which also holds the MASTER role in the Trust service. The reviewed service proxies use the same MASTER role for upgrade authorization.
At the time of review, the MASTER address had no deployed bytecode. It therefore operates onchain as an externally owned account, with no contract-enforced multisignature or timelock. Securitize stated that Fireblocks MPC controls the address under a multi-party approval policy. Those approvals are offchain and cannot be independently verified or enforced by the HINC contracts.
The MASTER can authorize upgrades to the HINC token and its active DS Protocol services without an onchain delay. A compromised key or improperly approved Fireblocks transaction could therefore change the implementation immediately, before Horizon governance, users, or risk providers could respond.
Securitize has stated that it plans to place the MASTER role behind a standard OpenZeppelin TimelockController. No controller address, enforced delay, or complete proxy-coverage configuration has yet been supplied for verification. The current assessment therefore remains unchanged.
Mandatory listing condition. The absence of an onchain timelock on HINC’s upgrade path is a hard-block condition under the Aave Risk Framework for Horizon onboarding. HINC must not be listed or enabled on Horizon until every authority capable of upgrading the HINC token or a relevant active DS Protocol service is subject to an onchain timelock with a defined, publicly verifiable minimum delay. Before activation, the applicable upgrade authorities, enforced delay, and coverage of every relevant proxy must be verified onchain.
3.3 Audit history and bytecode lineage
HINC uses Securitize’s shared DS Protocol. The five public audit reports below cover an earlier DS Token baseline or scoped later changes in the same codebase. The Global Registry review provides incremental audit coverage of the permit and transferWithPermit path. None is an end-to-end audit of the deployed HINC token and every active service.
| Audit | Date | Coverage | Outcome |
|---|---|---|---|
| Halborn DS Token v4 | Oct. 2025 | DS Token v4; before the later permit path | Two Medium findings were resolved; selected lower-severity items were risk-accepted or acknowledged. |
| Cyfrin DS Token v4 2.1 | Oct. 2025 | DS Token v4; before the later permit path | The Critical allowance finding was resolved; other Medium findings were resolved or acknowledged. |
| Cyfrin Global Registry v2.0 | Oct. 27–29, 2025; report issued Nov. 6 | Incremental Global Registry changes and ERC20PermitMixin.sol / StandardToken.sol, including permit and transferWithPermit |
The report identified three Medium and three Low findings. The permit name-change issue and the transferWithPermit front-running denial-of-service issue were fixed and Cyfrin-verified. |
| Cyfrin Full Investor Locks v2.0 | May 2026 | Investor-lock and regulated-compliance changes | Four Medium findings were resolved; two Medium findings were acknowledged. |
| Cyfrin Permissionless Compliance Diff v2.0 | Jun. 2026 | Permissionless-compliance diff | All reported issues except one Low were fixed and verified. |
The October 9–10 baseline reviews predate HINC’s permit-enabled token. The subsequent Global Registry review audited the incremental permit and transferWithPermit implementation. It does not establish a file-by-file or bytecode mapping from its audited commits to the deployed HINC token and every active HINC service. The Investor Locks review is in the same code family, but its reviewed files have not been mapped file by file to HINC’s active services. The Permissionless Compliance review does not directly apply to HINC’s permissioned configuration.
Exhibit 11
Securitize’s DS Protocol repository accepts vulnerability reports at protocol@securitize.io. Securitize also operates a public bug-bounty program that offers financial rewards based on the severity and impact of reported vulnerabilities. Its published scope identifies id.securitize.io and cp.securitize.io as primary systems. Securitize confirmed that the program covers the DS Protocol and associated on-chain resources. Because HINC’s token and supporting contracts use that shared DS Protocol, the program covers the HINC deployment. Reports may be submitted through bugbounty@securitize.io or the program’s designated form.
3.4 Access-control model
HINC uses Securitize’s shared Trust hierarchy rather than a token-specific OpenZeppelin AccessControl contract. At the time of writing, the following roles controlled the HINC token and its supporting services.
| Role or control | Holder at the time of writing | Authority |
|---|---|---|
MASTER and token owner() |
0x59c1…76Ee |
Transfer Trust ownership; assign and remove roles; replace and configure services; authorize upgrades |
TRANSFER_AGENT |
0xB40E…1a48 |
Pause and unpause HINC; seize and burn tokens; assign and remove other TRANSFER_AGENT accounts |
ISSUER |
0x22F5…528B |
Issue and burn tokens; assign and remove ISSUER and EXCHANGE accounts |
Service-contract ISSUERs |
Token Issuer, Wallet Registrar, and Transaction Relayer | Execute issuance and related protocol operations under onlyIssuerOrAbove |
Securitize confirmed that the HINC MASTER address is controlled through Fireblocks MPC under a multi-party approval policy. The supplied control framework describes sensitive and MASTER-level actions as requiring approvals from separate participants and maintaining records through Fireblocks and Securitize’s internal change-management process. These controls operate offchain: the Trust contract recognizes the resulting transaction as coming from the MASTER address and does not independently enforce the approval participants or threshold.
The two most consequential roles for Horizon are MASTER and TRANSFER_AGENT. MASTER controls the system’s role structure, service configuration, and upgrade path. The Transfer Agent can immediately stop token movement or change a holder’s balance through pause, seizure, and burn functions. Section 3.5 describes these token controls, and §3.8 applies them to Horizon’s supply, withdrawal, and liquidation path.
3.5 Pause and transfer-control surface
HINC has a global pause controlled by TRANSFER_AGENT and MASTER. When the token is paused, Compliance returns code 10, TOKEN_PAUSED, and ordinary transfer and transferFrom calls revert.
The pause does not disable every balance-changing function. In the verified source, issuance, burn, and seizure use separate validation paths that do not check the token’s paused state. Authorized ISSUER, TRANSFER_AGENT, and MASTER operations may therefore remain available while ordinary holder transfers are paused.
| Control | Effect |
|---|---|
| Global pause | Prevents ordinary transfer and transferFrom calls |
| Registry or Compliance rejection | Prevents the affected wallet from sending or receiving HINC |
| Token lock | Prevents transfer of the locked amount until its release time |
| Seizure | Reassigns a holder’s HINC to an issuer-designated special wallet |
The relevant role holders are identified in §3.4.
3.6 Token-level semantics
The defining token-level behavior of HINC is the permissioned transfer. transfer and transferFrom call Compliance before balances move. Compliance checks the sender’s balance, applicable token locks, and the eligibility of the sending and receiving wallets through the Registry. A transfer that does not satisfy those checks reverts.
The configured U.S. and non-U.S. subscription lock periods are both 24 hours, consistent with the PPM. Tokens subject to a lock cannot be transferred until the relevant amount is released.
HINC supports ERC-2612 permit and transferWithPermit. These functions allow a holder to authorize an allowance by signature, but the resulting transferFrom remains subject to the same Compliance, Registry, pause, and lock checks as an ordinary transfer.
The privileged burn function identifies the holder directly and does not require an allowance or holder approval. The seize function similarly reassigns a holder’s balance without an allowance, but requires the receiving address to be an issuer-designated special wallet. The roles authorized to call those functions are described in §3.4.
HINC records balances internally as shares and converts them to token amounts through the Rebasing Provider. At the observation block, multiplier() returned 1e18, so one internal share corresponded to one token unit and balances were not being rebased. Portfolio income is reflected through NAV rather than an increase in token quantity.
3.7 Oracle architecture
RedStone publishes the daily HINC value it identifies as the Fund Administrator’s offchain NAV through signed Trusted Single Source Oracle packages. On September 3, 2026, the Ethereum, Avalanche, and Solana packages each reported $1,002.11 per HINC.
For Horizon, Securitize identifies 0xbD284A0338ba4bd09Ec13Cd18Fd275442456C6d6 as the live Chainlink-compatible HINC NAV feed. The deployed contract is an EACAggregatorProxy. Section 5 covers the NAV methodology, publication timing, and proposed LlamaGuard configuration.
3.8 Horizon integration path
If the mandatory listing conditions in §§3.2 and 3.3 are satisfied, the proposed Horizon integration would hold the underlying HINC in a reserve-specific RwaAToken and record each supplier’s position through a non-transferable aToken. The reserve would be collateral-only: HINC could not be borrowed or flash-borrowed, supplyOnBehalfOf would be disabled, liquidation would transfer the underlying HINC, and the liquidation protocol fee would be 0%.
| Stage | Asset movement | HINC requirement |
|---|---|---|
| Supply | User → HINC RwaAToken |
The user must be permitted to send HINC, and the RwaAToken must be registered and eligible to receive it |
| Withdrawal | HINC RwaAToken → user |
The user must remain registered and eligible to receive HINC |
| Liquidation | HINC RwaAToken → liquidator |
The liquidator must be registered and eligible to receive HINC |
| Realization | Liquidator → Fund or eligible buyer | The liquidator must satisfy the applicable redemption or transfer requirements described in §2.3 |
During liquidation, the liquidator repays the Horizon Pool in the borrowed stablecoin and receives the underlying HINC directly from the RwaAToken. The liquidator must then realize the seized HINC through the Fund’s permissioned redemption process or a transfer to another eligible buyer.
Each transfer remains subject to the token controls described in §§3.5 and 3.6. A pause, token lock, or failed Registry or Compliance check can cause a transfer to revert. The RwaAToken and the liquidator’s wallet therefore need to be eligible under those controls for the liquidation path to work.
The live VBILL reserve confirms this custody and liquidation pattern. Its RwaAToken holds the supplied underlying, and liquidation transfers that underlying directly to msg.sender. Liquidators cannot elect to receive the non-transferable RWA aToken through receiveAToken=true.
HINC supply and liquidation path. The reserve-specific RwaAToken holds the underlying HINC. Withdrawals and liquidations transfer HINC through its Registry and Compliance controls, and a liquidator must use the Fund’s permissioned exit process to realize the collateral.
IV. Parameter Recommendations
4.1 Initial parameters
Subject to satisfaction of the mandatory listing conditions in §§3.2 and 3.3, LlamaRisk recommends the following initial parameters:
General Market Parameters
| Parameter | LlamaRisk recommendation |
|---|---|
| LTV | 55% |
| Liquidation Threshold | 67% |
| Liquidation Bonus | 8% |
| Reserve Factor | - |
| Optimal Utilization | - |
| Base Variable Borrow Rate | - |
| Variable Slope1 | - |
| Variable Slope2 | - |
| Supply Cap | 10,000 HINC |
| Borrow Cap | - |
| Borrowing Enabled | No |
| Usage as Collateral | Yes |
| Isolation Mode | No |
| Siloed Borrowing | No |
| Borrowable in Isolation | No |
| E-Mode | HINC GHO |
| Flashloan Enabled | No |
GHO E-Mode
| Asset | HINC | GHO |
|---|---|---|
| Collateral | Yes | No |
| Borrowable | No | Yes |
| LTV | 57% | - |
| LT | 69% | - |
| Liquidation Bonus | 8% | - |
The proposed initial supply cap is 10,000 HINC, set to limit initial collateral exposure to approximately $10 million. This is approximately half the expected $20 million day-one Fund size.
The recommendation reflects HINC’s below-investment-grade portfolio, permissioned transfer and redemption process, multi-day exit, and lack of an instant-redemption buffer at launch. At maximum LTV, HINC can decline 17.9% before reaching the 67% liquidation threshold. The 8% liquidation bonus provides an incentive for the liquidator to assume the underlying credit and execution risk. Sections 4.2 and 4.3 explain the parameter headroom and supply-cap decision.
4.2 Parameter calibration
The proposed LTV, liquidation threshold, and liquidation bonus are assessed against two margins: the decline from maximum LTV before liquidation begins, and the collateral remaining at liquidation after the bonus. The resulting values are shown below.
| Mode | LTV | LT | LB | Decline before liquidation | Residual at the trigger |
|---|---|---|---|---|---|
| Standard | 55% | 67% | 8% | 17.9% | 27.6% |
| GHO E-Mode | 57% | 69% | 8% | 17.4% | 25.5% |
Under the standard parameters, HINC can decline 17.9% from maximum LTV before liquidation begins. At the trigger, debt plus the 8% bonus consumes 72.4% of the then-current collateral value, leaving 27.6%. GHO E-Mode adds two percentage points to both LTV and LT while preserving similar decline-to-trigger headroom.
The public 70% HYG / 30% JBBB proxy is used to assess the speed and scale of market losses, not as evidence of HINC performance. Its worst one-, three-, and five-day losses since 2022 were 3.0%, 4.8%, and 5.2%, while its peak-to-trough decline was 13.40%. Each remains within the standard 17.9% decline-to-trigger.
The 8.0% and 16.0% hypothetical shocks remain within that margin. The supplied March 2020 benchmark loss of 18.25% would cross it. Crossing the threshold initiates liquidation; it does not by itself imply bad debt.
The 8% liquidation bonus reflects the permissioned transfer process, multi-day realization period, credit-market movement, and execution risk faced by a liquidator.
4.3 Supply cap and liquidation capacity
The proposed initial supply cap is 10,000 HINC, set to limit initial collateral exposure to approximately $10 million. This is approximately half the expected $20 million day-one Fund size.
| Measure or source | Amount | Basis or treatment |
|---|---|---|
| Recommended supply cap | 10,000 HINC | Initial approximately $10 million exposure limit |
| KPK | Approximately $5 million standing capacity | HINC-specific capacity indication; not contractual |
| Lhava | Approximately $5 million at a time, with daily replenishment | Supplemental; onboarding required and replenishment terms not contractual |
| Fission | $10 million initial platform capacity across multiple assets | Dynamically allocated; no amount dedicated or guaranteed to HINC |
| Expected day-one Fund size | Approximately $20 million | Planning figure |
The cited figures are capacity indications, not committed HINC facilities. They do not establish a dedicated HINC allocation, response-time or settlement SLA, or binding replenishment obligation.
V. Pricing Setup
5.1 NAV methodology and timing
The July 17 PPM states that Net Assets are determined at 4:00 p.m. ET on each Valuation Day and published promptly on the Portal as the Token price. The calculation uses Portfolio Holdings and Liquidity Pool values from the preceding Business Day. The July 23 Valuation Policy identifies IDC bid prices for high-yield bonds and S&P Global marks for CLOs; newly issued CLOs may remain valued at cost for approximately one to three weeks.
The issuer DDQ separately describes NAV as struck at 5:00 p.m. ET using current-Business-Day Administrator valuations. The PPM is the governing investor document, so this review uses its prior-business-day valuation process as the conservative assumption.
The documents also distribute valuation authority differently. The PPM gives the Investment Advisor conclusive valuation authority using Portfolio Holdings supplied by the Administrator. The Valuation Policy assigns residual-asset determinations to the sub-adviser and other valuation matters to the Administrator in consultation with the sub-adviser. The Articles allow the Directors or an authorised agent to determine the valuation method and permit the Directors to substitute a value they consider more representative.
Under the PPM assumption, the underlying portfolio marks may already be one Business Day old before NAV is calculated. Any additional delay between calculation, publication, and the Horizon oracle update increases the age of the collateral value used by Horizon. The full interval from the underlying security marks to the final oracle update determines how old the collateral value may be when Horizon uses it.
NAV is the Fund’s accounting value. A liquidator’s realized proceeds will also depend on transfer eligibility, redemption acceptance, any applicable deductions or holdbacks, market movement, asset sales, and settlement.
5.2 Oracle publication path
RedStone publishes HINC through signed Trusted Single Source Oracle packages. On September 3, 2026, the production packages for HINC_ETHEREUM_FUNDAMENTAL, HINC_AVALANCHE_FUNDAMENTAL, and HINC_SOLANA_FUNDAMENTAL each reported $1,002.11 per HINC. The packages establish the published value and signer quorum; the underlying portfolio valuation and NAV calculation remain offchain.
In the proposed Horizon configuration, the published value would first be delivered through a Chainlink-compatible source and then checked by LlamaGuard before the protocol uses it.
Exhibit 12
5.3 Recommended LlamaGuard configuration
If HINC satisfies the mandatory listing conditions and is approved for onboarding, LlamaRisk recommends the following initial LlamaGuard settings for the production HINC NAV feed.
| Parameter | Value |
|---|---|
maxExpectedApy |
800 bps (8%) |
upperBoundTolerance |
50 bps (0.5%) |
maxDiscount |
350 bps (3.5%) |
lowerBoundTolerance |
10 bps (0.1%) |
lookbackWindowSize |
4 |
The 8% maxExpectedApy aligns with the manager-indicated expected APY. The separate 0.5% upperBoundTolerance permits limited variation above that level. The 3.5% maxDiscount permits a daily decline approximately 48 basis points larger than the public proxy’s worst observed one-day loss of 3.02% in the reviewed 2022-onward series. The public proxy is a conservative reference point for setting the daily guardrail, rather than evidence of HINC’s own performance.
Disclaimer
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work. The information provided should not be construed as legal, financial, tax, or professional advice.