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Tranched Funds

A Tranched Fund is a wrapped Morpho V2 vault that splits its return stream into two share classes — senior (protected) and junior (premium income) — so depositors can pick their seniority on the same underlying strategy.

What a Tranched Fund is

A Tranched Fund is the standard LayerCover wrapper applied to a Morpho V2 vault. The underlying strategy and venue mix is unchanged — the curator still allocates across Morpho Blue, Euler V2, Aave V4, and any other approved adapter from a single vault — but the return stream that comes back is split into two pooled tranches.

Both share classes are fungible ERC-20s. Gains, losses, and the streaming premium all flow through the share prices rather than being attributed per position.

Senior vs junior

	Senior (`lcSEN`)	Junior (`lcJUN`)
Role	Protected yield	First-loss buffer
Yield in normal conditions	`underlyingAPY − premium`	`underlyingAPY + premium × (senior ÷ junior)`
Premium flow	Pays a continuous premium to junior	Receives a continuous premium from senior
Loss exposure	Untouched until junior is exhausted	Absorbs underlying losses first
Cap on size	Capped at 4× junior at deposit time	No upper bound — more junior lifts senior's cap
Withdrawal notice	5 days	10 days
Best for	Treasuries, DAOs, conservative allocators	Market makers, risk-seeking DeFi users

Why a curator would launch one

A Tranched Fund extends a curator's strategy to a wider audience without changing how they curate.

Conservative lenders — treasuries, DAOs, custodians — who want yield but won't sit in a single-tranche pooled-risk market can hold lcSEN.
Risk-seeking lenders — market makers, leveraged DeFi users — get amplified yield on lcJUN by absorbing senior's first-loss.

One strategy, two audiences, one fund to operate.

Learn More

Senior tranche — depositing, withdrawing, what protection actually buys.
Junior tranche — premium income, the 4× leverage cap, exit gate.
Protection model — the waterfall in full.
Junior cooldown — why both sides need a withdrawal notice.
Fees — protocol fee, curator fee, keeper-side withdrawal fee.
Premium rate changes — owner-scheduled, timelocked.