Cashflow timing and reward sustainability: why yield isn't the same as cash
Cashflow timing and reward sustainability: why yield isn't the same as cash
A yield number tells you how much a position is earning. It doesn't tell you when that earning turns into cash you can actually withdraw, and the gap between those two things is where a surprising number of yield products quietly break. A sustainable yield and an unsustainable one can display the identical APY right up until the moment the cash runs out.
How it works
Accrued yield is what a position has earned on paper. Realized cash is what has actually arrived and can be paid out. In a credit portfolio, these two rarely move in lockstep: a loan accrues interest daily, but the borrower might pay monthly, quarterly, or in a lump sum at maturity. The portfolio's stated yield reflects accrual; its ability to actually pay redeeming investors reflects realized cash, and those can diverge for extended periods.
That divergence creates a specific failure mode. If a fund promises investors regular, liquid redemptions but its underlying assets only generate cash at long intervals, it has a timing mismatch: it owes cash out on a faster schedule than its assets deliver cash in. As long as new deposits keep arriving, the mismatch can stay hidden, because new money funds old redemptions. When deposits slow, the mismatch surfaces immediately, and the fund either gates redemptions or is forced to sell assets at a discount to raise cash it doesn't otherwise have.
Reward sustainability is the discipline of making sure a yield is actually funded by real cash flow from the underlying assets, not by new deposits, token emissions, or reserves being drawn down. A yield paid from genuine portfolio cash flow can continue indefinitely. A yield paid from any of those other sources is borrowing from the future, and it lasts exactly as long as the source it's borrowing from.
Why it matters
The distinction between accrued yield and realized cash is the distinction between a headline number and a promise the structure can actually keep. An investor evaluating a yield product needs to look past the APY to the cash flow behind it: where does the money to pay me actually come from, and does it arrive on a schedule that matches when I'm told I can withdraw.
This is also the single most important thing separating a durable yield product from a fragile one. Many of the most damaging failures in both DeFi and traditional finance trace back to a timing mismatch that stayed invisible while inflows were strong, then became catastrophic the moment inflows reversed, because the yield was never really funded by the assets in the first place.
Where this shows up in Rekord
Rekord structures LP redemption terms to match the actual cash-generation timing of the underlying deal types, rather than promising liquidity the assets can't support. For how redemption timing specifically is handled for institutional deposits, see Async deposits and ERC-7540: why institutional LPs can't use synchronous vaults.