Retarget Leverage Flow

The retarget leverage flow is used to bring the Position Manager’s LTV back to its target when it has drifted due to interest accrual, price movements, or previous deposit/withdrawal flows that left the LTV off-target. There are two directions depending on whether leverage needs to increase or decrease.

This page describes the mechanism as the Position Manager sees it: a rebalancer arrives with capital, moves collateral and debt, and leaves with the proceeds. Since v1.3.0 that rebalancer is normally a Retargetter, which sources the capital for a whole operation and settles it under a set of guardrails. Its two concrete routes are documented separately:

• Synchronous Retargeting, funded by a flash loan, all in one transaction.
• Asynchronous Retargeting, funded by a bridge loan on a Request across the fund’s settlement window.

Increase Leverage

When the Position Manager is below its target LTV, the rebalancer increases leverage by depositing new collateral and borrowing against it.

sequenceDiagram
    participant R as Rebalancer
    participant PM as Position Manager

    R->>PM: 1. Deposit collateral assets
    PM->>PM: 2. Borrow against new collateral
    PM-->>R: 3. Debt tokens + fee

How It Works

1. Collateral acquisition — The rebalancer acquires collateral assets (e.g., wUSCC) externally, typically through a short-term loan
2. Deposit — The rebalancer deposits the collateral into the Position Manager
3. Borrow — The Position Manager borrows against the new collateral, increasing the LTV toward the target. The borrowed amount plus a fee is returned to the rebalancer to cover the cost of acquiring the collateral

The fee compensates the rebalancer for the cost of the loan taken to acquire the collateral assets.

Decrease Leverage

When the Position Manager is above its target LTV, the rebalancer decreases leverage by repaying debt to unlock collateral.

sequenceDiagram
    participant R as Rebalancer
    participant PM as Position Manager

    R->>PM: 1. Repay debt
    PM->>PM: 2. Unlock excess collateral
    PM-->>R: 3. Collateral assets + fee

How It Works

1. Debt repayment — The rebalancer provides capital (e.g., USDC) to repay a portion of the Position Manager’s debt, typically through a short-term loan
2. Collateral release — With less debt outstanding, excess collateral is unlocked and the LTV decreases toward the target
3. Return — The freed collateral plus a fee is returned to the rebalancer to cover the cost of the capital used for repayment

The fee follows the same principle — it compensates the rebalancer for the cost of the loan taken to provide the repayment capital.

When Retargeting Occurs

The Position Manager’s LTV drifts from its target over time due to:

• Interest accrual — borrow interest increases debt, pushing LTV up
• Price movements — changes in collateral value shift the LTV ratio
• Deposit/withdrawal flows — these flows are capped to avoid overshooting, often leaving the LTV slightly off-target

Retargeting is the only way to bring the LTV back to its exact target. Deposit and withdrawal flows partially retarget by netting with existing holders, but they do not overshoot to compensate.

Who Drives It

The rebalance entry point on the Position Manager is gated by its rebalancer role. Where that role is held by a Retargetter, the capital in the diagrams above is the Retargetter’s bridge loan and the fee is the yield paid to the lenders who funded it. The Retargetter also enforces, on top of the Position Manager’s own loss and cooldown checks, that a rebalance it drives moves the position in the right direction and does not grow the position’s net value while a bridge loan is outstanding.