# Canonical: https://www.uddalak.xyz/hyperliquid-academy/article/33-hlp-vaults
# Author: Uddalak Das
# Last source: https://www.uddalak.xyz/hyperliquid-academy/article/33-hlp-vaults

---
title: "HLP and HyperCore Vaults Explained"
description: "How Hyperliquid vaults pool capital, how HLP differs from user-created vaults, and what depositors are exposed to."
track: "Capital & DeFi"
level: "Intermediate"
primary_icp: ["DeFi-native user", "trader"]
secondary_icp: ["institutional decision-maker"]
reading_time: "3 min"
last_reviewed: "2026-09-07"
---

# HLP and HyperCore Vaults Explained

HyperCore vaults let multiple depositors allocate capital to one trading account or strategy. The best-known example is **HLP**, Hyperliquid's protocol vault, but the vault system also supports user-created strategies.

```mermaid
flowchart LR
    A[Depositors] --> B[Vault equity]
    B --> C[Vault trading account]
    C --> D[Market making]
    C --> E[Liquidation-related activity]
    C --> F[Other strategy positions]
    D --> G[PnL]
    E --> G
    F --> G
    G --> B
```

## A vault is pooled trading capital

A depositor receives a proportional claim on the vault's equity. If the strategy makes money, the value of that claim can rise. If the strategy loses money, the depositor shares that loss.

That makes a trading vault different from a lending pool. The return is driven by the underlying trading strategy rather than a contractual borrower interest rate.

## What makes HLP different?

HLP is protocol-operated and has historically performed functions connected to Hyperliquid's market structure, including market-making and handling positions created through the liquidation system. Its exact positions change continuously with market conditions.

Users should therefore avoid treating historical HLP returns as a fixed yield. The vault takes market risk and can experience drawdowns.

## User vaults add another layer of risk

HyperCore also allows users to create vaults managed by a designated leader. The leader controls trading strategy while depositors provide capital under the vault rules.

A depositor should assess:

- strategy concentration and leverage
- leader incentives and track record
- liquidity and withdrawal rules
- drawdowns, not only headline returns
- whether returns came from repeatable execution or one market regime

## Why vaults matter

Vaults turn trading expertise into a pooled onchain product. They also show how HyperCore can support more than direct self-trading: the same native market infrastructure can be used by strategies that aggregate third-party capital.

For professional users, the right comparison is closer to managed trading capital than a savings product. Returns come with execution, market, leverage, and strategy risk.

## Sources

- https://hyperliquid.gitbook.io/hyperliquid-docs/hypercore/vaults
- https://hyperliquid.gitbook.io/hyperliquid-docs/hypercore/vaults/protocol-vaults