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Quadratic Capital Management LLC
Quadratic is a differentiated, woman-owned fundamental global macro manager. We partner with our investors to deliver an absolute return strategy with low volatility and zero to negative correlation to risk markets.
Quadratic employs a risk-based approach to portfolio construction. We invest exclusively in liquid options and swaptions across FX, commodities, rates, equities, and credit. Using options that have a defined maximum possible loss, our portfolio has many of the attributes of principal protected investments. Further, we limit the maximum possible fund drawdown to no more than 15 percent of AUM at all times. Each individual, asymmetric position has a strictly limited risk-weighting, ensuring that no single directional view can have a large adverse impact on the portfolio.
Being long volatility is central to our structuring and, therefore, Quadratic tends to be uncorrelated to equity market beta in risk-off environments. Quadratic is an absolute return strategy, not volatility-based, so we aim to generate exceptional risk-adjusted returns in all volatility environments. We use options for risk management and to generate additional alpha by exploiting mispricings in volatility markets.
We see tremendous opportunity for Quadratic's strategy. Options markets are used primarily by hedgers and systematic sellers of volatility seeking yield enhancement, providing ample supply. Since bank dealer desks have significantly lower VaR limits as a result of recent regulatory changes (e.g. The Volker Rule, Dodd-Frank, Basel III), supply/demand imbalances occur more frequently in the global volatility markets than they did historically, and Quadratic is uniquely positioned to take advantage of such dislocations across asset classes.
Quadratic employs leverage from convexity in options, not from prime brokers. Therefore, Quadratic does not have funding risk or borrow risk like the majority of hedge funds.
Please contact Investor.Relations@QuadraticLLC.com for inquiries.
