Risk Factors & Disclosures

• Strategy-Specific Risks (Funding Spread Convergence, Trend Reversals): Quantitative strategies depend on market inefficiencies. For instance, funding rate arbitrage profits when differences between spot and futures markets remain wide. If these differences narrow quickly ("funding spread convergence"), returns may decrease. Similarly, momentum-based strategies perform well in trending markets but can face losses if markets reverse rapidly and unpredictably. Investors should understand that market conditions can impact returns significantly.

• Smart Contract Risk & Vault Security: Kvants leverages smart contracts to automate strategy execution and custody of funds securely. Although extensively audited, smart contracts still carry inherent technological risks such as coding vulnerabilities, potential exploits, or unforeseen operational failures. Kvants employs rigorous auditing, continuous monitoring, and proactive security measures, yet it’s important for investors to recognize smart contract security as a critical risk factor.

• AI Model Drift & Data Feed Sensitivity: AI models powering Kvants strategies rely heavily on real-time market data and machine learning algorithms. These models could experience "drift," where their predictions become less accurate over time due to shifts in market dynamics, data patterns, or unexpected anomalies. Additionally, any disruptions or inaccuracies in data feeds from external providers can directly impact model performance and strategy outcomes. Kvants actively manages and continuously updates these models to mitigate such risks.

• Legal, Regulatory & Custodial Risks Operating within the cryptocurrency and decentralized finance (DeFi) space exposes Kvants and its investors to regulatory uncertainty. Changing regulations or enforcement actions across jurisdictions could impact operational capabilities, compliance obligations, or strategy availability. Custodial risks, including potential compromise or failures of external custodians, could impact asset security. Kvants proactively ensures regulatory compliance, robust custody arrangements, and clear legal structuring to minimize these risks, but investors must remain aware of the evolving regulatory environment.