Risk Disclosures

1. General Risk Disclosure

Investing in digital assets and related strategies involves substantial risk, including the possible loss of principal. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.

Key considerations:

• Past performance is not indicative of future results
• Simulated or hypothetical performance has inherent limitations
• No representation is made that any account will achieve similar results
• There is always the potential for loss as well as gain

2. Market Risks

Digital asset markets are highly volatile and can experience significant price swings in short periods. Market conditions can change rapidly and without warning.

2.1 Price Volatility

• Digital assets may experience extreme price fluctuations
• Volatility can result in significant gains or losses in short timeframes
• Market prices may be influenced by speculation, regulatory news, and technological changes

2.2 Liquidity Risk

• Liquidity conditions may vary significantly across different venues and time periods
• Large positions may be difficult to liquidate without impacting market prices
• During periods of market stress, liquidity may disappear entirely
• Bid-ask spreads may widen significantly in volatile conditions

2.3 Market Disruption

• Trading venues may experience outages or technical failures
• Network congestion may prevent timely execution of transactions
• Market manipulation or abnormal trading activity may occur

3. Strategy-Specific Risks

Market-neutral strategies, while designed to minimize directional exposure, carry their own set of risks:

3.1 Basis and Spread Risk

• Convergence Risk: The spread between related instruments may not converge as expected
• Funding Rate Risk: Funding rates may move adversely or become highly volatile
• Correlation Risk: Historical correlations may break down during market stress

3.2 Execution Risk

• Market conditions may prevent optimal trade execution
• Slippage may exceed expectations, particularly for larger orders
• Execution delays may result in unfavorable pricing

3.3 Model Risk

• Quantitative models may not perform as expected in all market conditions
• Models are based on historical data that may not predict future behavior
• Parameter estimates may be incorrect or become outdated
• Unforeseen market events may cause model failures

3.4 Hedging Risk

• Hedges may not perform as intended under all market conditions
• Basis risk between hedging instruments and underlying positions
• Costs of hedging may reduce returns or result in losses

4. Technology and Smart Contract Risks

Digital asset strategies rely on blockchain technology and smart contracts, which carry inherent risks:

4.1 Smart Contract Risk

• Smart contracts may contain bugs, vulnerabilities, or exploits
• Audited contracts are not guaranteed to be free of issues
• Upgrades or changes to protocols may have unintended consequences
• Interaction between multiple smart contracts may create unforeseen risks

4.2 Protocol Risk

• DeFi protocols may be subject to governance attacks
• Economic exploits may drain funds from protocols
• Oracle manipulation or failures may cause incorrect pricing
• Protocol parameters may be changed without notice

4.3 Infrastructure Risk

• Blockchain networks may experience congestion, forks, or failures
• Validator or miner behavior may impact transaction processing
• Bridge or cross-chain protocols carry additional risks
• Dependency on third-party infrastructure providers

5. Counterparty and Custody Risks

5.1 Counterparty Risk

• Trading venues or protocols may fail or become insolvent
• Counterparties may default on their obligations
• Margin or collateral requirements may change without notice

5.2 Custody Risk

• Loss of private keys may result in permanent loss of assets
• Security breaches may result in theft of assets
• Multi-signature arrangements carry operational complexity
• Self-custody requires robust security practices

6. Regulatory Risks

The regulatory environment for digital assets is evolving and uncertain across jurisdictions:

• New laws or regulations may restrict or prohibit digital asset activities
• Tax treatment of digital assets may change or be unclear
• Enforcement actions may impact specific assets or protocols
• Regulatory uncertainty may affect market prices and liquidity
• Cross-border regulatory differences create compliance complexity
• Sanctions or restrictions may limit access to certain markets or assets

7. Operational Risks

• System Failures: Hardware, software, or network failures may disrupt operations
• Human Error: Mistakes in execution, monitoring, or risk management
• Cybersecurity: Hacking, phishing, or other cyber attacks
• Key Person Risk: Dependence on specific individuals for strategy execution
• Business Continuity: Events that disrupt normal business operations

8. Leverage and Margin Risks

While Monet Capital strategies emphasize risk-controlled exposure, the following risks apply to leveraged positions generally:

• Leverage amplifies both gains and losses
• Margin calls may require additional capital or forced liquidation
• Liquidation may occur at unfavorable prices
• Funding costs for leveraged positions may be significant

9. Concentration and Diversification Risks

• Concentration in specific assets, strategies, or venues increases risk
• Diversification does not guarantee protection against losses
• Correlations between assets may increase during market stress
• Limited investment universe in digital assets compared to traditional markets

10. Liquidity and Redemption Risks

• Investments may be subject to lock-up periods or redemption restrictions
• Redemption requests may be delayed during adverse market conditions
• NAV calculations may be delayed or subject to adjustment
• In-kind redemptions may be required in certain circumstances

11. Tax Risks

• Tax treatment of digital assets varies by jurisdiction and is subject to change
• Transactions may trigger taxable events with uncertain timing or treatment
• Reporting requirements may be complex and evolving
• Investors are responsible for their own tax compliance

12. No Guarantee of Returns

There is no guarantee that investment objectives will be achieved. Market-neutral strategies are not risk-free and can result in losses.

• Historical performance, simulated or actual, is not indicative of future results
• Backtested performance has significant limitations
• Results may vary significantly from expectations
• Total loss of invested capital is possible