Types of Clients
Polynomial currently provides provide investment advice to the following types of clients:
• Pooled investment funds structured as limited partnerships or exempted companies
The underlying investors in the Private Fund may include some or all of the following types of investors:
high net worth individuals, endowments, foundations, charitable organizations, sovereign wealth funds and
other sophisticated investors.
The constituent documents for the Private Fund sets minimum amounts for investment by prospective
investors and reserve to Polynomial the right to modify or waive, any minimum new investment
commitments from time to time. Minimum investment amounts for managed accounts will be determined
on a case-by-case basis.
POLYNOMIAL PARTNERS It e m
Methods of Analysis, Investment Strategies
and Risk of Loss Changes
Polynomial is a quantitative focused fund that invests in equities and other instruments such as preferred
stocks, warrants, fixed income instruments, futures, options, foreign exchange, and other derivatives as
necessary.
In general, the personnel of Polynomial use proprietary quantitative tools to forecast global index events and
trading at different time horizons. To have sound portfolio construction, Polynomial combines multiple
index events and often traded together to diversify as well as optimally execute the portfolio. The team then
utilizes large historical index data of various global indices to back test and fine tune the trading strategy.
Latest data and methodology are used to predict changes and measure the market impact of these index
events. These model predictions are then combined with risk management to adjust the target positions
related to size, liquidity, sector exposures and certain forward looking risk factors while taking predicted
liquidity and market impact into account.
Notwithstanding the above, the two main strategies that Polynomial employs which are discussed below.
Quantitative and Tactical Trading Approach
Polynomial runs quantitative and systematic strategies based on the market value of various financial
instruments impacted by supply/demand imbalances and converging towards their theoretical values (or
relative values) as predicted by statistical modeling and/or fundamental relative value modeling.
When deploying an opportunistic and tactical trading approach, Polynomial will employ a systematic global
trading strategy combining a collection of uncorrelated strategies each focusing on a limited number of
hard/soft catalyst events and/or signals having their number of risk metrics to be followed. In addition,
Polynomial will use various algorithms to forecast flows and supply/demand imbalances in financial
securities at various point in time.
Quantitative and Systematic Index Event Strategy
Polynomial specializes in a process-driven, systematic index event strategy and performs quantitative analysis
to build mathematical models that rely on patterns inferred from historical analysis of index events. Index
event strategies rely on directional long and short positions based on anticipated modifications and
reweighting of securities making up a certain index or indices maintained by the providers of such indices
in the market. The value of this strategy is derived from the ability to correctly anticipate those securities
who will be added, removed or otherwise have their weightings modified with respect to the relevant index
ahead of market movements reflecting the effects of the changes.
POLYNOMIAL PARTNERS
These strategies are designed by employing various risk management, optimization and execution
algorithms. In certain cases, Polynomial expects to rely primarily or solely on human discretion.
A. Material Risks
The full disclosure of risks facing investors in the Private Fund is found in the individual offering documents
for the relevant funds. Regarding risks that involve the investments and market strategies, which could lead
to a total loss of investment, the following are descriptive of material risks to an investment in the Private
Fund.
Leverage and Financing Risk
Polynomial typically will leverage its capital because Polynomial believes that the use of leverage may enable
the Private Fund to achieve a higher rate of return. Accordingly, the Private Fund may pledge its securities
in order to borrow additional funds for investment purposes. The Private Fund may also leverage their
investment return with options, short sales, swaps, forwards and other derivative instruments. The amount
of borrowings which the Private Fund may have outstanding at any time may be substantial in relation to
their capital.
While leverage presents opportunities for increasing the Private Fund’s total returns, it has the effect of
potentially increasing losses as well. Accordingly, any event which adversely affects the value of an
investment by the Private Fund would be magnified to the extent the Private Fund is leveraged. The
cumulative effect of the use of leverage by the Private Fund in a market that moves adversely to the Fund
and Private Fund’s investments could result in a substantial loss to the Private Fund which would be greater
than if the Private Fund were not leveraged.
Polynomial believes that the use of leverage may enable the Private Fund to achieve a higher rate of return.
Accordingly, the Private Fund may lever, taking the form of traditional borrowing such as trading on margin,
synthetic borrowings or holding derivative instruments which are inherently leveraged, stock borrowing,
and entering into other forms of borrowing or instruments with implied leverage. While Polynomial
maintains internal guidelines regarding the Private Fund’s use of leverage, the Private Fund is not subject to
any borrowing or leverage limitations.
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