Frequently Asked Questions

All estimation is driven by 10-minute VWAP (Volume-Weighted Average Price) observations of the underlying assets sampled during market hours. This intraday frequency allows the strategy to respond quickly to changing market conditions.

The strategy uses asymmetric rebalancing thresholds: it de-risks aggressively (2% threshold) when volatility is rising, but re-risks conservatively (3% threshold) when volatility is falling. This helps protect capital during stress while avoiding excessive trading in calm markets.

The strategy has an emergency override that forces immediate rebalancing if portfolio volatility exceeds 115% of target. This ensures sudden volatility spikes are addressed immediately, rather than waiting for the next scheduled window.

The Old vs. New strategy uses risk parity (equal risk contribution) rather than equal capital allocation. Each asset's weight is proportional to the inverse of its volatility, so the more volatile leg (typically QQQ) is held in smaller size to equalize each asset's contribution to portfolio risk.

Three conditions can trigger rebalancing in the Old vs. New strategy:

1. Scheduled rebalancing at 10:00, 13:00, 14:00, and 15:00 ET
2. Significant drift: when any asset's weight deviates by more than 5% from target
3. Emergency volatility breach: when portfolio volatility exceeds 115% of the target.

The strategy deliberately uses a minimal tradable universe of two assets on opposite sides of a thematic divide. This simplicity allows for focused risk management and clear thematic expression: gold as an inflation- and crisis-sensitive store of value versus technology as a growth engine.

The Lati bank is one of the oldest family-owned banks in Lebanon and a cornerstone in the history of the banking system of the Middle-East.

Established in 1924 by Joseph Lati (originally Lati Maison de Banque and then Banque Joseph Lati & Fils), the Lati family was deeply embedded in the Beirut business elite, located on Allenby Street, next to the Zilkha Bank and Jacob E. Safra bank. In 2009, the bank was merged with BLC Bank.

The Legacy continues internationally through the Joseph Isaac Lati's daughters and Lati Capital. Their international network runs from New York to Dubai, passing through Switzerland.

Yes, that's normal. Orders are always expressed in number of shares (or notes), so when you specify a dollar quantity, it will be converted to a number of notes right away. From the time between clicking "submit" and execution, the price can already change, so you will be buying for a slightly different dollar amount.

There's nothing to worry, you receive less value if the cost basis turns out to be different, you are just trading a quantity that at the most recent prices doesn't exactly equate to the dollar amount you initially entered anymore.

No - returns are never guaranteed. That’s a fundamental rule of investing. If a product offers higher returns in some scenarios, it must deliver lower returns in others.

With traditional bank-issued structured notes, this tradeoff is fixed upfront. The bank designs a payoff profile: strong returns in certain scenarios, weaker outcomes in others; and then prices it conservatively. In practice, that means you’re giving up some upside (and sometimes taking more downside risk) so the bank can build in a margin for itself.

With Lati Capital, you still have that same core tradeoff between outcomes across scenarios. But there’s an additional layer: the payoff is dynamically hedged rather than contractually fixed.

That means:

• We target a specific payoff profile and aim to replicate it as closely as possible
• In most cases, results are close to target
• But outcomes can be slightly better or worse depending on market conditions and hedge performance

So unlike a bank note, even the "target" payoff isn’t guaranteed.

Why do it this way? Because we don’t charge the embedded fees that banks do. Instead of the bank taking a margin and delivering a smoothed, conservative outcome, you keep that value, but take on the variability that comes with it.

A simple way to think about it:

• Bank structured note: more certainty, but lower expected return (fees baked in)
• Lati Capital: higher expected value, but some variability around the target payoff

On average, we aim to deliver the payoff you designed, without the bank’s margin.

A structured product is a pre-packaged, customized investment strategy, typically issued by an investment bank, that combines a debt instrument (bond) with one or more derivatives (like options).

Its returns are not driven by fixed interest, but are instead linked to the performance of an underlying asset, such as a stock index (e.g., S&P 500), a single stock, a basket of securities, or commodities.

Core Characteristics:

• Tailored Payoffs: Designed to meet specific goals, such as providing partial downside protection ("buffers") or enhanced income, in exchange for capping potential gains.
• Two Main Parts: A "bond piece" (often a zero-coupon bond) provides the principal protection, while the "options piece" provides exposure to the upside potential.
• Buy-and-Hold: Designed to be held until maturity, which is typically 1–10 years.
• Not Liquid: Limited secondary market exists; selling before maturity may result in significant losses.

Finding consistent yield in traditional markets is difficult, but there is one asset class that has historically been a persistent source of return: volatility - the rate and magnitude at which a stock’s price moves up or down over time.

In most cases, volatility is something investors try to avoid. Human behavior amplifies this preference: due to biases like loss aversion, people tend to dislike uncertainty and short-term price swings, even if those swings don’t affect long-term value.

However, volatility itself can be systematically harvested as a source of return when managed correctly. One way to think about it is as a disciplined version of “buy low, sell high,” where quantitative strategies dynamically adjust exposure as prices move, effectively monetizing the ups and downs rather than fearing them.

This creates an important distinction in financial products. When you buy a structured product from a bank, you are typically selling volatility, the bank is taking the other side and earning returns from the price movements you’re giving up. In contrast, when investing with Lati Capital, the strategy is designed to buy volatility, aiming to capture the returns generated by those same market fluctuations.

Each structure generates target quantities continuously, depending on tock prices, index rebalance events, or volatility triggers.

However, whether we actually trade to the new target quantity depends on a few factors:

1. Is the change meaningful? We don't trade tiny fractions of shares, although you can configure what the minimum threshold for trading is in your account settings
2. We don't immediately reverse trades: If we bought a stock 1 hour ago due to changes in volatility, but now the rebalance dictates a sale, we may not do it to avoid churn. Note though that volatility induced rebalances always occur
3. We net positions across strategies and may see rounding errors
4. there may be leverage constraints on the portfolio level that restrict us from fully allocating

A Fixed Index Annuity (FIA) is an insurance product that provides principal protection while offering returns linked to the performance of a market index, like the S&P 500.

Instead of directly investing in the market, your money is held by an insurance company. You typically earn:

• A minimum guaranteed return of 0% (no loss of principal, excluding fees/surrender charges)
• Upside participation in an index, subject to caps, spreads, or participation rates

The tradeoff is that you give up some upside in strong markets in exchange for downside protection and tax-deferred growth.

Bank-issued structured products typically include multiple layers of embedded costs.

First, there are explicit distribution fees, which are disclosed in the prospectus. These include underwriting discounts, dealer concessions, and selling fees. In most cases, these amount to roughly 3-5% of the investment upfront.

Second, there are implicit costs that are not directly disclosed. Banks price the underlying components, such as options and funding, using conservative assumptions that work in their favor. For example, they may use higher implied volatility when selling options to clients than what they expect to hedge at in the market. This creates additional economic margin beyond the stated fees.

As a result, the true cost of a bank-issued structured product is typically higher than the headline 3-5%, even though only part of that is explicitly visible.

As with any investment, your capital is at risk of price fluctuations. Stocks can go up or down, dynamics can change due to effects outside of our control. There is no guarantee of future performance from past returns.

Aside from that, there are other risks clients should be aware of, and at Lati Capital we do everything possible to mitigate them:

• Cyber security risk: Like any technology forward company, we are under constant attack from hackers trying to gain access to our systems. We use the best tools available to defend our infrastructure and have not had an issues in the past
• Hindsight risk: This is human bias similar to buyer's remorse. When you invest your money with Lati Capital, you can't invest the same money elsewhere, for example, in Bitcoin. If Bitcoin has an amazing run, you missed out and would have been better off investing in Bitcoin
• Operational risk: While we have a full, proprietary tech stack and go through rigorous testing via various stages, sometimes technology fails. In a worst case scenario this could mean that access to your portfolio is not possible. In an extreme scenario we would need to manually process any orders / transfer requests. While possible, it would be much slower. It is important to know though that it's virtually impossible that assets are "lost" in the sense that they disappear from your portfolio (but they can loose value).

For full disclosure of risks, please also refer to our Form ADV pt 2. brochure.

Lati Capital has a legacy that other firms can't match.

On one hand, there is the long standing history in banking. Banque Lati was founded over 100 years ago and has served customers in the Middle East.

On the other hand, there's the technology and academic edge: We have quants with decades of experience from top institutions including Goldman Sachs, Morgan Stanley, AQR. And it is important to know that at these firms, the founders were at the core of the action: In structuring, trading, and research.

Lastly, we offer a full suite. We are a registered investment advisory with FINRA, operating as an internet based advisor under SEC Rule 203A-2(e). You can open an account with us, you will get investment advice, tax statements, prospectuses, reports, notices, etc. We are a real investment advisor, not just a trading bot.

Lati Capital does not use AI to find a new trading strategy, like other shops. Instead, we use:

• Tried and tested volatility research to model the stochastic dynamics of stocks, and to price derivatives
• Academic research to design baskets of stocks that perform in a controlled way, for example, correlation models to ensure that the total volatility of a basket hits the target
• Rigorous risk management to ensure we protect your assets

We take the angle a top Wall Street institutions takes: Manage positions to minimize risk and maximize returns. This is fundamentally different from AI strategies that try to ride certain waves and overfit on data, without fully understanding what the dynamics behind everything are.

Having said all that, we do use AI to help is identifying signals, process data, and improve our processes before bringing it together using rigorous portfolio theory and derivatives modeling.

Traditional structured products have the following risks:

• Issuer/Credit Risk: If the bank that issued the note goes bankrupt, you could lose your entire investment, regardless of the underlying asset's performance
• Complexity: Difficult to price and understand the exact payoff formula
• Limited Gains: If the market surges, your return is often capped.
• No Dividends or interest: You generally do not receive dividends if the underlying asset is a stock, although you are paid a yield which is in part generated by the fact that your investment should return via interest or dividends

At Lati Capital, many of these risks don't exist, in particular, there is no credit risk towards a bank, or Lati Capital. We help you manage your money in a way that produces the return profile you want.

Some characteristics are the same:

• You also define your "payoff", i.e. you set the goals that you would like to meet, such as an 8% return over a 6 month period
• The products can reference single stocks, or a basket of stocks, and these baskets are professionally curated and managed

But there are key differences:

• You are not committing to a fixed duration and you can change your investment at any time, at no cost
• Because of that, your payoff is not guaranteed; instead, our algorithms work exactly the way the risk management and hedging strategies at the bank work: hedging the payoff so that your goals are achieved (or exceeded).
• In the traditional version, any extra profit made by the bank is kept by the bank; at Lati Capital, extra return is yours
• There are no hidden fees: you pay a flat management fee on the size of your investment
• There is no counterparty risk. Unlike structured notes, you are not facing a financial institution. Your assets are yours, held in your name, at a trusted, regulated brokerage and even in case of failure of any party involved, the cash and shares will not be lost (see important details below)

To sign up to Lati Capital's QIS platform, create an account at https://portal.lati-capital.com

The steps are:

1. create a login. You'll be asked basic info like email address, name, and phone number. You will need to verify your email address and once done, you can log in
2. create an account. This can be either a paper trading account if you want to try our system, or you can start the onboarding process for a live trading account

When these two steps are complete, you are ready to select the strategies you'd like to invest in.

The US Sector Climber is a sector rotation strategy. Its core objective is to dynamically allocate capital toward sectors expected to outperform, while reducing exposure to sectors expected to underperform.

Rather than focusing on individual stocks, it groups the market into broad economic sectors (for example Technology, Healthcare, Energy, and Utilities) and evaluates their relative attractiveness, often using signals such as momentum and trend dynamics. Based on these signals, the strategy systematically overweights sectors with stronger expected performance and underweights or avoids weaker ones.

This is meaningfully different from traditional market-cap weighted indices like the S&P 500. In those indices, sector weights change only gradually as companies grow or shrink in market capitalization. As a result, exposure is relatively sticky and does not actively respond to changing market regimes.

The Sector Climber, by contrast, is explicitly dynamic: it can meaningfully shift exposure across sectors as conditions change, leading to potentially large deviations from static benchmark allocations.

A key design goal is not just return maximization, but risk-adjusted performance. The strategy seeks to allocate risk efficiently across sectors, avoiding excessive concentration in high-volatility areas (such as Technology when it becomes overheated), and instead balancing exposure across multiple sectors in a way that targets higher returns per unit of risk. In practice, this means constructing a portfolio that can combine higher-growth sectors with more defensive ones (such as Utilities) to improve overall stability while maintaining return potential.

These terms are often used interchangeably in practice, but there is a technical distinction.

A strategy defines the rules for how capital is allocated across a set of underlying assets, specifically, the weights in each asset and how those weights evolve over time. For example, a simple strategy might specify: allocate 25% of capital to each of four stocks, and rebalance periodically to maintain those weights.

An index is the time series representation of applying that strategy to a notional starting capital. To construct it, you pick a base level (e.g. $10,000), allocate it according to the strategy, and then track how the value evolves as underlying prices move and as the strategy rebalances. By construction, the index starts at 10,000 on day one and fluctuates thereafter based on the performance of the underlying basket and the rebalancing rules.

So in practice:

• The strategy is the methodology (the rules engine)
• The index is the resulting performance path (the observable P&L series)

In QIS, instruments like GLRUSSC1 typically refer to both depending on context:

• When discussing construction, it refers to the strategy specification
• When discussing performance or pricing, it refers to the index level

GLRUSSC1 is the ticker for the US Sector Climber index. The ticker can be broken down as follows:

GLR = name of technology form providing the index
US = focused on US market
SC = sector climber

In other contexts, these strategies are called sector rotators, but the idea is the same: allocate dynamically to the best performing sectors.

There are a few challenges to keep in mind when building infrastructure to run strategies yourself:

1. Data infrastructure and quality control
   Access to high-quality data is not straightforward. Even with strong vendors, you still need to continuously ingest, normalize, and curate data, while handling issues like corporate actions, ticker changes, market halts, and missing prints. Options data alone can easily exceed 60GB per day, and strategies often require the full depth of the feed at all times, not just snapshots.
2. Continuous operations and reliability
   Strategies don’t run “when convenient”, they must operate throughout the entire trading day with strict timing constraints. This requires production-grade infrastructure with redundancy, failover systems, monitoring, and the ability to recover instantly from outages or data gaps without corrupting positions.
3. Derivatives modeling and calibration complexity
   Real-world derivatives modeling goes far beyond textbook Black-Scholes. Even simple replication or delta-hedging requires continuously calibrated inputs such as interest rate curves, dividend forecasts, and full volatility surfaces. These inputs are themselves noisy, high-dimensional, and market-dependent, and small errors can compound quickly into large P&L deviations.
4. Research, backtesting, and simulation integrity (often underestimated)
   Developing strategies is not just about coding a signal, it requires a robust research pipeline where backtests are realistic, bias-free, and reproducible. This includes handling look-ahead bias, survivorship bias, execution assumptions, and realistic transaction costs (including slippage and impact). Many strategies that look strong in research fail once implemented because the simulation environment was not sufficiently faithful to live trading conditions.

All our strategies are defined as intraday strategies, meaning they continuously monitor the market for new information. While the exact behavior varies from strategy to strategy, a few things are in common:

• Portfolios are checked for rebalancing
• Rebalances only occur when certain minimum thresholds are met
• We ensure that there's no churn: if a small sell would reverse an earlier buy, we may not execute it
• Risk management overlays, such as volatility targeting, can trade in exceptional circumstances, for example, if spikes due to macro economic events occur

Typically, our quantitative investment strategies turn over between 4 to 8 times per year.