BNDD: The Quadratic Deflation ETF

Q2 2026

About Quadratic Capital Management and Krane Funds Advisors, LLC

Quadratic Capital Management

Quadratic Capital Management is an innovative asset management firm founded in 2013 by Nancy Davis. The firm has utilized its significant expertise in fixed income and options markets to construct The Quadratic Deflation ETF (NYSE Ticker: BNDD). Quadratic Capital Management serves as the Investment Sub-Adviser to the BNDD ETF.

Krane Fund Advisors, LLC

Krane Funds was founded in 2013 by Jonathan Krane and manages approximately $9 billion. The firm seeks to provide innovative, first to market strategies that have been developed based on the firm and its partners' deep knowledge of investing. Krane Funds Advisors serves as the Investment Adviser to the BNDD ETF.

Select Quadratic Capital Highlights, Milestones, and Awards

Forbes profiles Nancy Davis

Nancy Davis named to inaugural Barron's "100 Most Influential Women in U.S. Finance" list

Wall Street Journal profiled 6 investors' market views and strategies

Nancy Davis of Quadratic Capital Management was featured alongside notable investors including Lloyd Blankfein (ex-CEO, Goldman Sachs), Paul Britton (Capstone Investment Advisors), Rick Rieder (BlackRock), Jeremy Grantham (Grantham Mayo Van Otterloo), and Rob Arnott (Research Affiliates).

Problem: The Debt Machine is Challenging Investors

Extreme over-indebtedness has worsened dramatically, and the US fiscal situation is tenuous.

BNDD uses interest rate options to enhance long duration bonds to increase the exposure if long-term yields fall and to benefit if the Fed does not cut interest rates as much as the market has currently priced in for the future.

• Is it time to add duration to your portfolios given the move higher in long-term interest rates?
• Are fundamentals too weak to sustain current long-term yields?
• After a year of risk management cuts in 2025, will higher energy costs in 2026 cause the Fed to fall short of rate cut expectations and stifle growth?
• Do demographics and high debt service costs breed more and more debt until we reach deflation?
• Is there no way out of this debt trap?

Key Themes:

• (MMT) Modern Monetary Theory
• Extreme Over-Indebtedness
• Demographics

Demographics

• The US population is aging, and the baby boomers are retiring.
• The birthrate in the US has been falling since the early '90s. The Census Bureau estimates that this decline will continue.
• An economy is strengthened by people having babies, consuming and working. When population growth stalls, the costs of government programs are spread over fewer people.
• The median age in the US has increased by roughly 50% since 1965.

Dependency Ratios for the Population: 1940 to 2010, Projected Ratios 2020 to 2060

By 2020, there are projected to be two dependents for every three working-age adults.

Year	Youth Dependency	Old-age Dependency	Total Dependency
1940	49	11	60
1950	51	13	64
1960	65	17	82
1970	61	17	78
1980	46	19	65
1990	42	20	62
2000	41	20	61
2010	38	21	59
2020	37	28	64
2030	37	35	72
2040	36	37	73
2050	35	38	73
2060	35	41	76

Extreme Indebtedness

• While many believe stimulus spurs growth, it has ballooned the federal debt to well beyond 100% of GDP.
• These are debt levels never seen outside of wartime.

U.S. Federal Debt and Deficit (chart showing Federal Debt Held by the Public as % GDP and Federal Deficit as % GDP from 1930 to 2030)

• Federal Debt Held by the Public peaked at 106.1% of GDP (WWII era) and has risen again to 100.3% of GDP recently.
• Federal Deficit reached 14.9% of GDP at its recent peak.

Lower for Longer: How different is the US from Europe and Japan?

• Global long-term interest rates have plummeted over the past three decades amid a surge in sovereign debt issuance.
• This may have created a perverse incentive for central banks to keep interest rates "lower for longer."
• With the recent rise in global long-term rates, is it time to add US duration to your portfolio?

30y Interest Rates (%) — Chart comparing 30y JPY Swap Rate, 30y EUR Swap Rate, and 30y USD Swap Rate from Jan-00 to Mar-26.

BNDD: Built to Help Investors Navigate the Debt Machine

• The Quadratic Deflation ETF (the "Fund") seeks to benefit from lower growth, deflation, lower or negative long-term interest rates, and/or a reduction in the spread between shorter and longer term interest rates by investing in U.S. Treasuries and options. It provides access to a part of the market usually reserved for large institutions.
• It may potentially help hedge a portfolio against the effects of deflation and/or the compression of the yield curve.

Unique Access

• Provides access to OTC fixed income options market which is typically not available to investors directly.

Asymmetric Upside

• Has the potential for enhanced returns in periods of lower growth.
• Option downside is limited to the market value of the options.*

Portfolio Diversification

• A potential diversifier to a traditional 60/40 portfolio.
• Bonds have historically increased during large equity sell-offs.

Quadratic Capital – Our Approach to Investing

BNDD is managed by Quadratic Capital, an innovative, woman-owned asset manager with extensive expertise in options trading and portfolio management.

QUADRATIC

• Quadratic was founded in 2013 by Nancy Davis
• Extensive experience structuring portfolios with the use of options
• Quadratic provides positive convexity to fixed income portfolios

PHILOSOPHY

• Quadratic's ETF strategies complement other diversifying investments
• Quadratic utilizes its significant expertise in the interest rate volatility and options markets to construct its portfolios

ACCESS

• The Quadratic ETFs aim to democratize financial markets by providing access to the OTC Interest Rate Markets
• Prior to Quadratic's ETFs, these strategies were not available to many investors

PROCESS

• An investment process must be repeatable
• Quadratic utilizes options in a way that seeks to mitigate the downside risk of the strategy while maintaining upside potential

PORTFOLIO

• Portfolio is composed of long dated US Treasury bonds plus interest rate options
• The interest rate options provide exposure to the spread between interest rates at different points in time

GOALS

• As long dated interest rates decline, the bonds should appreciate in price
• This strategy may serve as a bond enhancement strategy

BNDD Portfolio Composition

• The BNDD portfolio is composed primarily of long dated US Treasury bonds.
• In addition to bonds, the portfolio includes long-only options on the shape of the US interest rate curve.
• As interest rates decline, the bonds should appreciate in price.
• The options provide exposure to the spread between interest rates of different maturities.
• As the curve flattens because of lower inflation expectations and/or deflation, the price of the options tends to increase.

Portfolio Components:

• Actively managed long-only options that may benefit if long-term yields fall or if Fed cuts are less than what is priced by the market
• Long-Dated US Treasury Bonds

BNDD Provides Access to the Largest Asset Class: Rates

• BNDD provides access to the largest asset class: OTC rates.
• Most investors limit their exposure to stocks and bonds.
• The rates market is nearly 3 times larger than the US stock market.

Potential Benefits:

• By incorporating options, BNDD may enhance a portfolio consisting only of bonds and/or stocks.
• BNDD is a fixed-income strategy designed to benefit from the decline in interest rates and the flattening or inverting of the yield curve.
• BNDD may act as a market hedge since bond prices have historically increased during large equity sell-offs.

Relative Sizes of US Financial Markets

Segment	Share
OTC Rates	56%
Equities	21%
Credit	13%
Treasuries	10%

BNDD accesses the OTC Rates market.

The BNDD Ecosystem

• Portfolio Manager: Quadratic Capital
• Advisor: Krane Funds
• Exchange: NYSE
• Administrator: SEI
• Auditor: KPMG
• Custodian: BBH (Brown Brothers Harriman)

BNDD Risk Profile

Investing involves risk, including possible loss of principal. There can be no assurance that the Fund will achieve its stated objectives, including its objective of eliminating deflation risk.

• A Steepening Yield Curve Risk: BNDD may underperform or lose money when the forward U.S. interest rate curve steepens, perhaps significantly. When this occurs the Fund's investments may generally underperform a portfolio consisting solely of U.S. government bonds.
• Leverage Risk: BNDD's OTC options may give rise to a form of leverage, which may magnify the Fund's potential for gain and the risk of loss. The Fund may potentially be more volatile than a portfolio of traditional investments such as stocks or bonds.
• Liquidity & Counterparty Risk: OTC options may be subject to liquidity risk and counterparty risk.
• Credit & Non-Curve Interest Rate Risk: BNDD's use OTC options is not intended to mitigate counterparty risk, or non-curve interest rate risk. Additionally, BNDD invests in debt securities, which typically decrease in value when interest rates rise.
• Considered Speculative: Investing in options tied to the shape of the forward swap curve is considered speculative and can be extremely volatile.
• Concentration Risk: The fund is non-diversified.

BNDD Performance History

	Cumulative %			Average Annualized %
As of 3/31/26	3 Mo	6 Mo	Since Inception	1yr	3yr	Since Inception
Fund NAV	3.50%	0.39%	-19.60%	-4.62%	-4.49%	-4.70%
Closing Price	3.21%	-0.19%	-19.94%	-5.13%	-4.63%	-4.79%
Index*	-0.41%	-0.45%	-29.12%	0.47%	-1.51%	-7.32%

BNDD shareholders have received minimum monthly distributions of 30 basis points each month for over 4 years. Some distributions include a partial return of capital.

As of 3/31/26, the 30-day SEC Yield is 2.22%.

Performance Comments:

Since inception, BNDD has outperformed long-dated US Treasuries in various environments:

Risk On:

• BNDD outperformed during the risk on period of Q4 2021 thru Q1 2022 as it was +9.64% while long-term Treasuries were -7.83% and the S&P500 was +5.17%.
• BNDD outperformed in the first half of 2024. BNDD was roughly flat (-0.16%), while long-term Treasuries were -5.01%.
• BNDD underperformed in 2025 as the 2y30y yield curve steepened. Falling implied volatility negatively affected BNDD's option portfolio.

Risk Off:

• In Q3 2022, BNDD outperformed long-term Treasuries. BNDD was -2.98% while long-term Treasuries were -9.63%. The S&P500 was -5.28% in Q3 2022.
• In Q1 2025, as equity markets declined led by the Tech sector (Nasdaq -10.42%), BNDD underperformed (-0.29%) vs. long dated Treasury bonds (+4.67%).
• In Q1 2026, BNDD outperformed (+3.50%) long dated Treasury bonds (-0.61%) as the 2y30y yield curve flattened.

Portfolio Management and Capital Markets Leadership

Nancy Davis, Chief Investment Officer, Quadratic Capital Management

Nancy Davis founded Quadratic Capital in 2013. She is the portfolio manager for The Quadratic Interest Rate Volatility and Inflation Hedge ETF (Ticker: IVOL) and The Quadratic Deflation ETF (Ticker: BNDD). Prior to starting Quadratic, Nancy was with Goldman Sachs for about a decade, where she spent the majority of her time with the proprietary trading group. During her tenure, she advanced to become the Head of Credit, Derivatives and OTC Trading for Goldman Sachs Principal Strategies. She was also a Portfolio Manager at JP Morgan's hedge fund Highbridge Capital Management.

Nancy has been the recipient of numerous industry recognitions. Barron's named her to their inaugural list of the "100 Most Influential Women in U.S. Finance." Institutional Investor called her a "Rising Star of Hedge Funds." The Hedge Fund Journal tapped her as one of "Tomorrow's Titans."

Glenn Christal, Chief Operating Officer, Quadratic Capital Management

Glenn Christal is responsible for overseeing the business and trading operations for the company. Previously, Glenn Christal was at Tudor Investment Corp, a multi-billion macro hedge fund, for fifteen years where he was the Treasurer and chair of the Treasury and Credit Committees. His prior role was the Chief Operations Officer at Millennium Partners where he oversaw trade operations.

CK Chan, Senior Trader and Market Strategist, Quadratic Capital Management

CK's fixed income and volatility experience spans over 20 years as he headed market-making businesses for large banks such as Goldman Sachs, Morgan Stanley, and Citigroup. CK serves as an Adjunct Professor of Fixed Income at New York University and holds B.S. degrees in Mathematics and Management Science from Massachusetts Institute of Technology and an M.S. in Financial Risk Engineering from New York University.

Quadratic Capital and Krane Funds Leadership

Jonathan Krane, Chief Executive Officer, Krane Funds Advisors

Jonathan Krane is the founder and Chief Executive Officer of Krane Funds Advisors, the premier platform for developing and delivering differentiated, high-conviction investment strategies to global investors and KraneShares, an asset management firm delivering China-focused exchange traded funds to global investors.

Jonathan Shelon, Chief Operating Officer, Krane Funds Advisors

Jonathan is the Chief Operating Officer at KraneShares. Prior to KFA, he was the Chief Investment Officer of the Specialized Strategies Team at J.P. Morgan, overseeing $40 billion in AUM and a Portfolio Manager at Fidelity Investments where he was responsible for $150 billion in assets for over five million shareholders in Fidelity's target date strategies, the Freedom Funds.

David Adelman, Managing Director and General Counsel, Krane Funds Advisors

Ambassador (Ret.) David Adelman is a Managing Director and the General Counsel of KraneShares. He previously was a Managing Director at Goldman Sachs in Hong Kong and partner in two global law firms practicing law in New York, Washington, D.C., and Atlanta. David was the 15th United States Ambassador to Singapore, concluding his service in 2013.

Odette Gafner, Chief Compliance Officer, Krane Funds Advisors

Odette Gafner is Head of Compliance at KFA and joined the firm March in 2019 to oversee the compliance program for the Funds and to serve as the Chief Compliance Officer (CCO) to Krane Fund Advisors. Odette has over 12 years of experience implementing policies and establishing best practice across the asset management industry. Prior to joining the KraneShares team, Odette worked at BlackRock for 12 years.

Quadratic Capital and Krane Funds Leadership

Brendan Ahern, Chief Investment Officer, Krane Funds Advisors

Brendan Ahern is the Chief Investment Officer at Krane Funds Advisors (KFA). Mr. Ahern joined KFA in 2012 and was an original member of the team that launched its first ETFs. He leads the firm's research and education efforts and actively works with investors on a variety of subjects ranging from asset allocation to trading to articulating the growing influence that index providers hold in the asset management industry. Prior experience includes over ten years with Barclays Global Investors (subsequently BlackRock's iShares), which he joined in 2001 during the rollout of their ETF business.

James Maund, Head of Capital Markets, Krane Funds Advisors

James Maund joined KraneShares as head of Capital Markets in January 2020. James has more than 15 years of experience in ETF trading and capital markets. Prior to joining KraneShares, James was a vice president in the Institutional ETF Group / ETF Capital Markets Group at State Street Global Advisors. Prior to State Street, James was an ETF trader at Goldman Sachs & Co.

Florence Moon, Director, Krane Funds Advisors

Florence Moon joined KraneShares in June 2019 and is currently a Managing Director and Head of Institutional Business Development, supporting the firm's institutional efforts. Florence has over 15 years of experience working with institutional clients, handling all aspects of client service and relationship development.

Bill Fagan, Head of West Coast, Krane Funds Advisors

Bill Fagan joined KraneShares in 2017. He leads the firm's efforts across the Western U.S. & Canada. His expertise spans investment strategy, portfolio construction, exchange-traded products, trade execution/guidance, and retirement solutions. Prior to joining KraneShares, Bill worked at BlackRock with a focus on both traditional and alternative investment strategies.

Quadratic Capital and Krane Funds Leadership

Joseph Dube, Head of Marketing, Krane Funds Advisors

Joseph joined KraneShares in June 2012 as Head of Marketing. He is in charge of creating and maintaining all client-facing marketing materials including websites, advertisements, pitch books, and fact sheets as well as the bi-weekly research newsletter. He takes pride in designing and developing the highest quality educational material for retail investors, financial advisors, and journalists. Joseph has a BFA from the Rochester Institute of Technology.

Joe Demmler, Marketing Manager/Business Strategist, Krane Funds Advisors

Joe joined KraneShares in July 2021 as a Marketing Analyst to assist in creating and updating marketing materials, including pitchbooks, fact sheets, articles, and webinars. Currently, he's a Marketing Manager/Business Strategist, developing and executing marketing strategies and leading the cross-functional marketing team to meet project standards and business objectives.

Hugo Hasegawa, Senior Data Analyst, Krane Funds Advisors

Hugo is a Senior Data Analyst at KraneShares, specializing in delivering data-driven insights that drive asset growth, enhance lead generation, and improve system optimization performance. With a Bachelor's degree in Business Administration and a Master's degree in Business Analytics, Hugo brings a strong analytical foundation and a deep understanding of complex data systems to the team.

Brian Rista, Director, Client Service, Krane Funds Advisors

Brian joined KraneShares in 2017 as Director, Client Service. He is responsible for leading the internal sales team's efforts in increasing sales of KraneShares' China-focused ETFs. In his role as Director, Client Service, Mr. Rista focuses on building out distribution channels to wirehouses, independent broker-dealers, RIAs, institutions, and banks.

Quadratic Capital and Krane Funds Leadership

Zach Parke, Vice President, Client Services, Krane Funds Advisors

Zach joined KraneShares in March 2018 to further support the firm's Business Development efforts. His responsibilities include developing and fostering new relationships within Wirehouses, RIA Channels, Institutions, and Independent Broker-Dealers to promote and raise awareness of KraneShares as the thought-leader of China. Zach received his Bachelor of Business Administration in Finance with a concentration in Economics at the University of Delaware.

Kaitlyn Arico, Vice President, Client Services, Krane Funds Advisors

Kaitlyn joined KraneShares in March 2018 to further support the firm's Business Development efforts. As an Associate, Client Service, she focuses on cultivating new relationships with financial advisors, educating investors on China's investable markets and presenting KraneShares China-focused ETFs within the Wirehouses, RIA channels, Independent Brokers-Dealers and Institutions. Kaitlyn received her BA in Business Economics from the State University of New York at Oneonta, with a concentration in Finance.

Brooke Farley, Business Development, Quadratic Capital Management

Brooke Farley joined Quadratic in 2018. Previously, she was a consultant for McKinsey & Company and a risk underwriter at Bond Investors Guaranty. Ms. Farley received her BA in Art History from Manhattanville College and received a Master of International Affairs (MIA) from Columbia University's School of International and Public Affairs. Ms. Farley holds her Series 7 and Series 63 Securities licenses.

Guide to Trading ETFs

ETF liquidity is determined by the asset class, not by the fund size

• Exchange-traded funds (ETFs) are a wrapper, and although an investor may hold a large percentage of an ETF, one must look at the percentage owned of the underlying asset class.

ETF investors are not impacted by other investors' trades in the same ETF

• The ETF structure is unique in that all investors transact independently on an exchange. Being a large or small owner in a fund does not mean you're more or less impacted by the actions of other investors. In a mutual fund, all investors are impacted by the trading activity of other holders in the fund.

An ETF closure does not create principal risk

• If a fund were to close, neither large nor small investors would have a principal risk. The fund would be liquidated by the portfolio manager, and the investors would receive back NAV of the fund, minus costs, at the time of liquidation.

Trading in and out and fund size

• Investors can trade in and out of a fund regardless of the fund's AUM. ETF liquidity providers (market makers) can easily transfer the liquidity of the underlying basket into ETF shares. Market makers also accept NAV based orders for larger tickets.

Understanding ETF Liquidity

An ETF is not a stock

• If an ETF does not trade a certain number of shares per day, is the fund illiquid? No. It's a plausible assumption from a single-stock perspective, but with ETFs, there is more to consider. The key is to understand the difference between the primary and secondary market liquidity of an ETF.

Primary Market vs. Secondary Market

• Most noninstitutional investors transact in the secondary market—which means investors are trading the ETF shares that currently exist. Secondary liquidity is the "on screen" liquidity you see from your brokerage (e.g., volume and spreads), and it's determined primarily by the volume of ETF shares traded.

• However, one of the key features of ETFs is that the supply of shares is flexible—shares can be "created" or "redeemed" to offset changes in demand. Primary liquidity is concerned with how efficient it is to create or redeem shares. Liquidity in one market is not indicative of liquidity in the other market.

• The determinants of primary market liquidity are different than the determinants of secondary market liquidity. In the secondary market, liquidity is primarily a function of the value of the ETF shares traded and frequency and volume of the trading of those shares throughout the trading day. When placing a large trade—on the scale of tens of thousands of shares—investors are sometimes able to circumvent an illiquid secondary market by using an "authorized participant" (AP) to reach through to the primary market to "create" new ETF shares at NAV price.

Flow Chart of Creation Redemption Process for ETFs

• Small trades in ETFs flow normally are done in the secondary market, where all market participants can trade. It behaves like a stock, and everyone can buy (sell) from the best seller (buyer)

• Large and institutional trades – which normally would be a high percentage of the daily volume – are done in the primary market. The trading desk of the major broker dealers are called Authorized Participants and can create and redeem shares directly with the fund.

• BNDD Unit size for the primary market is 5,000 shares

Flow Chart:

Primary Market	Secondary Market
ETF ↔ Authorized Participants (ETF Shares / Cash / Securities)	Authorized Participants ↔ Trading Desk (Large Trade) ↔ Investor (Buy/Sell)
	Trading Desk ↔ Stock Exchange (Market Making / Market Order)

The Quadratic Deflation ETF

Key Fund Information

Field	Value
Ticker	BNDD
Fund Name	Quadratic Deflation ETF
Primary Exchange	NYSE
Total Annual Fund Operating Expense	1.02%
Inception Date	9/20/21
Distribution Frequency	Monthly

Important Notes

Carefully consider the Funds' investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Funds' full and summary prospectus, which may be obtained by visiting www.kfafunds.com. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal. There can be no assurance that a Fund will achieve its stated investment objectives. The Fund does not seek to mitigate credit risk, non-curve interest rate risk, or other factors influencing the price of U.S. government bonds, which factors may have a greater impact on the bonds' returns than the U.S. interest rate curve or deflation. There is no guarantee that the Fund's investments will eliminate or mitigate curve risk, or deflation risk on long positions in U.S. government bonds. In addition, when the forward U.S. interest rate curve steepens, the Fund's investments will generally underperform a portfolio comprised solely of the U.S. government bonds. In a steepening curve environment (increase in the spread between shorter and longer term interest rates), the Fund's strategy could result in disproportionately larger losses in the Fund's options as compared to gains or losses in the U.S. government bond positions. The Fund's exposure to options subjects the Fund to greater volatility than investments in traditional securities and may magnify the Funds' gains or losses. The Fund is non-diversified and therefore has concentration risk.

ETF shares are not redeemable with the issuing fund other than in large Creation Unit aggregations. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund.

There is no guarantee by the Fund will declare distributions in the future or that, if declared, such distributions will remain at current levels or increase over time. The Fund is non-diversified.

The Funds may invest in derivatives, which are often more volatile than other investments and may magnify the Funds' gains or losses.

There are risks involved with investing in options including total loss of principal. Options investing is not suitable for all investors.

Please carefully read the BNDD prospectus. Investors should read it carefully before investing or sending money.