The Convexity Edge: How David Dredge's Volatility Strategy Thrives in 2025's Turbulent Markets

In 2025, global markets are a mosaic of uncertainty. Geopolitical tensions, erratic inflation, and shifting interest rates have left investors scrambling to balance risk and return. Amid this chaos, one firm stands out: Convex Strategies Pte Ltd, whose volatility-driven investment philosophy, honed over three decades by its founder, David Dredge, is proving to be a beacon of resilience. Here's why their approach to convexity could be the key to navigating—and profiting from—the current storm.

The David Dredge Factor: A Career Built on Anticipating Chaos

David Dredge, Convex's CEO and Chief Investment Officer, has spent over 30 years mastering the art of volatility. His career spans roles at Fortress Investment Group, Artradis Fund Management, and RBS/ABN AMRO Group, where he refined a strategy that marries rigorous macroeconomic analysis with disciplined risk management. As a main committee member of Singapore's Foreign Exchange Markets Committee (SFEMC), Dredge has insider access to the dynamics shaping Asia's forex markets—a critical edge in an era where currency swings can upend portfolios overnight.

His expertise is underscored by his ability to anticipate pivotal market shifts. In 2022, he warned of “The Market Risk Nobody's Watching,” focusing on inflationary pressures and geopolitical disruptions long before they became mainstream concerns. Today, as energy crises, supply chain bottlenecks, and central bank hawkishness roil markets, his track record of spotting vulnerabilities and hedging against them positions Convex to outperform.

The Convexity Playbook: Turning Volatility into Opportunity

Convex's philosophy hinges on convexity, a mathematical concept describing strategies that profit disproportionately from extreme market moves while limiting downside exposure. This isn't about gambling on trends—it's about constructing portfolios that benefit from both rising and falling markets, thanks to carefully engineered hedges and derivatives.

Key pillars of their strategy include:
1. Foreign Exchange (FX) Volatility: Leveraging Singapore's position as a forex hub, Convex uses SFEMC insights to exploit currency dislocations. With the U.S.-China trade war, energy price swings, and the eurozone's fiscal fragility creating FX turbulence, their structured FX products are designed to capture asymmetric returns.
2. Interest Rate Arbitrage: As central banks globally hike rates to combat inflation, Dredge's team exploits mismatches between short-term and long-term yields. Their models, tested through decades of rate cycles, aim to profit from both tightening and eventual easing phases.
3. Structured Products & Catastrophe Bonds: Convex's foray into structured products—customized instruments that blend equity, debt, and derivatives—provides downside protection while targeting growth. A standout example is their Hypatia Re catastrophe bond, which pools risk across natural disasters, offering investors exposure to reinsurance markets without direct equity stakes.

Why 2025 Is the Perfect Storm for Convex Strategies

Current market conditions are tailor-made for Convex's approach:
- Elevated Volatility: The CBOE Volatility Index (VIX) has surged to multiyear highs, reflecting investor anxiety.
- Interest Rate Uncertainty: The U.S. Federal Reserve's aggressive rate hikes and the ECB's balancing act between growth and inflation create fertile ground for Dredge's arbitrage strategies.
- Structural Shifts: Geopolitical fragmentation is pushing capital toward safe havens like Singapore, where Convex's regional insights and SFEMC connections provide a competitive moat.

The Proof in the Pudding: A Track Record of Resilience

While precise performance metrics are confidential, Convex's trajectory speaks volumes. The firm emerged from a 2019 management buyout with $1.7 billion in committed capital, growing to over $2.7 billion by 2021 through investments from giants like GIC, Onex, and PSP Investments. Their ability to attract top-tier institutional capital—despite the lack of public offerings—reflects confidence in their risk-mitigation prowess.

Critically, their strategies have weathered storms before. During the 2022 stagflation scare, their focus on “defensive growth”—hedged positions in structured products and FX—helped clients avoid catastrophic losses while capitalizing on dislocations.

The Call to Action: Seize the Convexity Advantage

In 2025, investors face a stark choice: cling to traditional assets in a volatile world or adopt strategies designed to thrive in chaos. Convex Strategies' blend of convexity engineering, SFEMC-informed forex expertise, and structured product innovation offers a rare path to asymmetric returns—profits that grow exponentially with volatility, without the all-or-nothing gamble of pure speculation.

As Dredge often reminds clients: “A view is what you think will happen; risk is what hurts when you're wrong.” With his firm's proven ability to quantify and mitigate that risk, now is the time to act.

The markets are turbulent—but with Convex, you're not just riding the waves. You're shaping them.

Disclaimer: Past performance is not indicative of future results. Investments in volatility-based strategies carry risks, including the potential for 100% loss. Consult with a financial advisor before making decisions.