In a year when the world's biggest hedge funds are sufferinglosses and closures, one asset manager is trouncing rivals bybetting on currencies—without taking a view on their direction.

Quaesta Capital AG, a hedge fund based in the Zurich area, runsa $420 million foreign-exchange options program that earned 21percent this year through Nov. 11 by wagering on volatility,according to Thomas Suter, the company's chief executiveofficer. It's the top performer among 15 programs tracked by theParker Global Currency Manager Index, which lost almost 2 percentin that period.

The strategy, dubbed v-Pro, has profited by speculating thatswings in major currencies will grow more pronounced as theFederal Reserve moves to lift interest rates from near zero.It's the only strategy in the Parker index that focuses onvolatility, which has rebounded from a record low set in 2014.Quaesta uses dynamic delta hedging—a wager on volatility thatrequires constant adjustments to make sure it avoids taking astance on foreign-exchange movements.