Table of Contents

PART I

Item 1.           Business

Futures Portfolio Fund, Limited Partnership (“Fund”) is a Maryland limited partnership, was formed on May 11, 1989 and began trading on January 2, 1990.  Using professional trading advisors, the Fund engages in the speculative trading of futures contracts, forward currency contracts and other financial instruments traded in the United States (“U.S.”) and internationally.  The Fund primarily trades within seven market sectors: agricultural commodities, currencies, energy products, equity indices, interest rate instruments, metals and single stock futures.

The Fund’s fiscal year ends each December 31, and the Fund will automatically terminate on December 31, 2025, unless terminated earlier as provided in the Third Amended and Restated Limited Partnership Agreement (“Partnership Agreement”).  At December 31, 2017,2019, the capitalization of the Fund and net asset value per limited partner interest (“Units”) was as follows:

The Fund’s assets are allocated among professional trading advisors (“Trading Advisors”).  Portions of the Fund’s assets may be allocated to other investment funds or pools at the discretion of Steben & Company, Inc.LLC (“General Partner”).  The General Partner is responsible for selecting and monitoring the Trading Advisors, and itthe General Partner may add new Trading Advisors in the future, terminate the current Trading Advisors, and will, in general, allocate and reallocate the Fund’s assets among the Trading Advisors as it deems is in the best interests of the Fund and without prior notice to investors.

During 2014,Through year-end, the Fund purchased $58.5 million ofheld an interest in Class I shares of the Steben Managed Futures Strategy Fund (“SMFSF”).  SMFSF is a non-diversified series of shares of beneficial interest of Steben Alternative Investment Fund (the “Trust”), a statutory trust organized under the laws of the State of Delaware, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end investment company.  SMFSF issues four classes of shares: Class A, C, I and N. The General Partner servesserved as the investment manager of SMFSF.

SMFSF hashad a similar investment strategy to the Fund, using commodity trading advisors to engage in the speculative trading of futures contracts, forward currency contracts and other financial instruments.

At February 28, 2018,December 31, 2019, the Fund owned 40%38% of the value of the outstanding shares of SMFSF.  Prior to August 31, 2017, the Fund owned more than 50% of the value of outstanding shares of SMFSF and therefore had effective control of that entity.  Accordingly, the assets, liabilities and operating results of SMFSF were consolidated with the Fund through that date.  The portion of SMFSF that was not owned by the Fund was presented as the non-controlling interest.  Effective August 31, 2017, the Fund no longer consolidated the assets, liabilities and operating results of SMFSF into the Fund.  The Fund reports changes in the fair value of its investment in SMFSF on the Statement of Operations.  The investment in SMFSF is reported on the statement of financial condition as investment in SMFSF.  For financial reporting purposes, SMFSF is treated as a related party.  During 2017,2019, the Fund redeemed $19$6 million of its investment in SMFSF.  On January 24, 2020, SMFSF was merged into the LoCorr Macro Strategies Fund and on January 27, 2020, the Fund redeemed its interest in the LoCorr Macro Strategies Fund. 

The Fund maintains its margin deposits and reserves in cash, U.S. Treasury securities, registered U.S. money market funds, commercial paper, certificates of deposit, asset backed securities and corporate notes in accordance with Commodity Futures Trading Commission (“CFTC”) rules.  All related income earned accrues to the benefit of the Fund.

The Fund’s business constitutes only one segment for financial reporting purposes.  The Fund does not engage in material operations in foreign countries, although it does trade on international futures markets, nor is a material portion of its revenues derived from foreign customers.

General Partner

Under the Partnership Agreement, management of all aspects of the Fund’s business and administration is carried out exclusively by the General Partner, a Maryland corporationlimited liability company originally organized in February 1989.  The General Partner is registered with the CFTC as a commodity pool operator and introducing broker, and is also registered with the U.S. Securities and Exchange Commission (“SEC”) as an investment adviser and a broker dealer.  The General Partner is a member of the National Futures Association (“NFA”) and the Financial Industry Regulatory Authority (“FINRA”).

The shareholders of the General Partner entered into a stock purchase agreement with Octavus Group, LLC (“Octavus”) on September 25, 2019.  The transaction closed on October 31, 2019, and the General Partner became a wholly-owned member of Octavus.  Octavus is the parent company of LoCorr Fund Management LLC, which serves as the investment advisor to multiple alternative investment mutual funds.  LoCorr Fund Management LLC operates alternative investment funds with a low correlation to traditional asset classes.

The General Partner manages all aspects of the Fund’s business, including selecting the Fund’s trading advisors; allocating the Fund’s assets among them; investing a portion of the Fund’s assets in other investment pools; selecting the Fund’s futures broker(s), accountants and attorneys; computing the Fund’s net assets; reporting to limited partners; directing the allocation of excess margin monies; and processing subscriptions and redemptions.  The General Partner maintains office facilities for and furnishes administrative and clerical services to the Fund.  There have been no material administrative, civil or criminal actions within the past five years against the General Partner or its principals, and no such actions currently are pending.

Trading Advisors

As of February 28, 2018,29, 2020, the Trading Advisors of the Fund and the allocation of the Fund’s trading level are reflected as follows:

These allocations are subject to change at the General Partner’s sole discretion.

An objective of the Fund’s multi-manager approach is to reduce the Fund’s volatility without sacrificing overall rates of return.  Trading Advisors are selected by the General Partner based on a number of operational and performance factors.

Selling Agents

The General Partner acts as a selling agent for the Fund.  The General Partner has and intends to continue to appoint certain other broker-dealers registered under the Securities Exchange Act of 1934, as amended (“1934 Act”), and members of FINRA, to act as additional selling agents with respect to Class A, A2, A3, B, I and R Units.  Selling agents are selected to assist in the making of offers and sales of Class A, A2, A3, B, I and R Units.  The Fund currently has approximately 100 selling agents.  The selling agents are not required to purchase any Class A, A2, A3, B, I or R Units, or sell any specific number or dollar amount of Class A, A2, A3, B, I and R Units, but instead use their best efforts to sell such Units.  Where the General Partner acts as the selling agent it retains themay retain any selling agent fees, if any.fees.

Futures Brokers and Forward Currency Counterparties

The Fund’s futures trading is currently conducted with SG Americas Securities, LLC (“SGAS”), J.P. Morgan Securities LLC (“JPMS”), and Deutsche Bank Securities, Inc. (“DBSI”). and RJ O’Brien & Associates, LLC.  The Fund’s forward currency trading is conducted with Société Générale International Limited (“SGIL”) and Deutsche Bank AG, and UBS AG.  SGAS and Société Générale International LimitedSGIL are wholly-ownedwholly owned subsidiaries of Société Générale.  Société Générale is a société anonyme governed by French law.one of the largest financial institutions in Europe.  JPMS is an indirect, wholly-ownedwholly owned subsidiary of JPMorgan Chase & Co., one of the largest bank holding companies in the U.S.  DBSI is an indirect, wholly-ownedwholly owned subsidiary of Deutsche Bank AG, one of the largest bank holding companies in Europe.  UBS AGR.J. O’Brien & Associates LLC is another of the fund’s forward currency counterparties. UBS AG is a global financial services company operatingoldest and largest independent futures brokerage firm in more than 50 countries.the U.S. 

The General Partner may, in its discretion, have the Fund use other futures brokers, swap or forward currency counterparties if it deems it to be in the best interest of the Fund.

Cash Managers

The Fund has engaged Principal Global Investors, LLC (“PGI” or the “Cash Manager”) to provide cash management services to the Fund.  PGI manages the Fund’s cash and excess margin through investments in fixed income instruments, pursuant to investment parameters established by the General Partner.

Description of Current Charges

Market Sectors

The Fund trades speculatively, through the allocation of its assets to Trading Advisors, in U.S. and international futures markets, and may trade or hold futures, forwards, swaps or options.  Specifically, the Fund trades futures on agricultural commodities, currencies, energy products, equity indices, interest rate instruments, metals and single stock futures.  The Fund also trades forward currency contracts and may trade options, swaps and other forwards other than currencies in the future.

Market Types

The Fund trades on a variety of U.S. and international futures exchanges.  As in the case of its market sector allocations, the Fund’s commitments to different types of markets - U.S. and non-U.S., regulated and non-regulated - differ substantially from time to time, as well as over time, and may change at any time if a Trading Advisor, with the approval of the General Partner, determines such change to be in the best interests of the Fund.

Regulations

The Fund is a registrant with the SEC pursuant to the 1934 Act.  As a registrant, the Fund is subject to the regulations of the SEC and the reporting requirements of the 1934 Act.  As a commodity pool, the Fund is subject to the regulations of the CFTC, an agency of the U.S. government, which regulates most aspects of the commodity futures industry; rules of the NFA, an industry self-regulatory organization; and the requirements of commodity exchanges where the Fund executes transactions.  Additionally, the Fund is subject to the requirements of futures commission merchants, futures brokers and Interbank market makers through which the Fund trades.

Commodity exchanges in the U.S. are subject to regulation under the Commodity Exchange Act (“CEAct”), by the CFTC, the governmental agency having responsibility for regulation of commodity exchanges and commodity interest trading conducted thereon.  The function of the CFTC is to implement the objectives of the CEAct of preventing price manipulation and excessive speculation and promoting orderly and efficient commodities markets.  In addition, the various commodity exchanges themselves exercise regulatory and supervisory authority over their members.

The CFTC has exclusive authority to designate exchanges for the trading of specific futures contracts and options on futures contracts and physicals and to prescribe rules and regulations for the marketing of each.  The CFTC also possesses exclusive jurisdiction to regulate the activities of commodity trading advisors, commodity pool operators, introducing brokers, futures commodity merchants, swap dealers and floor brokers, among others, and may suspend, modify or terminate the registration of any registrant for failure to comply with CFTC rules or regulations.  Furthermore, the CEAct establishes an administrative procedure under which commodity customers may institute complaints for damages arising from alleged violations of the CEAct by persons registered with the CFTC (“reparations”).  The CEAct also gives the states certain powers to enforce its provisions and the regulations of the CFTC.

Pursuant to authority in the CEAct, the NFA has been formed and registered with the CFTC as a “registered futures association.” At the present time, the NFA is the only non-exchange self-regulatory organization for commodities professionals.  The CFTC has delegated to the NFA responsibility for certain registration processing.  The General Partner, the Fund’s futures brokers and swap dealers are members of the NFA (the Fund itself is not required to become a member of the NFA).  As members, they are subject to NFA standards relating to fair trade practices, financial condition and consumer protection.  As the self-regulatory body of the commodities industry, the NFA promulgates rules governing the conduct of commodity professionals and disciplines those professionals which do not comply with such standards.  The NFA also arbitrates disputes between members and their customers and conducts registration and fitness screening of applicants for membership and audits of its existing members.

The regulations of the CFTC and the NFA prohibit any representation by a person registered with the CFTC or by any member of the NFA that such registration or membership, respectively, in any respect indicates that the CFTC or the NFA, as the case may be, has approved or endorsed such person or such person’s trading program or objectives.  The registrations and memberships described above must not be considered as constituting any such approval or endorsement.  No commodity exchange has given or will give any such approval or endorsement.

The regulation of commodity trading in the U.S. and other countries is an evolving area of law, particularly in the context of implementing various aspects of Dodd-Frank and similar laws being implemented in other countries. The various statements made herein are subject to modification by legislative action and changes in the rules and regulations of the CFTC, NFA, and commodity exchanges or other regulatory bodies.

Competition

The Fund operates in a competitive environment in which it faces several forms of competition, including, without limitation, the following:

Available Information

The Fund files Forms 10-Q, 10-K, 8-K, 3 and 4, as required, with the SEC. The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  Additional information about the Reference Room may be obtained by calling the SEC at (800) SEC-0330.  Reports filed electronically with the SEC may be found at http://www.sec.gov.

Reports to Security Holders

None.

Enforceability of Civil Liabilities Against Foreign Persons

None.

Item 1A.            Risk Factors

No Limitations on Trading Policies

The Fund’s Partnership Agreement places no limitation on the trading policies the General Partner may pursue for the Fund.

Potential Increase in Leverage

The General Partner may increase the leverage used with a particular Trading Advisor by the use of notional funds.  Notional funds are used when a Trading Advisor is instructed to trade an account according to its trading system under the assumption that the account is larger than the actual cash or securities on hand.  This additional leverage, while creating additional profit potential which the General Partner feels may be appropriate with certain Trading Advisors in light of the Fund’s multi-trader diversification, also increases the risk of loss to the Fund.  It is anticipated that the General Partner will allocate between $1 and $2 to the Trading Advisors for every $1 of equity in the Fund.  Throughout 2019, the Fund maintained a notional trading level of approximately $1.60 for every $1 of equity in the Fund.

Volatility

The volatility of the Fund is expected to be similar to what it has been in the past, although it could be more or less volatile in the future depending upon the volatility of the market, the success of the Trading Advisors and the level of notional funding used by the General Partner in its allocations to the Trading Advisors.

Liquidity

Although the Fund offers monthly redemptions, the Fund may delay payment if special circumstances require, such as a market emergency that prevents the liquidation of commodity positions or a delay or default in payment to the Fund by a futures broker or a counterparty.

Complex Fee StructureCoronavirus (COVID-19) Pandemic

Allocation to more than oneThe ongoing coronavirus situation could cause unpredictable rapid market changes and increased volatility, which could negatively affect the trading programs of the Trading Advisor makes the Fund’s fee structure more complex which may impact the Fund’s profit potential.Advisors.

Fund Expenses Will Be Substantial

The Fund is obligatedobli­gated to pay brokerage expenses, Trading Advisor management and incentive fees, General Partner management and incentive fees, ongoing selling agent fees, Cash Manager fees and other administrative fees, regardless of whether it realizes profits.  The Fund will need to make substantialsubstan­tial trading profits to avoid depletion of its assets from these expenses.

Reliance on General Partner

The Fund’s success depends significantly on the General Partner’s ability to select Trading Advisors.Advisors and support the operations of the Fund.

Dependence on Key Personnel

The General Partner is dependentdepen­dent on the services of Mr. Kenneth E. Steben and key management personnel. If Mr. Steben’s services became unavailable, another principal of the firm or a new principal (whose experience cannot be known at this time) would need to take charge of the General Partner.

Reliance on the Trading Advisors

The Fund’s success depends largely on the ability of its Trading Advisors.  There can be no assurance that their trading methods will produce profits (or not generate losses).  Past performance is not necessarily indicative of future results.

Reliance on Futures Brokers’ Financial Condition

If one of the futures brokers becomes insolvent, the Fund might incurin­cur a loss of all or a portion of the funds it had deposited directly or indirectly with such futures broker.  There is no governmentgovern­ment insurance for commodity brokeragebroker­age accounts.  Such a loss could occur if one of the futures brokers unlawfullyun­lawfully failed to segregate its customers’ funds or if a customercusto­mer failed to pay a deficiency in its account.

Use of Cash Manager

A significant percentage of the Fund’s assets not placed as margin with the futures brokers are managed by PGI.  Using investment guidelines established by the General Partner, PGI may invest the excess margin in U.S. Treasury securities, U.S. and foreign government sponsored enterprise notes, commercial paper, corporate notes, asset backed securities and certificates of deposit.  Although these investments are considered to be high quality, some of the securities purchased are neither guaranteed by the U.S. government nor supported by the full faith and credit of the U.S. government.  There is some risk that a security issuer may fail to pay the interest and principal in a timely manner, or that negative perceptions about the issuer’s ability to make such payments will cause the price of these instruments to decline in value.

Investment in Other Investment Pools

During 2014,Although it does not do so currently, the Fund purchased $58.5 millionmay invest in other pools.  The Fund expects to be liable to those pools (e.g., limited partners), only for the amount of its investment plus any undistributed profits.  However, there can be no assurance in this regard, and the Fund might invest as a general partner if the situation warranted, and thus be liable for additional amounts.  If the Fund does invest in other pools, investors in the Fund could be subject to additional fees, as the Fund would be charged fees by the other pools.

During 2019, the Fund held an investment in Class I shares of the Steben Managed Futures Strategy Fund (“SMFSF”).  SMFSF is a non-diversified series of shares of beneficial interest of Steben Alternative Investment Fund, a statutory trust organized under the laws of the State of Delaware, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.  SMFSF has a similar investment strategy to the Fund, using trading advisors to engage in the speculative trading of futures contracts, forward currency contracts and other financial instruments.  Prior to March 2016, SMFSF used a total return swap to gain access to the gains and losses of a basket of trading advisors. The General Partner serves as the investment manager of SMFSF.

Although it does not do so currently,  The General Partner reduced the administration fees charged to the Fund may investto offset the management fee that the General Partner received from SMFSF related to the Fund’s investment in other pools. TheSMFSF.  On January 24, 2020, SMFSF was merged into the LoCorr Macro Strategies Fund expects to be liable to those pools (e.g., limited partners), only for the amount of its investment plus any undistributed profits. However, there can be no assurance in this regard, and on January 27, 2020, the Fund might invest as a general partner ifredeemed its interest in the situation warranted, and thus be liable for additional amounts.LoCorr Macro Strategies Fund. 

Investment in pools (or similar investment vehicles), as distinguished from direct participation in the markets, has several potential disadvantages.  Those investments may increase the Fund’s expenses, since the Fund will have to pay its pro rata share of the expenses borne by the investors in the pools, and the pools may have higher expenses.  The Fund will generally be a minority investor in those pools and thus lack control over the pools.  The pools might (a) change trading policies, strategies and trading advisors without prior notice to the Fund; (b) substantially restrict the ability of their investors to withdraw their capital from the pools; (c) be new ventures with little or no operating history; (d) be general rather than limited partnerships, thus increasing the Fund’s liability; and/or (e) use aggressive leveraging policies.

Use of Electronic Trading

The Trading Advisors may use electronic trading while implementing their strategies on behalf of the Fund.  Electronic trading differs from traditional methods of trading.  Electronic system transactions are subject to the rules and regulations of the exchanges offering the system or listing the specific contracts.  Attributes of electronic trading may vary widely among the various electronic trading systems with respect to order requirements, processes and administration. There may also be differences regarding conditions for access and reasons for termination and limitations on the types of orders that may be placed into the system.  These factors may present various risk factors with respect to trading on or using a specific system.  Electronic trading systems may also possess particular risks related to system access, varying response times and security procedures.  Internet enabled systems may also have additional risks associated with service providers and the delivery and monitoring of electronic communications.

Electronic trading may also be subject to risks associated with system or component failure.  In the event of system or component failure, it is possible that a Trading Advisor may not be able to initiate new orders, fill existing orders or modify or cancel orders that were previously entered, as well as exit existing positions.  System or component failure may also result in loss of orders or order priority.  Some contracts offered on an electronic trading system may also be traded electronically and through open outcry during the same trading hours. Exchanges offering an electronic trading system which lists contracts may have implemented rules to limit their liability, the liability of futures brokers, as well as software and communication system vendors and the damages that may be collected for system inoperability and delays.  These limitations of liability provisions may vary among the various exchanges.

Changes in Trading Strategies

The trading strategies of the Trading Advisors are continually developing.  The Trading Advisors are free to make any changes in their trading strategies, without notice, if they feel that doing so will be in the Fund’s best interest.  The General Partner will notify the limited partners of any such changes that the General Partner considers material.  Changes in commodities or the markets traded shall not be deemed a change in trading strategy.

Disadvantages of Periodic Incentive Fees

Because the Trading Advisor incentivein­cen­tive fees (if any) are paid on a quarterly or annual basis, they could receive incentive fees for a period even though their trading for the year was unprofitable.  Once an incentiveincen­tive fee is paid, the Trading Advisors retain the fee regardless of their subsequent performance, but no new incentive fees will be paid until after all previous losses have been recovered.

Disadvantages of Multi-Trader Structure

The Fund’s use of multiple Trading Advisors to conduct its trading has several potential disadvantages.  Each Trading Advisor is paid incentive fees solely on the basis of its trading for the Fund.  The Fund, therefore, could have periods in which it pays fees to one or more Trading Advisors even though the Fund, as a whole, has a loss for the period (because the losses incurred by the Fund from unprofitable Trading Advisors exceed the profits earned by the Fund from profitable Trading Advisors).

Because the Trading Advisors trade independently of each other, they may establish offsetting positions for the Fund.  For example, one Trading Advisor may sell 12 March wheat contracts at the same time another Trading Advisor buys 12 March wheat contracts.  The net effect for the Fund will be the incurring of two brokerage commissions without the potential for earning a profit (or incurring a loss).

Under certain unusual circumstances, the Fund might have to direct a Trading Advisor to liquidate positions in order to generate funds needed to meet margin calls, to fund the redemption of Units, or to permit the reallocation of funds to another Trading Advisor.  Such liquidations could disrupt the Trading Advisor’s trading system or method.

Disadvantages of Replacing Trading Advisors

The General Partner has the authority to reallocate the Fund’s assets among the Trading Advisors, terminate Trading Advisors and allocate assets to new Trading Advisor(s), or invest the Fund’s assets in other investment funds or commodity pools.

Trading Advisors generally have to “make up” previous trading losses incurred by the Fund on portions of the Fund the Trading Advisors are managing, before they can earn an incentive fee.  However,How­ever, a Trading Advisor might terminate its services to the Fund or the General Partner might decide to replace a Trading Advisor when it has such a loss carry-forward.  The Fund might have to pay a new Trading Advisor higher advisory fees than are currentlycurrent­ly being paid to the current Trading Advisor.  In addition, the FundFund­ would lose the potential benefit of not having to pay the Trading Advisor an incentive fee during the time that the Trading Advisor was generating profits that made up for the prior losses.  The replacement Trading Advisor would “start from scratch,” that is, the Fund would have to pay a new Trading Advisor an incentive fee for each dollar of profit it generated for the Fund, regardless of the Fund’s previous experience.

Limited Partners Do Not Participate in Management

Limited partners are not entitled to participatepartici­pate in the management of the Fund or the conduct of its business.

Non-Transferability of Units

Investors may acquire Units only for investment and not for resale, and the Units are transferable only with the GeneralGen­eral Partner’s consent,con­sent, provided that the economic benefits of ownership of a limited partner may be transferred or assigned without the consent of the General Partner.  There will be no resale market for the Units.  However, limited partners may redeem all or (subject to certain limitations) any portion of their Units at the end of any month, on five business days’ written notice to the General Partner.

Possible Adverse Effect of Large Redemptions

The Trading Advisors’ trading strategies could be disrupted by large redemptions by limited partners.part­ners.  For example, such redemptions could require the Trading Advisors to prematurely liquidate futuresli­quidate fu­tures positions they had established for the Fund.

Mandatory Redemptions

The General Partner may require a limited partner to redeem from the Fund if the General Partner deems the redemption (a) necessary to prevent or correct the occurrence of a nonexempt prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code of 1986, as amended, (b) beneficial to the Fund or (c) necessary to comply with state, federal, or other self-regulatory organization regulations.

Cybersecurity Breaches

The Fund and Traders are subject to risks associated with a breach in their cybersecurity.   Cybersecurity is a generic term used to describe the technology, processes and practices designed to protect networks, systems, computers, programs and data from “hacking” by other computer users, other unauthorized access and the resulting damage and disruption of hardware and software systems, loss or corruption of data as well as misappropriation of confidential information.  If a cybersecurity breach occurs, the Fund may incur substantial costs, including (without limitation) those associated with: forensic analysis of the origin and scope of the breach; increased and upgraded cybersecurity; investment  losses from sabotaged trading systems; identity theft; unauthorized use of proprietary information; litigation; adverse investor reaction; the unauthorized dissemination of confidential and proprietary information; and reputational damage.  Any such breach could expose each of the General Partner, the applicable Trader, and/or the Fund to civil liability as well as regulatory inquiry and/or action.  In addition, any such breach could cause substantial withdrawals from the Fund.

Indemnification

The Fund is required to indemnify the GeneralGen­eral Partner, the Trading Advisors and the futures brokers, and their affiliates, against various liabilities they may incur in providing services to the Fund, provided the indemnified party met the standard of conduct specified in the applicable indemnificationindem­nification clause.  The Fund’s indemnification obligations could require the Fund to make substantial indemnification payments.

Termination of Fund

The Fund will automatically terminate on December 31, 2025, unless terminated earlier as provided in the Partnership Agreement.  For example, the General PartnerPart­ner can withdraw as general partner on 90 days’ prior written notice, and such a withdrawalwithdraw­al could result in termination of the Fund.  The General Partner has no present intention of withdrawing and intends to continue the Fund business as long as it believes that it is in the best interest of all partners to do so.  In addition, certain other events may occur which could result in early termination.

Lack of Regulation

The Fund is not an investment company under the federal securities laws.  Thus, limited partners will not have the benefits of federal regulation of investmentinvest­ment companies.

Conflicts of Interest

The General Partner and its principals have organized and are involved in other business ventures, and may have incentives to favor certain of these ventures over the Fund.  The Fund will not share in the risks or rewards of such other ventures.  However, such other ventures will compete for the General Partner’s and its principals’ time and attention, which might create other conflicts of interest.  The Partnership Agreement does not require the General Partner to devote any particular amount of time to the Fund.

The General Partner or any of its affiliates or any person connected with it may invest in, directly or indirectly, or manage or advise other investment funds or accounts which invest in assets which may also be purchased or sold by the Fund.  Neither the General Partner nor any of its affiliates nor any person connected with it is under any obligation to offer investment opportunities of which any of them becomes aware to the Fund or to account to the Fund in respect of (or share with the Fund or inform the Fund of) any such transaction or any benefit received by any of them from any such transaction, but will allocate such opportunities on an equitable basis between the Fund and other clients.

Payment of Incentive Fees to the Trading Advisors

The Trading Advisors are entitled to incentive fees, therefore the Trading Advisors may have an incentive to cause the Fund to make riskier or more speculative investments than it otherwise would.

Personal Trading

The Trading Advisors, the futures brokers, the General Partner and the principals and affiliates thereof may trade commoditycommod­ity interests for their own account.  In such trading, positions might be taken which are opposite those of the Fund, or that compete with the Fund’s trades.

Trades by the Trading Advisors and their Principals

The Trading Advisors and their principals may trade for their own accounts in addition to directing trading for client accounts.  Therefore, the Trading Advisors and their principals may be deemed to have a conflict of interest concerning the sequence in which orders for transactions will be transmitted for execution.  Additionally, a potential conflict may occur when the Trading Advisors and their principals, as a result of a neutral allocation system, testing a new trading system, trading their own proprietary account(s) more aggressively, or any other actions that would not constitute a violation of fiduciary duties, take positions in their own proprietary account(s) which are opposite, or ahead of, the position(s) taken for a client.  Proprietary accounts, in trading a new or experimental system, may enter the same markets earlier than (either days before or on the same day) client accounts traded at the same or other futures commission merchants.  Since the principals of the Trading Advisors trade futures and foreign exchange for their own accounts, there is potentially a conflict of interest between these principals and the Trading Advisors’ clients when allocating prices on trades that are executed by a futures commission merchant at multiple prices.  In such instances, the Trading Advisors use a non-preferential method of fill allocation.  The clients of the Trading Advisors will not be permitted to inspect the personal trading records of the Trading Advisors, futures brokers and forward currency counterparties, or their respective principals, or the written policies relating to such trading.  Client records are not available for inspection due to their confidential nature.

Effects of Speculative Position Limits

The CFTC and domestic exchanges have established speculative position limits on the maximum net long or net short futures position which any person, or group of persons, or group of persons acting in concert, may hold or control in particular futures contracts or options on futures traded on U.S. commodity exchanges.  All commodity accounts owned or controlled by the Trading Advisors and their principals are combined for speculative position limits.  Because speculative position limits allow the Trading Advisors and their principals to control only a limited number of contracts in any one commodity, the Trading Advisors and their principals are potentially subject to a conflict among the interests of all accounts the Trading Advisors and their principals control which are competing for shares of that limited number of contracts.  There exists a conflict between the Trading Advisors’ interest in maintaining a smaller position in an individual client’s account in order to also provide positions in the specific commodity to other accounts under management and the personal accounts of the Trading Advisors and their principals.  The General Partner does not believe, however, that the position limits are likely to impair the Trading Advisors’ trading for the Fund, although it is possible the issue could arise in the future.

To the extent that position limits restrict the total number of commodity positions which may be held by the Fund and those other accounts, the Trading Advisors will allocate the orders equitably between the Fund and such other accounts. Similarly, where orders for the same commodity given on behalf of both the Fund and other accounts managed by the Trading Advisors cannot be executed in full, the Trading Advisors will equitably allocate between the Fund and such other accounts that portion of the total quantity able to be executed.

Other Activities of the Principals of the Advisors

Certain principals of the Trading Advisors are currently engaged, and expect in the future to be engaged, in other activities, some of which may involve other business activities in the futures industry.  In addition, each principal of the Trading Advisors may be engaged in trading for his own personal account.  The principals will have a conflict of interest between their obligations to devote all of their attention to client accounts and their interests in engaging in other activities.  However, the principals of the Trading Advisors intend to devote substantial attention to the operation and activities of the Trading Advisors consistent with the division of responsibilities among them as is described herein.

Fiduciary Responsibility of the General Partner

The General Partner has a fiduciary duty to the Fund to exercise good faith and fairness in all dealings affecting the Fund.  If a limited partner believes this duty has been violated, he/she may seek legal relief under applicable law, for himself/herself and other similarly situated partners, or on behalf of the Fund.  However, it may be difficult for limited partners to obtain relief because of the changing nature of the law in this area, the vagueness of standards defining required conduct and the broad discretion given the General Partner in the Partnership Agreement and the exculpatory provisions therein.

Selling Agents

The receipt by the selling agents and their registered representatives of continued sales commissions and/or servicing fees for outstanding Units may give them an incentive to advise limited partners to remain investors in the Fund.  These payments cease to the extent the limited partners withdraw from the Fund.

The General Partner Serving as Selling Agent

The General Partner also serves as a selling agent for the Fund.  As a result, the fees and other compensation received by the General Partner as selling agent have not been independently negotiated.

Futures Brokers

The futures brokers affect transactions for customers (including public and private commodity pools), including the Fund, who may compete with the Fund’s transactions including with respect to priorities or order entry.  Since the identities of the purchaser and seller are not disclosed until after the trade, it is possible that the futures brokers could affect transactions for the Fund in which the other parties to the transactions are the futures brokers’ officers, directors, employees, customers or affiliates.  Such persons might also compete with the Fund in making purchases or sales of commodities without knowing that the Fund is also bidding on such commodities.  Since orders are filled in the order in which they are received by a particular floor broker, transactions for any of such persons might be executed when similar trades for the Fund are not executed or are executed at less favorable prices.  However, in entering orders for the Fund and other customer accounts, including with respect to priorities of order entry and allocations of executed trades, CFTC regulations prohibit a futures commission merchant from utilizing its knowledge of one customer’s trades for its own or its other customer’s benefit.

Item 1B.            Unresolved Staff Comments

None.

Item 2.               Properties

The Fund does not use any physical properties in the conduct of its business. Its assets currently consist of futures and other contracts, cash and high grade fixed income instruments.

The General Partner’s principal business office is in Gaithersburg, Maryland.Excelsior, Minnesota.

Item 3.               Legal Proceedings

None.

Item 4.               Mine Safety Disclosures

Not applicable.

PART II

Item 5.               Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

No class of Units of the Fund is publicly traded.  Class A, A2, A3, B, I and R UnitsInterests in the Fund may be transferred or redeemed subject to the conditions imposed by the Partnership Agreement.

Class A, A2, A3, B, I and REach class of Units are beingis offered continuously by selling agents on a best-efforts basis at subsequent closing dates at a price equal to the net asset value per unit as of the close of business on each applicable closing date, which is the first business day of each month.  The minimum investment for Class A, A2, A3, B and R Units is $10,000, and for Class I Units it is $2,000,000.

Holders

As of February 28, 2018, there were 3,390 holders29, 2020, the number of Class A Units, 1,374 holdersholder of Class B Units, 4 holders of Class I Units and 155 holders of Class R Units of the Fund.units by class were:

Dividends

The General Partner has sole discretion in determining what distributions, if any, the Fund will make to its limited partners.  From inception through the date of this filing, the General Partner has not made any distributions.

Securities Authorized for Issuance under Equity Compensation Plans

No Units were authorized for issuance under equity compensation plans.

Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities

There were no sales of unregistered securities of the Fund during the year ended December 31, 2017.2019. 

The proceeds of the sale of registered securities are deposited in the Fund’s bank and brokerage accounts for the purpose of engaging in trading activities in accordance with the Fund’s trading policies and the Trading Advisors’ trading programs.

Issuer Purchases of Equity Securities

Class A, A2, A3, B, I and RAll classes of Units are eligible for redemption on a continuous basis at subsequent closing dates at a price equal to the net asset value per unit as of the close of business on each applicable closing date, which is the last business day of each month.  Redemptions may be made by a limited partner as of the last business day of any month at the net asset value on such redemption date of the redeemed Units (or portion thereof) on that date, on five business days’ prior written notice to the General Partner.  Partial redemptions must be for at least $1,000, unless such requirement is waived by the General Partner.  In addition, if making a partial redemption, the limited partner must maintain at least $10,000 or his or her original investment amount, whichever is less, in the Fund unless such requirement is waived by the General Partner.

Redemptions of Class A, B, I and R Units during the fourth quarter 20172019 were as follows:

There were no redemptions of Class A2, A3 or I Units during the fourth quarter.

Item 6.   Selected Financial Data

The following selected consolidated financial data of the Fund as of and for the years ended December 31, 2019, 2018, 2017, 2016 2015, 2014, and 20132015 is derived from the consolidated financial statements that have been audited by RSM US LLP, the Fund’s independent registered public accountant.  This financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and with the Fund’s consolidated financial statements and notes thereto, included elsewhere in this Annual Report on Form 10-K.

Certain amounts in the selected financial information prior to 20172019 have been reclassified to conform to the 20172019 presentation without affecting previously reported partners’ capital (net asset value) or net income (loss).

Results from past periods are not necessarily indicative of results that may be expected for any future period.

¹ Class A2 Units were introduced in December 2018.  Total return for 2018 is for the period from introduction to year end and is not annualized.

² Class A3 Units were introduced in July 2019.  Total return for 2019 is for the period from introduction to year end and is not annualized.

³ Class R Units were introduced in April 2017.  Total return is for 2017 is for the period from introduction to year end and is not annualized.

The following unaudited supplementary summarized quarterly data are presented for the three-months ended March 31, June 30, September 30 and December 31, 20172019 and 2016.2018.

Current Positioning

As of December 31, 2017, the Fund’s largest risk contribution came from currencies, with long positions in emerging markets, the Australian dollar and the Japanese yen, and short positions in the Euro and British pound. In the interest rates sector, the portfolio was positioned long, primarily in U.S. and European bonds. The Fund had long equity index exposure, focused on the U.S. In the commodities markets, the Fund was short in agricultural grains markets, long in precious metals and very modestly long in energy, mainly in natural gas, with neutral oil exposure. Note that these were tactical positions generated by systematic managed futures programs in reaction to perceived market trends and opportunities. Positions will generally adapt as market conditions change.

Results of Operations

The returns for each Classclass of Units for the years ended, or periods ended from inception to, December 31, 2017, 2016,2019, 2018 and 20152017 were:

† Inception date:  November 1, 2018.
†† Inception date:  July 1, 2019.

Results from past periods are not necessarily indicative of results that may be expected for any future period.  Monthly analysis of the trading gains and losses is provided below.

2019
January

January saw a sharp rebound in equity indices following December’s sell-off.  The Federal Reserve moderated its previous hawkish language and suggested it could pause interest rate hikes, which boosted investor optimism.  Milder market expectations for U.S. monetary tightening led to a weakening of the U.S. Dollar and a helped to boost industrial commodities such as oil and metals.  In Europe, concerns over the economic impact of an uncertain Brexit process led to a rally in bonds.

The month’s trend reversal in risk assets such as equities and oil proved challenging for the Fund’s trend-following programs, which began the year with defensive net short positioning.  U.S. Dollar weakness, especially against commodity exporter currencies as the Canadian Dollar, also detracted from performance.  The Fund did make gains in fixed income trading with long positions in European bonds, which rallied during the month.  The Fund finished with a net loss of 3.31%, 3.20%, 3.16%, 3.08, and 3.15% for Class A, A2, B, I, and R Units, respectively.

February

In February, the Federal Reserve and the European Central Bank affirmed they would be flexible and could adopt a less hawkish monetary policy stance in the near term as a result of softness in economic data.  This led to a rally in global equity indices despite slowing GDP growth.  U.S. and German bond yields were choppy, ending the month slightly higher, while the U.S. Dollar gained against most developed market currencies.  In commodities, oil prices rose on global supply cuts, while agricultural commodities trended lower.

The Fund made gains with short positions in agricultural markets, particularly wheat and coffee, which saw large price declines.  In currencies, long U.S. Dollar positions against the Euro were profitable.  However, long U.S. and European bond positions detracted from performance.  There were also modest losses in stock indices, as trend-following systems gradually transitioned out of short positions.  The Fund finished with a net loss of 0.16%, 0.04%, 0.01% for Class A, A2, and B Units, respectively, and a net gain of 0.07% and 0.01% for Class I and R Units, respectively.

March

In March, investors grew increasingly worried about potential recession risks over the coming year, due to soft global economic data, as well as Brexit uncertainty and the unresolved trade conflict between the U.S. and China.  As a result, the Federal Reserve indicated that it would pause rate hikes, while the European Central Bank signaled an accommodative stance.  This caused a yield curve inversion in the U.S. with 10-Year Treasury yields falling below 3-Month rates, and it led to German 10-Year yields turning negative for the first time since 2016.

The Fund had a strong month, profiting from long positions in bonds, particularly in Europe, which rallied as a result of economic growth concerns.  Long positions in stocks also added to performance, as equity markets were lifted by supportive central bank statements.  In currencies, long U.S. Dollar positions against the Euro made a positive contribution.  Performance in commodities was relatively flat with modest losses in energy markets.  The Fund finished with a net gain of 4.82%, 4.94%, 4.98%, 5.07%, and 5.00% for Class A, A2, B, I, and R Units, respectively.

April

In April, better economic data propelled risk assets higher.  U.S. first quarter GDP growth beat estimates, coming in at 3.2%, while Chinese economic activity also surprised to the upside.  This led to a sell-off in bonds and perceived safe haven currencies such as the Japanese Yen and Swiss Franc, and a rally in pro-cyclical assets such as global equities, oil and emerging market currencies.

The Fund made a profit during the month across a range of sectors.  In equities, gains came from net long positions in stock indices, as well as a short position in VIX futures.  Currencies were also a positive contributor, through short positions in the Yen and the Franc, and long positions in a range of emerging markets.  In energy, long positions in crude oil and refined oil products were profitable.  Meanwhile, in the agricultural sector, the Fund benefited from downward trends in grain prices through short positions.  The largest negative contribution came from long bond positions, which gave back some of the prior month’s gains.  The Fund finished with a net gain of 1.28%, 1.40%, 1.43%, 1.51%, and 1.45% for Class A, A2, B, I, and R Units, respectively.

May

Escalating trade tensions dominated financial headlines in May.  With the U.S. increasing its pressure on Chinese phone maker Huawei, trade negotiations between the two countries devolved into heated rhetoric and political brinksmanship.

In addition, the U.S. threatened Mexico with punitive tariffs if it did not help to reduce illegal immigration.  Trade concerns fed fears of faltering economic growth over the coming year, leading to an inversion of the front end of the yield curve as investors priced in the potential need for interest rate cuts by the Federal Reserve.  Equities reversed their bullish trend and saw a sharp drop, with the S&P 500 Total Return Index falling 6.35% in May.  Other risk assets such as oil and emerging market currencies also retreated during the month.

Reversals in global equity and energy markets had a negative impact on the Fund’s predominantly trend-following strategy, which came into the month with long positions in those markets.  These losses were partially offset by gains in bonds as a rotation into defensive assets helped the Fund’s long fixed income positions.  Short positions in agricultural commodities detracted from performance as poor weather in growing regions caused a rise in grain prices.  The Fund finished with a net loss of 3.38%, 3.27%, 3.24%, 3.16, and 3.22% for Class A, A2, B, I, and R Units, respectively.

June

In June, several leading indicators for economic growth weakened, prompting central banks around the world to make increasingly dovish policy signals.  Global bond prices rallied as a result, with yields falling in most developed markets. German 10-year Bund yields tumbled further below zero, setting an all-time record low of -0.33%.  Expectations that the Fed might cut U.S. interest rates more than other countries led to a weakening of the U.S. Dollar. Despite economic risks on the horizon, equity investors were focused on the potential for more monetary stimulus and progress in U.S./China trade talks, leading to a strong rise in stock indices.

The largest contributions in June came from long positions in global bonds and stocks.  These gains were somewhat offset by losses in currencies, as a rebound in the Euro hurt the Fund’s short Euro positions.  Commodities were a minor detractor, as oil and other markets saw trendless, choppy moves.  Overall however, the Fund benefitted from sustained, sizable trends, and finished the month with strong positive performance.  The Fund finished with a net gain of 3.42%, 3.54%, 3.57%, 3.65%, and 3.59% for Class A, A2, B, I, and R Units, respectively.

July

In July, financial markets focused their attention on anticipated central bank action. In Europe, investors expected further easing from both the European Central Bank and the Bank of England in response to weakening economic growth and the prospect of a hard Brexit under new UK Prime Minister Boris Johnson.  As a result, bond yields fell in Germany and the UK, while the Euro and Pound Sterling depreciated against the U.S. Dollar.  In the U.S., the Federal Reserve delivered its first interest rate cut in 10 years, in an attempt to offset risks from worsening business confidence indicators and deteriorating trade relations between the US and China.  Global equity indices rose on the prospect of more central bank support, while gold rallied to its highest level since 2013 on the expectation of looser monetary policies.

Amid all this uncertainty and volatility, the Fund had a strong month.  The currency sector was the largest contributor, as gains came from short positions in the Euro and Pound Sterling.  The Fund was also profitable in the fixed income sector, as long positions benefited from the rally in European and UK bonds.  Gains were also made in long equity positions, while performance was flat in physical commodities.  The Fund finished with a net gain of 3.66%, 3.78%, 3.76%, 3.81%, 3.89%, and 3.83% for Class A, A2, A3, B, I, and R Units, respectively.

August

In August, financial markets became increasingly concerned about the potential impact of a trade war on global growth.  The U.S. and China threatened each other with additional tariffs, and the Chinese currency depreciated to its weakest level since 2008.  Meanwhile, in Europe, the prospect of a “no deal” Brexit became more likely.  Global bonds rallied strongly in an environment of rising macroeconomic risks.  U.S. 30-year Treasury bond yields declined to an all-time low of 1.95% during the month, while 10-year bond yields dropped further into negative territory in Japan, Germany and 11 other European countries.  Global equities sold off during the month, while gold rallied. 

The Fund enjoyed a strong month, even as risk assets like equities sold off.  The largest gains came from long positions in 2017a range of global bond futures.  Modest long equity positions detracted from performance.  However, the Fund profited in foreign exchange markets, through long U.S. Dollar positions against the Euro and emerging market currencies.  Commodities were also a positive contributor, benefiting from short agricultural exposures, as well as long gold and short copper positions in the metals sector.  The Fund finished with a net gain of 3.04%, 3.16%, 3.15%, 3.20%, 3.28%, and 3.21% for Class A, A2, A3, B, I, and R Units, respectively.

September

In September, investor risk appetite grew after signs of progress in U.S.-China trade relations, leading to a rise in global equity indices.  Central banks in the U.S., Europe and Japan precipitated a sell-off in bonds after signaling that they saw limits on how much more they could push down interest rates and bond yields to support economic growth.  In energy markets, a drone attack on Saudi facilities caused a temporary 15% spike in crude oil prices, the largest one day jump in over 10 years.

Some of the profitable trends from July and August made partial reversals in September.  While the Fund made gains in long stock index positions, there were losses in fixed income futures as a result of a correction in bond prices.  In the commodities sector, short positions in grains, short positions in energy and long positions in precious metals all saw declines on market reversals.  The Fund finished with a net loss of 2.90%, 2.79%, 2.80%, 2.76, 2.68% and 2.74% for Class A, A2, A3, B, I, and R Units, respectively.

October

In October, the Federal Reserve made its third interest rate cut of the year as global growth data continued to underwhelm. Market sentiment improved, however, as a result of apparent progress in both Brexit negotiations and the U.S.-China trade conflict.  The UK was given a 3-month Brexit deadline extension, allowing time for a general election and a chance for the UK Prime Minister to try to build a parliamentary majority to approve a draft Brexit deal.  This led to a “risk-on” rally in European stocks, a rebound in European currencies, particularly the British Pound, and a sell-off in global bonds.  Meanwhile, the US and China appeared willing to compromise in the first phase of trade talks towards a possible long-term agreement.  This positive development led to a rotation out of bonds and into stocks in the U.S. and Asia.

The Fund saw declines in its long positions in global bonds, as investors rolled out of perceived safe-haven assets, reversing a bullish bond trend from earlier in the year.  In the foreign exchange sector, short positions in the Euro and British Pound were also detractors as those currencies recovered.  Commodities also saw a modest giveback as a result of choppy price action.  However, the Fund did make gains in its long equity positions, capitalizing on stronger investor risk appetite during the month.  The Fund finished with a net loss of 3.66%, 3.54%, 3.56%, 3.51%, 3.54%, and 3.50% for Class A, A2, A3, B, I, and R Units, respectively.

November

In November, global equities rallied as the U.S. and China appeared to make progress in trade negotiations.  Better U.S. economic data made it likely the Federal Reserve would pause interest rate cuts, which led to a rally in the U.S. dollar against most currencies.  Meanwhile, pre-election polls in the UK pointed to a likely Conservative Party victory, raising the likelihood of a soft rather than hard Brexit.  Investors became less risk averse, rotating away from perceived safe-haven assets such as bonds and gold, and into stocks.

The Fund enjoyed a positive month, with the strongest gains coming from long positions in global stock indices.  Currencies were also a positive contributor, as the Fund’s long U.S. dollar/short Euro position benefited from a dollar rally.  Greater investor risk appetite caused bonds to sell off, negatively impacting long exposures in fixed income futures.  In commodities, metals were the primary detractor due to price reversals in gold and nickel.  Trading in agricultural and energy contracts saw mixed results.  The Fund finished with a net gain of 1.05%, 1.17%, 1.16%, 1.28% and 1.22% for Class A, A2, A3, B, I, and R Units, respectively

December

December saw a continued rally in global equities and other risk assets. Rising investor risk tolerance was driven by a preliminary U.S.-China trade agreement, as well as a Conservative Party win in the UK elections, which resolved much of the policy uncertainty surrounding Brexit.  In domestic politics, the passage of articles of impeachment against President Trump did little to dampen market optimism.  Monetary policy across the globe remained largely expansionary, while international economic growth data improved.  This macroeconomic boost, together with rising oil prices, spurred an increase in inflation expectations, which pushed gold prices higher and caused bonds to sell off.

The Fund made gains during the month from its long positions in equities.  However, there were declines in fixed income and currency trading, as falling bond prices and a depreciation of the U.S. Dollar negatively impacted the Fund’s long positions in these markets.  In commodities, the Fund profited from long oil and long precious metals exposures.  There were modest losses from short positions in the agricultural sector as the re-opening of the Chinese market to U.S. exports caused prices to rise.  While the Fund saw a net decline in December, it finished the year with a positive return.

2018

January

Global equity markets rallied sharply in January, driven higher by investor euphoria over economic growth data and US tax cuts. This pushed already rich valuations further towards historic extremes.  By the end of the month, the S&P 500’s Shiller P/E ratio exceeded its high during the 1929 stock market bubble.  Meanwhile, anticipation of sustained monetary tightening by the Federal Reserve pushed the US 10-year bond yield up to 2.7%, its highest level since 2014.  In foreign exchange markets, the U.S. Dollar weakened against a broad set of developed and emerging market currencies.

The Fund enjoyed a strong start to 2018, following a solid fourth quarter finish last year. Profits were made in long equity positions, particularly in Asia and the U.S.  Gains were also made in currencies through short positions in the U.S. dollar against long positions in the Euro, British pound, and Australian dollar.  In commodities, energy was a positive contributor as long oil positions benefited from a rise in the price of crude from $60 to $65 per barrel.  Detractors for the month included long bond positions in the U.S. and Europe, as well as short positions in grains.  The Fund finished with a net gain of 5.65%, 5.81%, 5.90%, and 5.83% for Class A, B, I, and R Units, respectively.

February

Following a period of historic calm in markets, volatility jumped higher in February as equities sold off and bond yields increased.  The S&P 500 Total Return Index had closed higher for 15 consecutive months prior to February’s decline.  Market participants attributed the February spike in volatility to several factors including high equity valuations, the potential for faster than expected interest rate hikes and fears that inflation was rising too quickly.  The decline in stocks spilled over into other sectors as well.  Oil prices ended January at nearly $65 per barrel, fell as low as $59 by mid-February, before recovering to $61 at month-end.  Bond markets did not provide safety for investors either.  The Bloomberg Barclays US Aggregate Bond Index was down more than 2% this year through February, after posting its first back-to-back monthly losses since 2016.

After strong performance in the fourth quarter of 2017 and into January, the Fund experienced a reversal of those gains in February.  Positions that led to the Fund’s previous performance gains contributed to losses for the month.  In particular, the Fund had losses from long exposure in equity and oil contracts.  The currency sector was also challenging due to the Fund’s short bias positioning in the U.S. dollar, which strengthened against most major currencies.  Interest rate markets were a positive contributor as the Fund recently shifted towards a short bias in those markets and bond prices declined.  The Fund finished with a net loss of 9.12%, 8.99%, 8.91%, and 8.97% for Class A, B, I, and R Units, respectively.

March

Global equities declined again in March, with the MSCI World Index falling 2.4%, as President Trump announced a range of import tariffs, which investors feared could spark a trade war with China and Europe.  Technology stocks were also hit over privacy concerns, as it was reported that large datasets of Facebook user activity had been used in political advertising.  Meanwhile, the Federal Reserve raised U.S. interest rates by 25 basis points, the first of several expected hikes this year.  Long-term bond yields dipped in Europe on disappointment in economic growth indicators.

The Fund finished the month with a positive return.  Gains came primarily from long positions in the energy sector as crude oil prices rose to $65 per barrel on rising Mideast tensions and continued tight supply.  In currencies, the Fund also benefited from short U.S. dollar positions, particularly against the British pound.  Modestly-sized long equity positions detracted from performance, as did long positions in base metals.  Fixed income sector returns were relatively flat as declines in short U.S. bond positions were offset by gains in long European bond positions.  The Fund finished with a net gain of 0.55%, 0.70%, 0.79%, and 0.72% for Class A, B, I, and R Units, respectively.

April

Inflation expectations continued to drift higher in April pushing U.S. 10-year bond yields above the symbolic 3% threshold for the first time since 2014, as the market anticipated the Fed would continue to pursue monetary tightening.  Oil prices also rose to their highest level in four years on the possibility of new Iranian sanctions.  Equity markets stabilized from their early year declines as the trade spat between the U.S. and China subsided and as first quarter earnings proved to be relatively robust.

The Fund was profitable in April, with the strongest returns coming from long positions in the oil complex.  Gains were also made in modestly sized long equity index positions, particularly in France.  Short bond positions in the U.S. contributed positively as yields rose and prices declined.  Currencies were the primary detractor as trends reversed with a weakening of the British pound and Japanese yen.  The Fund finished with a net gain of 1.32%, 1.47%, 1.55%, and 1.48% for Class A, B, I, and R Units, respectively.

May

In May, hawkish Federal Reserve monetary policy expectations pushed the U.S. 10-year bond yield to a 7- year high of 3.1%, before reversing course in the second half of the month.  While global stocks made early gains, trade disputes over U.S. import tariffs caused a late month dip, particularly in Asia and Europe.  Meanwhile, President Trump’s withdrawal from the Iran nuclear deal and tight supply conditions led to a further rise in oil prices to a high of $72 per barrel, before moderating on an agreement between Russia and OPEC to expand output.  Italian politics dominated financial headlines at month-end, as a newly formed populist government stoked fears of fiscal indiscipline and weakening loyalties to the Eurozone.  This caused the Euro to weaken and Italian stocks and bonds to sell off.

While the Fund made gains early in May, these were followed by declines at month-end as a number of trends reversed.  The political crisis in Italy caused losses in long Italian bond and stock positions as well as in currency trading, with the Euro falling to its weakest level of the year.  Long positions in other European and Asian stock indices also detracted from performance as trade relations with the U.S. deteriorated.  The strongest positive contributor for the Fund came from long oil positions, which profited from the continued rise in energy prices.  The Fund finished with a net loss of 1.30%, 1.15%, 1.07%, and 1.13% for Class A, B, I, and R Units, respectively.

June

In June, the U.S. Government’s economic policies continued to stoke global trade tensions.  The threat of tariffs hurt Asian and European stocks, while the prospect of retaliatory measures from China caused U.S. grain prices to slump.  Economic data remained strong, however, leading the Fed to make its second interest rate hike of 2018, with the potential for two more hikes before year-end.  Tightening U.S. monetary policy also caused a strengthening of the U.S. dollar against major currencies.  Meanwhile, OPEC increased production less than expected, leading to a further rise in oil prices.

The Fund made a net profit for the month, with the largest positive contribution coming in the agricultural sector. Highlighting the Fund’s ability to profit from declining markets, short positions in soybeans and corn benefited from price declines ahead of potential Chinese import reductions. In currencies, the Fund made gains on long U.S. dollar positions against the Euro, Japanese yen and British pound. Fed tightening helped short positions in U.S. bonds. In energy, long positions in crude oil gained as its price hit a high for the year of $74 per barrel.  The Fund finished with a net gain of 0.84%, 0.99%, 1.08%, and 1.01% for Class A, B, I, and R Units, respectively.

July

U.S. stocks rose in July as a result of strong earnings and solid second quarter GDP growth, which were boosted by fiscal stimulus from this year’s tax cuts.  The month saw a sharp rotation from high momentum technology stocks into value-oriented stocks.  In international markets, Chinese equities continued to slump as a result of both central bank tightening and an ongoing trade spat with the U.S.  In the energy sector, increased supply from Saudi Arabia and Libya caused a pullback in oil prices.  Fixed income markets saw a reversal during the month.  Bond yields rose in Europe and Japan (and bond prices fell) in anticipation of announcements of the gradual withdrawal of easy monetary policy.

The Fund’s trading style is primarily trend-following, leading to profits in markets where trends are sustained and losses in markets where trends reverse.  In July, the Fund made gains in long positions in stock indices and short positions in precious metals.  However, these profits were offset by declines in other sectors. Long positions in oil and refined oil products were impacted by a reversal of bullish price trends in the energy sector.  In bond futures, long German and Japanese positions saw losses as a result of a rise in yields in anticipation of less accommodative central bank policy. Choppiness in the U.S. dollar led to a giveback in the currency sector.  The Fund finished with a net loss of 1.41%, 1.26%, 1.18%, and 1.24% for Class A, B, I, and R Units, respectively.

August

August saw a panic in emerging markets, as countries with large USD-denominated debt buckled under the strength of the U.S. dollar and rising U.S. interest rates.  A politically induced trade spat with the U.S. proved to be an additional catalyst in Turkey as the Lira fell 25% during August.  Fear spread to other emerging markets, culminating in a dramatic drop in the Argentine peso at month end.  Investor risk aversion caused a decline in European and Asian stocks and a rotation into bonds. Despite this international turmoil, U.S. equity markets proved robust, with the S&P 500 rising on strong earnings and a rally in technology stocks.

The Fund had a strong month and was profitable in each of the sectors it trades.  Metals were the biggest positive contributor, as the Fund made gains in short positions in gold, which declined with U.S. dollar strength, and in short positions in industrial metals, which fell on weaker Chinese demand.  In energy, long positions profited from a rise in crude oil prices.  In agricultural markets, short coffee positions saw the strongest gains.  Turning to financial futures markets, the Fund profited from long exposure to U.S. stock indices, long exposure to European bonds and broadly long U.S. dollar exposure against other currencies.  The Fund finished with a net gain of 2.81%, 2.96%, 3.05%, and 2.98% for Class A, B, I, and R Units, respectively.

September

With U.S. economic data continuing to show strength in September, the Federal Reserve made its third interest rate hike of the year and signaled four more hikes by the end of 2019.  U.S. Treasury yields rose and bonds sold off as Fed minutes dropped long-standing references to an “accommodative” monetary policy.  The European Central Bank’s plans to move ahead with tapering of their quantitative easing policy caused European bonds to decline as well.  The trade conflict between the U.S. and China escalated with U.S. tariffs announced on $200 billion of Chinese goods.  U.S. equity markets were relatively unfazed by these developments, but many Asian stock markets fell.  Oil prices continued to climb with looming U.S. sanctions on Iran, a major producer.

The Fund’s biggest gains in the month came from the energy sector with long positions in crude oil.  However, the interest rates sector detracted from performance.  The Fund had a positive contribution from short U.S. positions, but saw losses from long European bond futures positions.  In currencies, the Fund benefited from the continued depreciation of the Japanese yen, but saw reversals in other markets.  Stock index trading saw a balance between gains in the U.S. and declines in Europe.  The Fund finished with a net loss of 1.02%, 0.87%, 0.79%, and 0.86% for Class A, B, I, and R Units, respectively.

October

Global equities reversed sharply in October, in the second major sell-off this year.  The S&P 500 fell 6.84% during the month, as fears mounted over the pace of monetary policy tightening by the Federal Reserve.  Investor expectations for earnings and economic growth also moderated during the month, hurting the high growth technology sector as well as traditional cyclical sectors such as consumer discretionary, industrials, materials and energy.  As part of a broad decline in risk assets, crude oil prices fell from $73 to $65 per barrel.  What may be viewed as a safe haven, currencies such as the U.S. dollar and Japanese yen rallied.  Bonds rallied in Europe and Japan, but not in the U.S. where quantitative tightening gathered pace.

The Fund employs a range of managed futures strategies, but has a concentration in trend-following.  Trend-based strategies may profit during extended bullish or bearish trends, but tend to see declines at turning points when markets reverse course.  October saw a sharp reversal of the 6-month bullish trend in stock indices, causing losses in the equities sector.  The Fund’s positions adjusted from long to neutral in stocks as a result, ready to move onto the next trend, long or short.  In commodities, reversals in oil prices and sugar prices also detracted from performance.  The Fund made gains in the fixed income sector, being short the U.S. and long international bond futures.  The currency sector profited from long US dollar positioning.  The Fund finished with a net loss of 2.89%, 2.74%, 2.66%, and 2.73% for Class A, B, I, and R Units, respectively.

November

November was a choppy month for stocks, as markets reacted to the U.S. mid-term elections, U.S.-China trade relations and tightening monetary policy.  The S&P 500 traded in a wide 7% range between its intra-month high and low, finishing on an up note, as Fed Chairman Jerome Powell commented that interest rates may now be close to neutral, hinting at more limited rate hikes going forward.  In Europe, concerns over a messy Brexit deal and an impasse over the Italian budget caused a flight to quality and a rally in bonds.  Commodities saw significant volatility as crude oil prices dropped more than 20% on high production and weakening demand, while natural gas prices spiked on low inventories and a projected cold winter in North America.

The Fund profited from the large price moves in the energy sector, benefiting from short positions in oil and long positions in natural gas.  In equity indices, small long positions in U.S. stocks were positive.  The fixed income sector saw mixed performance as gains were made in long positions in European bonds, but these were offset by losses in short U.S. bond exposures.  Currencies were the main detractor for the month as a rebound in the Australian dollar and New Zealand dollar hurt the Fund’s short positions.  The Fund finished with a net gain of 0.14%, 0.29%, 0.37%, and 0.31% for Class A, B, I, and R Units, respectively.

December

The year finished in a turbulent fashion for equities, as investors worried about slowing global growth, monetary tightening by the Fed, and the trade conflict between the U.S. and China.  In December, the S&P 500 Total Return Index experienced an intra-month drop of 15.6% before making a partial recovery.  That index finished the month down 9.0% and ended the year down 4.4%.  Low demand and increased supply hit oil prices, which declined from $51 to $45 per barrel. Government bonds rallied in a flight to quality, while perceived safe haven currencies like the Japanese yen appreciated.

The Fund had significantly less volatility than the broader markets due to its low net exposure to equity indices.  The Fund’s foreign exchange positioning was long the US dollar against other major currencies, which led to a loss as the Japanese yen rallied.  In energy markets, the Fund made gains in short oil positions, but saw offsetting losses in long natural gas positions which declined with warmer than expected weather.  In other commodities, the Fund was profitable in short grain positions, but saw a modest loss in short precious metals positions.  The Fund ended the year with relatively defensive positioning, being net long global bonds, short most industrial commodities, and with little equity exposure.  The Fund finished with a net loss of 0.70%, 0.59%, 0.55%, 0.47% and 0.54% for Class A, A2, B, I, and R Units, respectively.

2017

January

Markets digested the impact of the new U.S. administration’s economic policy proposals as the calendar year began.  The policy specifics remain uncertain, but market participants showed optimism that potential changes to the tax code and increased infrastructure spending would bolster economic growth.  Equity markets in the U.S. and Europe were generally higher, while interest rates held mostly steady.  Following broad based strength in the second half of 2016, the U.S. dollar weakened during the start of the year as concerns about trade protection and accusations of currency manipulation began to emerge.

Ongoing strength in equity markets was a positive contributor to Fund performance.  Specifically, long positions in Nasdaq, S&P 500 and Hang Seng indices were key contributors. Increased economic bullishness also led to a near 9% rise in copper prices, benefitting the Fund’s long copper position.  After several months of strength, energy prices drifted lower in January, due partially to the belief that OPEC’s attempts to cut production would be short lived.  The Fund’s long energy positions detracted from performance.  Within foreign exchange markets, the U.S. dollar reversal caused losses, as the Fund was long U.S. dollar versus Euro, British pound and Japanese yen.  The Fund finished with a net loss.  Overall, the Fund finished with a net loss of 2.27%, 2.13% and 2.04% for Class A, B and I Units, respectively.

February

February saw a continued rise in investor risk appetite.  The S&P 500 rallied to new highs and rich valuations got even richer, spurred by positive earnings data and the Trump administration’s pledge to cut corporate taxes and spend heavily on infrastructure.  International equity markets also had a positive month as global economic data showed improvement.  In Europe, the political risk of potential nationalist party victories in upcoming elections in France and the Netherlands led to a rally in safe haven German bonds and a depreciation of the Euro.

The Fund’s largest gains during the month came from long equity index positions, which benefited from the global rally in stocks.  Long positions in European bonds and a short currency position in the Euro both profited from market skittishness over possible populist electoral gains.  The Fund did see modest losses in energy as trend-following programs were whipsawed by choppy directionless oil prices.  Overall, the Fund finished the month with a net profit.  Overall, the Fund finished the month with a net gain of 3.33%, 3.48% and 3.57% for Class A, B and I Units, respectively.

March

Economic policy remained a focus for markets throughout the month.  President Trump’s proposal to replace the Affordable Care Act failed in Congress as it met with resistance from conservative Republicans.  The fate of this measure was significant as it provided an indication of Trump’s ability to push through other policies such as tax reform and deregulation.  The bill’s failure initially triggered a dip in global equities, but optimism over the prospects for tax cuts quickly returned and markets recovered. March also saw developments in monetary policy, as the Federal Reserve raised interest rates by 25 basis points, in line with expectations. In Europe, the United Kingdom formally triggered the exit process from the European Union, and investor attention turned to the possibility of populist gains in the upcoming French presidential election.

The Fund profited from its long equity exposure, with the strongest gains coming from Europe.  Losses occurred in interest rate, currency and energy positions.  Within the interest rate sector, the Fund encountered choppy trading conditions in European rate markets, but the primary losses came from Germany, where bond prices rallied against the Fund’s short position.  Losses in the currency sector were attributable to a long U.S. dollar bias, as expectations of a slower tightening cycle by the Fed caused the dollar to depreciate against the euro, pound and yen.  Overall, the Fund finished the month with a net loss of 1.97%, 1.82% and 1.74% for Class A, B and I Units, respectively.

April

Heightened geopolitical uncertainty weighed on risk assets early in the month.  Markets were focused on saber rattling from North Korea and U.S. airstrikes in Syria.  Later in the month, the first round of the French Presidential elections concluded without surprise, making a Le Pen victory and potential French exit from the Eurozone less probable.  As a result, equity markets traded higher and the Euro rallied sharply.  The Euro finished April at 1.09 against the U.S. dollar and gained more than 2% during the month.  Energy markets were volatile, as an early month rally quickly gave way to a sell-off, with crude oil ending April down 3.4%.