UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2012 |
or
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to |
Commission File number: 000-50264 |
THE CAMPBELL FUND TRUST |
(Exact name of Registrant as specified in charter) |
Delaware | 94-6260018 | |
(State of Organization) | (IRS Employer Identification Number | |
2850 Quarry Lake Drive | ||
Baltimore, Maryland 21209 | ||
(Address of principal executive offices, including zip code) | ||
(410) 413-2600 | ||
(Registrant's telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Page | ||||||||
PART I — FINANCIAL INFORMATION | ||||||||
Item 1. | Financial Statements. | |||||||
Condensed Schedules of Investments as of September 30, 2012 and December 31, 2011 (Unaudited) | 3-6 | |||||||
Statements of Financial Condition as of September 30, 2012 and December 31, 2011 (Unaudited) | 7 | |||||||
Statements of Operations for the Three Months and Nine Months Ended September 30, 2012 and 2011 (Unaudited) | 8 | |||||||
Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 (Unaudited) | 9 | |||||||
Statements of Changes in Unitholders’ Capital (Net Asset Value) for the Nine Months Ended September 30, 2012 and 2011 (Unaudited) | 10-11 | |||||||
Financial Highlights for the Three Months and Nine Months Ended September 30, 2012 and 2011 (Unaudited) | 12-14 | |||||||
Notes to Financial Statements (Unaudited) | 15-20 | |||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 21-25 | ||||||
Item 3. | Quantitative and Qualitative Disclosure About Market Risk. | 27-32 | ||||||
Item 4. | Controls and Procedures. | 32 | ||||||
PART II — OTHER INFORMATION | ||||||||
Item 1. | Legal Proceedings. | 33 | ||||||
Item 1A. | Risk Factors. | 33 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 33 | ||||||
Item 3. | Defaults Upon Senior Securities. | 33 | ||||||
Item 4. | Mine Safety Disclosures. | 33 | ||||||
Item 5. | Other Information. | 33 | ||||||
Item 6. | Exhibits. | 33 | ||||||
SIGNATURES | 34 |
THE CAMPBELL FUND TRUST CONDENSED SCHEDULE OF INVESTMENTS SEPTEMBER 30, 2012 (Unaudited) |
FIXED INCOME SECURITIES | |||||||
Maturity Face Value | Description | Fair Value ($) | % of Net Asset Value | ||||
Bank Deposits | |||||||
Australia | |||||||
Financials | $10,402,787 | 2.32 % | |||||
(cost $10,400,000) | |||||||
Canada | |||||||
Financials | $15,512,834 | 3.46 % | |||||
(cost $15,500,138) | |||||||
Finland | |||||||
Financials | $11,808,001 | 2.64 % | |||||
(cost $11,800,102) | |||||||
Total Bank Deposits (cost $37,700,240) | $37,723,622 | 8.42 % | |||||
Commercial Paper | |||||||
United States | |||||||
$22,462,000 | Consumer Discretionary Hasbro, Inc. Due 10/01/2012 | $22,461,326 | 5.01 % | ||||
Energy | $49,835,990 | 11.13 % | |||||
Financials | |||||||
$23,326,000 | ING America Insurance Holdings, Inc. Due 10/01/2012 | $23,324,834 | 5.21 % | ||||
Other | $28,471,600 | 6.36 % | |||||
Materials | $28,992,700 | 6.47 % | |||||
Industrials | $19,999,600 | 4.46 % | |||||
Utilities | $14,499,698 | 3.24 % | |||||
Total Commercial Paper (cost $187,613,104) | $187,585,748 | 41.88 % | |||||
Corporate Bonds | |||||||
United States | |||||||
Financials | $85,576,226 | 19.11 % | |||||
(cost $85,533,265) | |||||||
Government And Agency Obligations | |||||||
United States | |||||||
U.S. Government Agency | $15,389,805 | 3.44 % | |||||
$44,500,000 | U.S. Treasury Bill U.S. Treasury Bill * Due 10/25/2012 | $44,498,309 | 9.93 % | ||||
$17,000,000 | U.S. Treasury Bill * Due 12/27/2012 | $16,996,090 | 3.79 % | ||||
Total Government And Agency Obligations (cost $76,853,721) | $76,884,204 | 17.16 % | |||||
Short Term Investments | |||||||
United States | |||||||
Short Term Investments | $823 | 0.00 % | |||||
(cost $823) | |||||||
Total Fixed Income Securities ** (cost $387,701,153) | $387,770,623 | 86.57 % | |||||
See Accompanying Notes to Financial Statements.
3
THE CAMPBELL FUND TRUST
CONDENSED SCHEDULE OF INVESTMENTS
September 30, 2012 (Unaudited)
CONDENSED SCHEDULE OF INVESTMENTS
September 30, 2012 (Unaudited)
LONG FUTURES CONTRACTS | |||||||||
Description | Fair Value ($) | % of Net Asset Value | |||||||
Agriculture | $(377,805 | ) | (0.08 | )% | |||||
Energy | $1,726,853 | 0.38 | % | ||||||
Metals | $6,543,373 | 1.46 | % | ||||||
Stock indices | $(3,369,003 | ) | (0.75 | )% | |||||
Short-term interest rates | $839,071 | 0.19 | % | ||||||
Long-term interest rates | $3,012,597 | 0.67 | % | ||||||
Net long futures contracts | $8,375,086 | 1.87 | % | ||||||
SHORT FUTURES CONTRACTS | |||||||||
Description | Fair Value ($) | % of Net Asset Value | |||||||
Agriculture | $(178,857 | ) | (0.04 | )% | |||||
Energy | $(15,740 | ) | (0.01 | )% | |||||
Metals | $(5,415,855 | ) | (1.21 | )% | |||||
Short-term interest rates | $(57,122 | ) | (0.01 | )% | |||||
Net short futures contracts | $(5,667,574 | ) | (1.27 | )% | |||||
Net unrealized gain (loss) on open futures contracts | $2,707,512 | 0.60 | % | ||||||
FORWARD CURRENCY CONTRACTS | |||||||||
Description | Fair Value ($) | % of Net Asset Value | |||||||
Various long forward currency contracts | $11,256,354 | 2.52 | % | ||||||
Various short forward currency contracts | $(6,792,995 | ) | (1.52 | )% | |||||
Net unrealized gain (loss) on open forward currency contracts | $4,463,359 | 1.00 | % | ||||||
* | Pledged as collateral for the trading of futures and forward positions. |
** | Included in fixed income securities is U.S. Treasury Bills with a fair value of $44,498,309 deposited with the futures broker. |
See Accompanying Notes to Financial Statements.
4
THE CAMPBELL FUND TRUST
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2011 (Unaudited)
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2011 (Unaudited)
FIXED INCOME SECURITIES | ||||||
Maturity Face Value | Description | Fair Value ($) | % of Net Asset Value | |||
Bank Deposits | ||||||
Canada | ||||||
Financials | $12,767,798 | 3.41 % | ||||
(cost $12,764,148) | ||||||
Netherlands | ||||||
Financials | $12,499,978 | 3.34 % | ||||
(cost $12,500,000) | ||||||
Total Bank Deposits (cost $25,264,148) | $25,267,776 | 6.75 % | ||||
Commercial Paper | ||||||
United States | ||||||
$10,075,000 | Financials ING America Insurance Holdings Inc. Due 01/03/2012 | $10,074,922 | 2.69 % | |||
$12,000,000 | ING America Insurance Holdings Inc. Due 01/04/2012 | $11,999,533 | 3.20 % | |||
Other | $11,999,140 | 3.20 % | ||||
Materials | $12,478,321 | 3.33 % | ||||
Services | $12,499,320 | 3.34 % | ||||
Utilities | $39,618,269 | 10.58 % | ||||
Total Commercial Paper (cost $98,665,851) | $98,669,505 | 26.34 % | ||||
Corporate Bonds | ||||||
Switzerland | ||||||
Financials | $6,529,664 | 1.74 % | ||||
(cost $6,543,542) | ||||||
United States | ||||||
Financials | $52,348,609 | 13.98 % | ||||
Materials | $4,054,837 | 1.08 % | ||||
Total United States (cost $56,307,036) | $56,403,446 | 15.06 % | ||||
Total Corporate Bonds (cost $62,850,578) | $62,933,110 | 16.80 % | ||||
Government And Agency Obligations | ||||||
United States | ||||||
$16,625,000 | U.S. Government Agency Federal Home Loan Mortgage Corp. 0.5% Due 02/08/2013 | $16,627,660 | 4.44 % | |||
$12,500,000 | Federal Home Loan Mortgage Corp. 0.55% Due 09/09/2013 | $12,484,700 | 3.33 % | |||
$10,000,000 | Federal Home Loan Mortgage Corp. 0.6% Due 08/22/2013 | $10,003,600 | 2.67 % | |||
$13,000,000 | Federal Home Loan Mortgage Corp. 0.6% Due 10/25/2013 | $13,001,794 | 3.47 % | |||
$12,000,000 | Federal Home Loan Mortgage Corp. Step Up #TR 00424 Due 07/26/2013 | $11,991,840 | 3.20 % | |||
Other | $4,997,900 | 1.33 % | ||||
$16,400,000 | U.S. Treasury Bill U.S. Treasury Bills* Due 02/02/2012 | $16,400,000 | 4.38 % | |||
Total Government And Agency Obligations (cost $85,525,947) | $85,507,494 | 22.82 % |
See Accompanying Notes to Financial Statements.
5
THE CAMPBELL FUND TRUST
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2011 (Unaudited)
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2011 (Unaudited)
Short Term Investments | |||||
United States | |||||
Short Term Investments | $127 | 0.00 % | |||
(cost $127) | |||||
Total Fixed Income Securities ** (cost $272,306,651) | $272,378,012 | 72.71 % | |||
LONG FUTURES CONTRACTS | |||||
Description | Fair Value ($) | % of Net Asset Value | |||
Agriculture | $58,376 | 0.01 % | |||
Energy | $(27,330) | (0.01)% | |||
Metals | $102,079 | 0.03 % | |||
Stock indices | $860,496 | 0.23 % | |||
Short-term interest rates | $566,770 | 0.15 % | |||
Long-term interest rates | $4,454,229 | 1.19 % | |||
Net long futures contracts | $6,014,620 | 1.60 % | |||
SHORT FUTURES CONTRACTS | |||||
Description | Fair Value ($) | % of Net Asset Value | |||
Agriculture | $(2,673,080) | (0.71)% | |||
Energy | $862,051 | 0.23 % | |||
Metals | $1,629,572 | 0.43 % | |||
Stock indices | $172,827 | 0.05 % | |||
Short-term interest rates | $(821) | 0.00 % | |||
Net short futures contracts | $(9,451) | 0.00 % | |||
Net unrealized gain (loss) on open futures contracts | $6,005,169 | 1.60 % | |||
FORWARD CURRENCY CONTRACTS | |||||
Description | Fair Value ($) | % of Net Asset Value | |||
Various long forward currency contracts | $105,868 | 0.03 % | |||
Various short forward currency contracts | $7,903,682 | 2.11 % | |||
Net unrealized gain (loss) on open forward currency contracts | $8,009,550 | 2.14 % | |||
* | Pledged as collateral for the trading of forward positions. |
** | Included in fixed income securities is U.S. Treasury Bills with a fair value of $0 deposited with the futures broker. |
See Accompanying Notes to Financial Statements.
6
THE CAMPBELL FUND TRUST STATEMENTS OF FINANCIAL CONDITION September 30, 2012 and December 31, 2011 (Unaudited) |
September 30, 2012 | December 31, 2011 | ||
ASSETS | |||
Equity in futures broker trading accounts | |||
Cash | $29,849,777 | $49,135,636 | |
Restricted cash | 11,320,045 | 34,189,502 | |
Fixed income securities - (cost $44,498,554 and $0, respectively) | 44,498,309 | 0 | |
Net unrealized gain (loss) on open futures contracts | 2,707,512 | 6,005,169 | |
Total equity in futures broker trading accounts | 88,375,643 | 89,330,307 | |
Cash and cash equivalents | 14,695,665 | 8,935,724 | |
Fixed income securities (cost $343,202,599 and $272,306,651, respectively) | 343,272,314 | 272,378,012 | |
Net unrealized gain (loss) on open forward currency contracts | 4,463,359 | 8,009,550 | |
Interest receivable | 1,091,615 | 405,242 | |
Subscriptions receivable | 37,866 | 0 | |
Total assets | $451,936,462 | $379,058,835 | |
LIABILITIES | |||
Accounts payable | $215,766 | $125,238 | |
Management fee | 1,417,079 | 1,205,071 | |
Performance fee payable | 104,220 | 0 | |
Service fee | 10,184 | 7,149 | |
Accrued commissions and other trading fees on open contracts | 77,373 | 42,489 | |
Offering costs payable | 98,945 | 63,138 | |
Redemptions payable | 2,074,124 | 2,983,337 | |
Total liabilities | 3,997,691 | 4,426,422 | |
UNITHOLDERS' CAPITAL (Net Asset Value) | |||
Series A Units - Redeemable | |||
Other Unitholders - 85,874.794 and 57,271.409 units outstanding at September 30, 2012 and December 31, 2011, respectively | 224,755,870 | 140,986,636 | |
Series B Units - Redeemable | |||
Managing Operator - 0.000 and 20.360 units outstanding at September 30, 2012 and December 31, 2011, respectively | 0 | 51,185 | |
Other Unitholders - 73,939.364 and 85,812.139 units outstanding at September 30, 2012 and December 31, 2011, respectively | 198,405,930 | 215,730,706 | |
Series W Units - Redeemable | |||
Other Unitholders - 9,039.840 and 6,975.389 units outstanding at September 30, 2012 and December 31, 2011, respectively | 24,776,971 | 17,863,886 | |
Total unitholders' capital (Net Asset Value) | 447,938,771 | 374,632,413 | |
Total liabilities and unitholders' capital (Net Asset Value) | $451,936,462 | $379,058,835 |
See Accompanying Notes to Financial Statements.
7
THE CAMPBELL FUND TRUST STATEMENTS OF OPERATIONS For the Three Months and Nine Months Ended September 30, 2012 and 2011 (Unaudited) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2012 | 2011 | 2012 | 2011 | ||||
TRADING GAINS (LOSSES) | |||||||
Futures trading gains (losses) | |||||||
Realized | $8,910,801 | $23,119,773 | $45,492,573 | $18,154,158 | |||
Change in unrealized | 8,001,510 | 8,632,911 | (3,297,657) | (2,779,047) | |||
Brokerage commissions | (492,425) | (334,306) | (1,325,841) | (917,094) | |||
Net gain (loss) from futures trading | 16,419,886 | 31,418,378 | 40,869,075 | 14,458,017 | |||
Forward currency and options on forward | |||||||
currency trading gains (losses) | |||||||
Realized | (10,087,703) | (4,836,926) | (353,689) | 4,415,564 | |||
Change in unrealized | 11,512,955 | (10,522,367) | (3,546,191) | (16,009,213) | |||
Brokerage commissions | (33,521) | (33,083) | (74,550) | (117,152) | |||
Net gain (loss) from forward currency and options on forward currency trading | 1,391,731 | (15,392,376) | (3,974,430) | (11,710,801) | |||
Total net trading gain (loss) | 17,811,617 | 16,026,002 | 36,894,645 | 2,747,216 | |||
NET INVESTMENT INCOME (LOSS) | |||||||
Investment income | |||||||
Interest income | 478,625 | 270,051 | 1,280,850 | 905,562 | |||
Realized gain (loss) on fixed income securities | (1,755) | 333 | 10,405 | 6,154 | |||
Change in unrealized gain (loss) on fixed income securities | 1,806 | (160,883) | (1,891) | (177,460) | |||
Total investment income | 478,676 | 109,501 | 1,289,364 | 734,256 | |||
Expenses | |||||||
Management fee | 4,182,978 | 3,784,632 | 11,904,376 | 10,739,070 | |||
Service fee | 29,175 | 21,443 | 79,803 | 54,299 | |||
Performance fee | 108,003 | 5,222 | 116,877 | 5,222 | |||
Operating expenses | 253,844 | 131,995 | 542,334 | 382,372 | |||
Total expenses | 4,574,000 | 3,943,292 | 12,643,390 | 11,180,963 | |||
Net investment income (loss) | (4,095,324) | (3,833,791) | (11,354,026) | (10,446,707) | |||
NET INCOME (LOSS) | $13,716,293 | $12,192,211 | $25,540,619 | $(7,699,491) | |||
NET INCOME (LOSS) PER MANAGING OPERATOR AND OTHER UNITHOLDERS UNIT | |||||||
(based on weighted average number of units outstanding during the period) | |||||||
Series A | $80.69 | $67.38 | $150.13 | $(61.49) | |||
Series B | $90.83 | $92.86 | $176.97 | $(55.53) | |||
Series W | $82.33 | $93.35 | $179.87 | $(17.40) | |||
INCREASE (DECREASE) IN NET ASSET VALUE PER MANAGING OPERATOR AND OTHER UNITHOLDERS UNIT | |||||||
Series A | $83.26 | $84.27 | $155.52 | $(66.00) | |||
Series B | $88.99 | $90.15 | $169.37 | $(55.79) | |||
Series W | $84.47 | $97.78 | $179.87 | $(36.77) | |||
WEIGHTED AVERAGE NUMBER OF | |||||||
UNITS OUTSTANDING DURING THE PERIOD | |||||||
Series A | 76,732.307 | 45,226.871 | 67,271.997 | 37,402.076 | |||
Series B | 75,213.544 | 92,200.357 | 79,304.562 | 95,554.251 | |||
Series W | 8,412.611 | 6,245.613 | 7,816.320 | 5,391.753 |
See Accompanying Notes to Financial Statements.
8
THE CAMPBELL FUND TRUST STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2012 and 2011 (Unaudited) |
Nine Months Ended September 30, | |||
2012 | 2011 | ||
Cash flows from (for) operating activities | |||
Net income (loss) | $25,540,619 | $(7,699,491) | |
Adjustments to reconcile net income (loss) to net cash from (for) operating activities | |||
Net change in unrealized on futures, forwards, options and fixed income | 6,845,739 | 18,965,720 | |
(Increase) decrease in restricted cash | 22,869,457 | (21,996,093) | |
(Increase) decrease in option premiums paid | 0 | 1,091,379 | |
Increase (decrease) in option premiums received | 0 | (237,756) | |
(Increase) decrease in interest receivable | (686,373) | (393,113) | |
Increase (decrease) in accounts payable and accrued expenses | 444,675 | (285,592) | |
Purchases of investments in fixed income securities | (12,122,087,590) | (11,752,247,504) | |
Sales/maturities of investments in fixed income securities | 12,006,693,088 | 11,755,303,759 | |
Net cash from (for) operating activities | (60,380,385) | (7,498,691) | |
Cash flows from (for) financing activities | |||
Addition of units | 89,076,750 | 71,876,039 | |
Redemption of units | (41,521,177) | (29,299,341) | |
Offering costs paid | (701,106) | (393,866) | |
Net cash from (for) financing activities | 46,854,467 | 42,182,832 | |
Net increase (decrease) in cash and cash equivalents | (13,525,918) | 34,684,141 | |
Unrestricted cash | |||
Beginning of period | 58,071,360 | 59,836,098 | |
End of period | $44,545,442 | $94,520,239 | |
End of period cash and cash equivalents consists of: | |||
Cash in broker trading accounts | $29,849,777 | $83,697,856 | |
Cash and cash equivalents | 14,695,665 | 10,822,383 | |
Total end of period cash and cash equivalents | $44,545,442 | $94,520,239 |
See Accompanying Notes to Financial Statements.
9
THE CAMPBELL FUND TRUST STATEMENTS OF CHANGES IN UNITHOLDERS’ CAPITAL (NET ASSET VALUE) For the Nine Months Ended September 30, 2012 and 2011 (Unaudited) |
Unitholders’ Capital - Series B | |||||||||||
Managing Operator | Other Unitholders | Total | |||||||||
Units | Amount | Units | Amount | Units | Amount | ||||||
Nine Months Ended September 30, 2012 | |||||||||||
Balances at December 31, 2011 | 20.360 | $51,185 | 85,812.139 | $215,730,706 | 85,832.499 | $215,781,891 | |||||
Net income (loss) for the nine months ended September 30, 2012 | 1,878 | 14,033,035 | 14,034,913 | ||||||||
Additions | 0.000 | 0 | 223.184 | 604,320 | 223.184 | 604,320 | |||||
Redemptions | (20.360) | (53,063) | (12,095.959) | (31,962,131) | (12,116.319) | (32,015,194) | |||||
Balances at September 30, 2012 | 0.000 | $0 | 73,939.364 | $198,405,930 | 73,939.364 | $198,405,930 | |||||
Nine Months Ended September 30, 2011 | |||||||||||
Balances at December 31, 2010 | 20.360 | $54,087 | 99,342.853 | $263,905,408 | 99,363.213 | $263,959,495 | |||||
Net income (loss) for the nine months ended September 30, 2011 | (1,136) | (5,304,584) | (5,305,720) | ||||||||
Additions | 0.000 | 0 | 596.215 | 1,573,178 | 596.215 | 1,573,178 | |||||
Redemptions | 0.000 | 0 | (8,786.577) | (23,111,567) | (8,786.577) | (23,111,567) | |||||
Balances at September 30, 2011 | 20.360 | $52,951 | 91,152.491 | $237,062,435 | 91,172.851 | $237,115,386 |
Net Asset Value per Managing Operator and Other Unitholders’ Unit - Series B | ||||||
September 30, 2012 | December 31, 2011 | September 30, 2011 | December 31, 2010 | |||
$2,683.36 | $2,513.99 | $2,600.72 | $2,656.51 |
See Accompanying Notes to Financial Statements.
10
THE CAMPBELL FUND TRUST STATEMENTS OF CHANGES IN UNITHOLDERS’ CAPITAL (NET ASSET VALUE) For the Nine Months Ended September 30, 2012 and 2011 (Unaudited) |
Unitholders’ Capital | |||||||
Series A - Other Unitholders | Series W - Other Unitholders | ||||||
Units | Amount | Units | Amount | ||||
Nine Months Ended September 30, 2012 | |||||||
Balances at December 31, 2011 | 57,271.409 | $140,986,636 | 6,975.389 | $17,863,886 | |||
Net income (loss) for the nine months ended | |||||||
September 30, 2012 | 10,099,244 | 1,406,462 | |||||
Additions | 31,280.458 | 81,282,004 | 2,668.891 | 7,228,292 | |||
Redemptions | (2,677.073) | (6,954,904) | (604.440) | (1,641,866) | |||
Offering costs | (657,110) | (79,803) | |||||
Balances at September 30, 2012 | 85,874.794 | $224,755,870 | 9,039.840 | $24,776,971 | |||
Nine Months Ended September 30, 2011 | |||||||
Balances at December 31, 2010 | 27,273.338 | $71,343,164 | 4,160.119 | $11,146,969 | |||
Net income (loss) for the nine months ended | |||||||
September 30, 2011 | (2,299,956) | (93,815) | |||||
Additions | 24,250.679 | 62,726,472 | 2,773.931 | 7,328,324 | |||
Redemptions | (657.633) | (1,702,057) | (351.505) | (931,422) | |||
Offering costs | (365,610) | (54,299) | |||||
Balances at September 30, 2011 | 50,866.384 | $129,702,013 | 6,582.545 | $17,395,757 |
Net Asset Value per Other Unitholders’ Unit - Series A | ||||||
September 30, 2012 | December 31, 2011 | September 30, 2011 | December 31, 2010 | |||
$2,617.25 | $2,461.73 | $2,549.86 | $2,615.86 | |||
Net Asset Value per Other Unitholders’ Unit - Series W | ||||||
September 30, 2012 | December 31, 2011 | September 30, 2011 | December 31, 2010 | |||
$2,740.86 | $2,560.99 | $2,642.71 | $2,679.48 |
See Accompanying Notes to Financial Statements.
11
THE CAMPBELL FUND TRUST
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
For the Three Months and Nine Months Ended September 30, 2012 and 2011
(Unaudited)
(Unaudited)
The following information presents per unit operating performance data and other supplemental financial data for the three months and nine months ended September 30, 2012 and 2011. This information has been derived from information presented in the unaudited financial statements.
Series A | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2012 | 2011 | 2012 | 2011 | ||||
Per Unit Performance | |||||||
(for a unit outstanding throughout the entire period) | |||||||
Net asset value per unit at beginning of period | $2,533.99 | $2,465.59 | $2,461.73 | $2,615.86 | |||
Income (loss) from operations: | |||||||
Total net trading gains (losses) (1) | 111.63 | 114.38 | 238.77 | 19.88 | |||
Net investment income (loss)(1) | (25.07) | (26.79) | (73.48) | (76.10) | |||
Total net income (loss) from operations | 86.56 | 87.59 | 165.29 | (56.22) | |||
Offering costs (1) | (3.30) | (3.32) | (9.77) | (9.78) | |||
Net asset value per unit at end of period | $2,617.25 | $2,549.86 | $2,617.25 | $2,549.86 | |||
Total Return (3) | 3.29 % | 3.42 % | 6.32 % | (2.52)% | |||
Supplemental Data | |||||||
Ratios to average net asset value: | |||||||
Expenses prior to performance fee (4) | 4.23 % | 4.16 % | 4.13 % | 4.04 % | |||
Performance fee (3) | 0.00 % | 0.00 % | 0.00 % | 0.00 % | |||
Total expenses | 4.23 % | 4.16 % | 4.13 % | 4.04 % | |||
Net investment income (loss)(2),(4) | (3.79)% | (4.05)% | (3.71)% | (3.80)% |
Total returns are calculated based on the change in value of a unit during the period. An individual unitholder's total returns and ratios may vary from the above total returns and ratios based on the timing of additions and redemptions. | |
(1) | Net investment income (loss) per unit and offering costs per unit are calculated by dividing the net investment income (loss) and offering costs by the average number of units outstanding during the period. Total net trading gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. |
(2) | Excludes performance fee. |
(3) | Not annualized |
(4) | Annualized |
See Accompanying Notes to Financial Statements.
12
THE CAMPBELL FUND TRUST FINANCIAL HIGHLIGHTS For the Three Months and Nine Months Ended September 30, 2012 and 2011 (Unaudited) |
The following information presents per unit operating performance data and other supplemental financial data for the three months and nine months ended September 30, 2012 and 2011. This information has been derived from information presented in the unaudited financial statements.
Series B | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2012 | 2011 | 2012 | 2011 | ||||
Per Unit Performance | |||||||
(for a unit outstanding throughout the entire period) | |||||||
Net asset value per unit at beginning of period | $2,594.37 | $2,510.57 | $2,513.99 | $2,656.51 | |||
Income (loss) from operations: | |||||||
Total net trading gains (losses) (1) | 114.65 | 117.39 | 244.25 | 20.97 | |||
Net investment income (loss)(1) | (25.66) | (27.24) | (74.88) | (76.76) | |||
Total net income (loss) from operations | 88.99 | 90.15 | 169.37 | (55.79) | |||
Net asset value per unit at end of period | $2,683.36 | $2,600.72 | $2,683.36 | $2,600.72 | |||
Total Return (3) | 3.43 % | 3.59 % | 6.74 % | (2.10)% | |||
Supplemental Data | |||||||
Ratios to average net asset value: | |||||||
Expenses prior to performance fee (4) | 4.31 % | 4.23 % | 4.24 % | 4.17 % | |||
Performance fee (3) | 0.00 % | 0.00 % | 0.00 % | 0.00 % | |||
Total expenses | 4.31 % | 4.23 % | 4.24 % | 4.17 % | |||
Net investment income (loss)(2),(4) | (3.85)% | (4.12)% | (3.81)% | (3.89)% |
Total returns are calculated based on the change in value of a unit during the period. An individual unitholder's total returns and ratios may vary from the above total returns and ratios based on the timing of additions and redemptions. | |
(1) | Net investment income (loss) per unit is calculated by dividing the net investment income (loss) by the average number of units outstanding during the period. Total net trading gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. |
(2) | Excludes performance fee. |
(3) | Not annualized |
(4) | Annualized |
See Accompanying Notes to Financial Statements.
13
THE CAMPBELL FUND TRUST FINANCIAL HIGHLIGHTS For the Three Months and Nine Months Ended September 30, 2012 and 2011 (Unaudited) |
The following information presents per unit operating performance data and other supplemental financial data for the three months and nine months ended September 30, 2012 and 2011. This information has been derived from information presented in the unaudited financial statements.
Series W | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2012 | 2011 | 2012 | 2011 | ||||
Per Unit Performance | |||||||
(for a unit outstanding throughout the entire period) | |||||||
Net asset value per unit at beginning of period | $2,656.39 | $2,544.93 | $2,560.99 | $2,679.48 | |||
Income (loss) from operations: | |||||||
Total net trading gains (losses) (1) | 116.38 | 118.83 | 250.19 | 21.63 | |||
Net investment income (loss)(1) | (28.44) | (17.62) | (60.11) | (48.33) | |||
Total net income (loss) from operations | 87.94 | 101.21 | 190.08 | (26.70) | |||
Offering costs (1) | (3.47) | (3.43) | (10.21) | (10.07) | |||
Net asset value per unit at end of period | $2,740.86 | $2,642.71 | $2,740.86 | $2,642.71 | |||
Total Return (3) | 3.18 % | 3.84 % | 7.02 % | (1.37)% | |||
Supplemental Data | |||||||
Ratios to average net asset value: | |||||||
Expenses prior to performance fee (4) | 2.74 % | 2.68 % | 2.67 % | 2.60 % | |||
Performance fee (3) | 0.45 % | 0.01 % | 0.52 % | 0.01 % | |||
Total expenses | 3.19 % | 2.69 % | 3.19 % | 2.61 % | |||
Net investment income (loss)(2),(4) | (2.30)% | (2.57)% | (2.25)% | (2.35)% |
Total returns are calculated based on the change in value of a unit during the period. An individual unitholder's total returns and ratios may vary from the above total returns and ratios based on the timing of additions and redemptions. | |
(1) | Net investment income (loss) per unit and offering costs per unit are calculated by dividing the net investment income (loss) and offering costs by the average number of units outstanding during the period. Total net trading gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. |
(2) | Excludes performance fee. |
(3) | Not annualized |
(4) | Annualized |
See Accompanying Notes to Financial Statements.
14
THE CAMPBELL FUND TRUST
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2012 (Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Trust
The Campbell Fund Trust (the Trust) is a Delaware statutory trust which operates as a commodity investment pool. The Trust engages in the speculative trading of futures contracts and forward currency contracts. Prior to September 2011, the Trust also traded options on forward currency contracts.
Effective August 31, 2008, the Trust began offering units of beneficial interest classified into Series A units, Series B units and Series W units. The rights of the Series A units, Series B units and Series W units are identical, except that the fees and commissions vary on a Series-by-Series basis. Series A and Series W commenced trading on October 1, 2008 and March 1, 2009, respectively. The initial minimum subscription for Series A units and Series W units is $25,000. Series B units are only available for additional investments by existing holders of Series B units. See Note 1G, Note 1I, Note 2 and Note 6 for an explanation of allocations and Series specific charges.
B. Regulation
The Trust is a registrant with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934 (the "Act"). As a registrant, the Trust is subject to the regulations of the SEC and the informational requirements of the Act. As a commodity investment pool, the Trust is subject to the regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of the various commodity exchanges where the Trust executes transactions. Additionally, the Trust is subject to the requirements of futures commission merchants (the "brokers") and interbank market makers through which the Trust trades.
C. Method of Reporting
The Trust's financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which may require the use of certain estimates made by the Trust's management. Actual results may differ from these estimates.
Investment transactions are accounted for on the trade date. Gains or losses are realized when contracts are liquidated. Unrealized gains and losses on open contracts (the difference between contract trade price and fair value) are reported in the Statements of Financial Condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 210-20, Offsetting - Balance Sheet. The fair value of futures (exchange-traded) contracts is based on the various futures exchanges, and reflects the settlement price for each contract as of the close on the last business day of the reporting period. The fair value of forward currency (non-exchange traded) contracts was extrapolated on a forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) on the last business day of the reporting period.
The fair value of option (non-exchange traded) contracts is calculated by applying an industry-standard adaptation of the Black-Scholes options valuation model to foreign currency options, using as inputs the spot prices, interest rates and option implied volatilities quoted as of 3:00 P.M. (E.T.) on the last business day of the reporting period. Any change in net unrealized gain or loss from the preceding period is reported in the Statements of Operations.
When the Trust writes an option, an amount equal to the premium received by the Trust is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current fair value of option written. Brokerage commissions include other trading fees and are charged to expense when contracts are opened.
The fixed income investments, other than U.S. Treasury bills, are held at the custodian and marked to market on the last business day of the reporting period using a third party vendor hierarchy of pricing providers who specialize in such markets. The prices furnished by the providers consider the yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. U.S. Treasury bills are held at the brokers or interbank market makers and are stated at cost plus accrued interest, which approximates fair value. Premiums and discounts on fixed income securities are amortized and accreted for financial reporting purposes.
For purposes of both financial reporting and calculation of redemption value, Net Asset Value per unit is calculated by dividing Net Asset Value by the number of outstanding units.
15
THE CAMPBELL FUND TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 2012 (Unaudited)
D. Fair Value
The Trust follows the provisions of ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Trust has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The value of the Trust's exchange-traded futures contracts fall into this category.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. This category includes forward currency contracts and options on forward currency contracts that the Trust values using models or other valuation methodologies derived from observable market data. This category also includes fixed income investments.
Level 3 inputs are unobservable inputs for an asset or liability (including the Trust's own assumptions used in determining the fair value of investments). Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of September 30, 2012 and December 31, 2011 and the periods ended September 30, 2012 and 2011, the Trust did not have any Level 3 assets or liabilities.
The following tables set forth by level within the fair value hierarchy the Trust's investments accounted for at fair value on a recurring basis as of September 30, 2012 and December 31, 2011.
Fair Value at September 30, 2012 | ||||
Description | Level 1 | Level 2 | Level 3 | Total |
Investments | ||||
Fixed income securities | $0 | $387,770,623 | $0 | $387,770,623 |
Other Financial Instruments | ||||
Exchange-traded futures contracts | 2,707,512 | 0 | 0 | 2,707,512 |
Forward currency contracts | 0 | 4,463,359 | 0 | 4,463,359 |
Total | $2,707,512 | $392,233,982 | $0 | $394,941,494 |
Fair Value at December 31, 2011 | ||||
Description | Level 1 | Level 2 | Level 3 | Total |
Investments | ||||
Fixed income securities | $0 | $272,378,012 | $0 | $272,378,012 |
Other Financial Instruments | ||||
Exchange-traded futures contracts | 6,005,169 | 0 | 0 | 6,005,169 |
Forward currency contracts | 0 | 8,009,550 | 0 | 8,009,550 |
Total | $6,005,169 | $280,387,562 | $0 | $286,392,731 |
There were no transfers to or from Level 1 to Level 2 for the period ended September 30, 2012 and the year ended December 31, 2011.
The gross presentation of the fair value of the Trust's derivatives by instrument type is shown in Note 10. See Condensed Schedules of Investments for additional detail categorization.
E. Cash and Cash Equivalents
Cash and cash equivalents includes cash and overnight money market investments at financial institutions.
F. Income Taxes
The Trust prepares calendar year U.S. federal and applicable state information tax returns and reports to the unitholders their allocable shares of the Trust's income, expenses and trading gains or losses. No provision for income taxes has been made in the accompanying financial statements as each unitholder is individually responsible for reporting income or loss based on such unitholder's respective share of the Trust's income and expenses as reported for income tax purposes.
Management has continued to evaluate the application of ASC 740, Income Taxes, to the Trust, and has determined that no reserves for uncertain tax positions were required. The Trust files federal and state tax returns. The 2008 through 2011 tax years generally remain subject to examination by the U.S. federal and most state tax authorities.
G. Offering Costs
Campbell & Company, Inc. ("Campbell & Company") has incurred all costs in connection with the initial and continuous offering of units of the Trust ("offering costs"). Series A units and Series W units will each bear the offering costs incurred in the relation to the offering of Series A units and Series W units, respectively. Offering costs are charged to Series A and Series W at a monthly rate of 1/12 of 0.5% (0.5% annualized) of each Series' month-end net asset value (as defined in the Declaration of Trust and Trust Agreement) until such amounts are fully reimbursed. Such amounts are charged directly to unitholders' capital. Series A and Series W are only liable for payment of offering costs on a monthly basis. The offering costs allocable to the Series B units are borne by Campbell & Company.
If the Trust terminates prior to completion of payment to Campbell & Company for the unreimbursed offering costs incurred through the date of such termination, Campbell & Company will not be entitled to any additional payments, and Series A units and Series W units will have no further obligation to Campbell & Company. At September 30, 2012 and December 31, 2011, the amount of unreimbursed offering costs incurred by Campbell & Company is $2,931,513 and $2,848,875 for Series A units and $580,637 and $578,115 for Series W units, respectively.
16
THE CAMPBELL FUND TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 2012 (Unaudited)
H. Foreign Currency Transactions
The Trust's functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income.
I. Allocations
Income or loss (prior to calculation of the management fee, service fee, offering costs and performance fee) is allocated pro rata to each Series of units. Each Series of units is then charged the management fee, service fee, offering costs and performance fee applicable to such Series of units.
J. Recently Issued Accounting Pronouncements
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS ("ASU 2011-04"), to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 explains how to measure fair value. It does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting. As of January 1, 2012, the Trust adopted the provisions of ASU 2011-04. The adoption of ASU 2011-04 did not have a material impact on the Trust's financial statement disclosures.
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11"), which requires entities to disclose information about financial instruments and derivative instruments that have been offset or that subject to enforceable master netting agreements, to enable users of its financial statements to evaluate the effect or potential effect of those agreements on its financial position. Entities will be required to provide both net (offset amounts) and gross information in the notes to the financial statements for relevant assets and liabilities that are offset or subject to the arrangements. The amendments in ASU No. 2011-11 are effective for interim and annual periods beginning on or after January 1, 2013, and an entity should provide the disclosures required by the amendments retrospectively for all comparable periods presented. The Trust is in the process of evaluating the disclosure requirements and any impact the new disclosures will have on its financial statements.
Note 2. MANAGING OPERATOR AND COMMODITY TRADING ADVISOR
The managing operator of the Trust is Campbell & Company which conducts and manages the business of the Trust. Campbell & Company is also the commodity trading advisor of the Trust.
Series A units and Series B units pay the managing operator a monthly management fee equal to 1/12 of 4% (4% annually) of the Net Assets (as defined) of Series A units and Series B units, respectively, as of the end of each month. Series W units pay the managing operator a monthly management fee equal to 1/12 of 2% (2% annually) of the Net Assets (as defined) of Series W units as of the end of each month. Each Series of units will pay the managing operator a quarterly performance fee equal to 20% of the aggregate cumulative appreciation in Net Asset Value per Unit (as defined) exclusive of appreciation attributable to interest income on a Series-by-Series basis.
The performance fee is paid on the cumulative increase, if any, in the Net Asset Value per Unit over the highest previous cumulative Net Asset Value per Unit (commonly referred to as a High Water Mark). In determining the management fee and performance fee (the "fees"), adjustments shall be made for capital additions and withdrawals and Net Assets shall not be reduced by the fees being calculated for such current period. The performance fee is not subject to any clawback provisions. The fees are typically paid in the month following the month in which they are earned. The fees are paid from the available cash at the Trust's bank, broker or cash management custody accounts.
Note 3. TRUSTEE
The trustee of the Trust is U.S. Bank National Association, a national banking corporation. The trustee has delegated to the managing operator the duty and authority to manage the business and affairs of the Trust and has only nominal duties and liabilities with respect to the Trust.
Note 4. ADMINISTRATOR
Effective August 1, 2012, SEI Global Services, Inc. (SEI) became the Administrator of the Trust. The Administrator receives fees at rates agreed upon between the Trust and the Administrator and is entitled to reimbursement of certain actual out-of-pocket expenses incurred while performing its duties. The Administrator's primary responsibilities are portfolio accounting and fund accounting services.
The Administration Agreement (the Agreement) with SEI is effective until July 31, 2015 and is automatically renewed for successive one year periods unless terminated by the Trust or SEI pursuant to giving of ninety days written notice prior to the last day of the current term. The Agreement may be terminated by the Trust or SEI giving at least thirty days prior notice in writing to the other party if at any time the other party or parties have been first (i) notified in writing that such party shall have materially failed to perform its duties and obligations under the Agreement (“Breach Notice”) and (ii) the party receiving the Breach Notice shall not have remedied the noticed failure within thirty days after receipt of the Breach Notice requiring it to be remedied.
Note 5. CASH MANAGER AND CUSTODIAN
The Trust appointed Horizon Cash Management LLC as (the "cash manager") under the Investment Advisory Agreement dated December 22, 2010 to manage and control the liquid assets of the Trust. The cash manager is registered as an investment adviser with the SEC of the United States under the Investment Advisers Act of 1940.
The Trust has a custodial account at the Northern Trust Company (the "custodian") and has granted the cash manager authority to make certain investments on behalf of the Trust provided such investments are consistent with the investment guidelines created by the managing operator. All securities purchased by the cash manager on behalf of the Trust will be held in its custody account at the custodian. The cash manager will have no beneficial or other interest in the securities and cash in such custody account.
Note 6. SERVICE FEE
The selling firms who sell Series W units receive a monthly service fee equal to 1/12 of 0.5% of the month-end Net Asset Value (as defined) of the Series W units, totaling approximately 0.50% per year.
Note 7. DEPOSITS WITH FUTURES BROKER
The Trust deposits assets with UBS Securities LLC (the "broker") to act as futures broker, subject to Commodity Futures Trading Commission regulations and various exchange and futures broker requirements. Margin requirements are satisfied by the deposit of U.S. Treasury bills and cash with such futures broker. The Trust typically earns interest income on its assets deposited with the futures broker.
Note 8. DEPOSITS WITH INTERBANK MARKET MAKER
The Trust’s counterparty with regard to its forward currency transactions is the Royal Bank of Scotland PLC ("RBS"). The Trust has entered into an International Swap and Derivatives Association, Inc. agreement with RBS which governs these transactions. The credit ratings reported by the three major rating agencies for RBS were considered investment grade as of September 30, 2012. Margin requirements are satisfied by the deposit of U.S. Treasury bills and cash with RBS. The Trust typically earns interest income on its assets deposited with RBS.
17
THE CAMPBELL FUND TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 2012 (Unaudited)
Note 9. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Trust are made by subscription agreement, subject to acceptance by Campbell & Company.
The Trust is not required to make distributions, but may do so at the sole discretion of Campbell & Company. A unitholder may request and receive redemption of units owned, subject to restrictions in the Declaration of Trust and Trust Agreement. Units are transferable, but no market exists for their sale and none is expected to develop. Monthly redemptions are permitted upon ten (10) business days advance written notice to Campbell & Company.
Redemption fees, which are paid to Campbell & Company, apply to Series A units through the first twelve month-ends following purchase (the month-end as of which the unit is purchased is counted as the first month-end) as follows: 1.833% of Net Asset Value per unit redeemed through the second month-end, 1.666% of Net Asset Value per unit redeemed through the third month-end, 1.500% of Net Asset Value per unit redeemed through the fourth month-end, 1.333% of Net Asset Value per unit redeemed through the fifth month-end, 1.167% of Net Asset Value per unit redeemed through the sixth month-end, 1.000% of Net Asset Value per unit redeemed through the seventh month-end, 0.833% of Net Asset Value per unit redeemed through the eight month-end, 0.667% of Net Asset Value per unit redeemed through the ninth month-end, 0.500% of Net Asset Value per unit redeemed through the tenth month-end, 0.333% of Net Asset Value per unit redeemed through the eleventh month-end and 0.167% of Net Asset Value per unit redeemed through the twelfth month end. For the nine months ended September 30, 2012 and 2011, Campbell & Company received redemption fees of $11,193 and $4,301, respectively.
Note 10. TRADING ACTIVITIES AND RELATED RISKS
The Trust engages in the speculative trading of U.S. and foreign futures contracts, forward currency contracts and options on forward currency contracts (collectively, "derivatives"). Specifically, the Trust trades a portfolio focused on financial futures, which are instruments designed to hedge or speculate on changes in interest rates, currency exchange rates or stock index values, as well as metals, energy and agriculture values. The Trust is exposed to both market risk, the risk arising from changes in the fair value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract.
Purchase and sale of futures contracts requires margin deposits with the futures brokers. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a futures broker to segregate all customer transactions and assets from such futures broker's proprietary activities. A customer's cash and other property (for example, U.S. Treasury bills) deposited with a futures broker are considered commingled with all other customer trusts subject to the futures broker's segregation requirements. In the event of a futures broker's insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than total cash and other property deposited.
The amount of required margin and good faith deposits with the futures brokers and interbank market makers usually range from 10% to 30% of Net Asset Value. The fair value of securities held to satisfy such requirements at September 30, 2012 and December 31, 2011 was $61,494,399 and $16,400,000, respectively, which equals 14% and 4% of Net Asset Value, respectively. The cash deposited with interbank market makers at September 30, 2012 and December 31, 2011 was $55,600 and $21,775, respectively, which equals 0% and 0% of Net Asset Value, respectively. These amounts are included in cash and cash equivalents. Included in cash deposits with the futures broker and interbank market maker at September 30, 2012 and December 31, 2011 was restricted cash for margin requirements of $11,320,045 and $34,189,502 respectively, which equals 3% and 9% of Net Asset Value, respectively.
The Trust trades forward currency and options on forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty nonperformance. Accordingly, the risks associated with forward currency and options on foreign currency contracts are generally greater than those associated with exchange traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency and options on forward currency contracts typically involves delayed cash settlement.
The Trust has a substantial portion of its assets on deposit with financial institutions. In the event of a financial institution's insolvency, recovery of Trust assets on deposit may be limited to account insurance or other protection afforded such deposits.
For derivatives, risks arise from changes in the fair value of the contracts. Market movements result in frequent changes in the fair value of the Trust's open positions and, consequently, in its earnings and cash flow. The Trust's market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the fair value of financial instruments and contracts, the diversification effects among the Trust's open positions and the liquidity of the markets in which it trades. Theoretically, the Trust is exposed to a market risk equal to the notional contract value of futures and forward currency contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Trust pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option.
Written options expose the Trust to potentially unlimited liability, and purchased options expose the Trust to a risk of loss limited to the premiums paid. See Note 1. C. for an explanation of how the Trust determines its valuation for derivatives as well as the netting of derivatives.
The Trust adopted the provisions of ASC 815, Derivatives and Hedging, ("ASC 815"). ASC 815 provides enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments are accounted for, and how derivative instruments affect an entity's financial position, financial performance and cash flows.
The following tables summarize quantitative information required by ASC 815.
The fair value of the Trust's derivatives by instrument type, as well as the location of those instruments on the Statements of Financial Condition, as of September 30, 2012 and December 31, 2011 is as follows:
18
THE CAMPBELL FUND TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 2012 (Unaudited)
Type of Instrument * | Statements of Financial Condition Location | Asset Derivatives at September 30, 2012 Fair Value | Liability Derivatives at September 30, 2012 Fair Value | Net |
Agriculture Contracts | Net unrealized gain (loss) on open futures contracts | $657,773 | $(1,214,435) | $(556,662) |
Energy Contracts | Net unrealized gain (loss) on open futures contracts | 1,795,382 | (84,269) | 1,711,113 |
Metal Contracts | Net unrealized gain (loss) on open futures contracts | 7,720,415 | (6,592,897) | 1,127,518 |
Stock Indices Contracts | Net unrealized gain (loss) on open futures contracts | 348,394 | (3,717,397) | (3,369,003) |
Short-Term Interest Rate Contracts | Net unrealized gain (loss) on open futures contracts | 906,429 | (124,480) | 781,949 |
Long-Term Interest Rate Contracts | Net unrealized gain (loss) on open futures contracts | 3,401,469 | (388,872) | 3,012,597 |
Forward Currency Contracts | Net unrealized gain (loss) on open forward currency contracts | 19,325,404 | (14,862,045) | 4,463,359 |
Totals | $34,155,266 | $(26,984,395) | $7,170,871 | |
* Derivatives not designated as hedging instruments under ASC 815 |
Type of Instrument * | Statements of Financial Condition Location | Asset Derivatives at December 31, 2011 Fair Value | Liability Derivatives at December 31, 2011 Fair Value | Net |
Agriculture Contracts | Net unrealized gain (loss) on open futures contracts | $561,871 | $(3,176,575) | $(2,614,704) |
Energy Contracts | Net unrealized gain (loss) on open futures contracts | 1,069,580 | (234,859) | 834,721 |
Metal Contracts | Net unrealized gain (loss) on open futures contracts | 2,315,558 | (583,907) | 1,731,651 |
Stock Indices Contracts | Net unrealized gain (loss) on open futures contracts | 1,166,337 | (133,014) | 1,033,323 |
Short-Term Interest Rate Contracts | Net unrealized gain (loss) on open futures contracts | 1,049,308 | (483,359) | 565,949 |
Long-Term Interest Rate Contracts | Net unrealized gain (loss) on open futures contracts | 4,648,643 | (194,414) | 4,454,229 |
Forward Currency Contracts | Net unrealized gain (loss) on open forward currency contracts | 12,831,895 | (4,822,345) | 8,009,550 |
Totals | $23,643,192 | $(9,628,473) | $14,014,719 | |
* Derivatives not designated as hedging instruments under ASC 815 |
The trading revenue of the Trust's derivatives by instrument type, as well as the location of those gains and losses on the Statements of Operations, for the three months and nine months ended September 30, 2012 and 2011 is as follows:
Type of Instrument | Trading Gains / (Losses) for the Three Months Ended September 30, 2012 | Trading Gains / (Losses) for the Three Months Ended September 30, 2011 | ||
Agriculture Contracts | $2,546,778 | $(9,020,457) | ||
Energy Contracts | 517,081 | (5,084,181) | ||
Metal Contracts | (169,952) | 3,182,922 | ||
Stock Indices Contracts | 10,328,421 | (6,513,952) | ||
Short-Term Interest Rate Contracts | 4,102,224 | 10,718,343 | ||
Long-Term Interest Rate Contracts | (437,610) | 38,353,446 | ||
Forward Currency Contracts | 1,425,252 | (15,294,359) | ||
Purchased Options on Forward Currency Contracts | 0 | (2,271,933) | ||
Written Options on Forward Currency Contracts | 0 | 2,206,999 | ||
Total | $18,312,194 | $16,276,828 |
Type of Instrument | Trading Gains / (Losses) for the Nine Months Ended September 30, 2012 | Trading Gains / (Losses) for the Nine Months Ended September 30, 2011 | ||
Agriculture Contracts | $7,286,130 | $(13,683,913) | ||
Energy Contracts | 4,817,919 | (4,155,372) | ||
Metal Contracts | (2,584,662) | (1,135,027) | ||
Stock Indices Contracts | 10,167,698 | (18,688,736) | ||
Short-Term Interest Rate Contracts | 8,945,653 | 2,642,139 | ||
Long-Term Interest Rate Contracts | 13,736,939 | 50,328,924 | ||
Forward Currency Contracts | (3,899,880) | (6,331,984) | ||
Purchased Options on Forward Currency Contracts | 0 | (11,630,929) | ||
Written Options on Forward Currency Contracts | 0 | 6,369,264 | ||
Total | $38,469,797 | $3,714,366 |
Line Item in the Statement of Operations | Trading Gains / (Losses) for the Three Months Ended September 30, 2012 | Trading Gains / (Losses) for the Three Months Ended September 30, 2011 | ||
Futures trading gains (losses): | ||||
Realized ** | $8,885,432 | $23,003,210 | ||
Change in unrealized | 8,001,510 | 8,632,911 | ||
Forward currency and options on forward currency trading gains (losses): | ||||
Realized | (10,087,703) | (4,836,926) | ||
Change in unrealized | 11,512,955 | (10,522,367) | ||
Total | $18,312,194 | $16,276,828 | ||
** Amounts differ from the amounts on the Statements of Operations as the amounts above do not include gains and losses on foreign currency cash balances at the futures broker. |
19
THE CAMPBELL FUND TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 2012 (Unaudited)
Line Item in the Statement of Operations | Trading Gains / (Losses) for the Nine Months Ended September 30, 2012 | Trading Gains / (Losses) for the Nine Months Ended September 30, 2011 | ||
Futures trading gains (losses): | ||||
Realized ** | $45,667,334 | $18,087,062 | ||
Change in unrealized | (3,297,657) | (2,779,047) | ||
Forward currency and options on forward currency trading gains (losses): | ||||
Realized | (353,689) | 4,415,564 | ||
Change in unrealized | (3,546,191) | (16,009,213) | ||
Total | $38,469,797 | $3,714,366 | ||
** Amounts differ from the amounts on the Statements of Operations as the amounts above do not include gains and losses on foreign currency cash balances at the futures broker. |
For the three months ended September 30, 2012 and 2011, the monthly average of futures contracts bought and sold was approximately 41,875 and 28,400 respectively, and the monthly average of notional value of forward currency and options on forward currency contracts was $3,133,500,000 and $2,959,700,000 respectively.
For the nine months ended September 30, 2012 and 2011, the monthly average of futures contracts bought and sold was approximately 36,913 and 24,500 respectively, and the monthly average of notional value of forward currency and options on forward currency contracts was $2,214,700,000 and $3,389,300,000 respectively.
Open contracts generally mature within twelve months; as of September 30, 2012, the latest maturity date for open futures contracts is September 2014 and the latest maturity date for open forward currency contracts is December 2012. However, the Trust intends to close all futures and foreign currency contracts prior to maturity.
Campbell & Company has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. Campbell & Company's basic market risk control procedures consist of continuously monitoring open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30%. Campbell & Company's attempt to manage the risk of the Trust's open positions is essentially the same in all market categories traded. Campbell & Company applies risk management policies to its trading which generally limit the total exposure that may be taken per "risk unit" of assets under management. In addition, Campbell & Company follows diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as reducing position sizes dynamically in response to trading losses. Campbell & Company controls the risk of the Trust's non-trading fixed income instruments by limiting the duration of such instruments and requiring a minimum credit quality of the issuers of those instruments.
Campbell & Company seeks to minimize credit risk primarily by depositing and maintaining the Trust's assets at financial institutions and brokers which Campbell & Company believes to be credit worthy. The unitholder bears the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received.
Note 11. INDEMNIFICATIONS
In the normal course of business, the Trust enters into contracts and agreements that contain a variety of representations and warranties which provide general indemnifications. The Trust's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. The Trust expects the risk of any future obligation under these indemnifications to be remote.
Note 12. INTERIM FINANCIAL STATEMENTS
The statements of financial condition, including the condensed schedules of investments, as of September 30, 2012 and December 31, 2011, the statements of operations and financial highlights for the three months and nine months ended September 30, 2012 and 2011, and the statements of cash flows and changes in unitholders' capital (Net Asset Value) for the nine months ended September 30, 2012 and 2011 are unaudited. In the opinion of management, such financial statements reflect all adjustments, which were of a normal and recurring nature, necessary for a fair presentation of financial position as of September 30, 2012, and the results of operations and financial highlights for the three months and nine months ended September 30, 2012 and 2011, and cash flows and changes in unitholders' capital (Net Asset Value) for the nine months ended September 30, 2012 and 2011.
Note 13. SUBSEQUENT EVENTS
Management of the Trust has evaluated subsequent events through the date the financial statements were filed. There are no subsequent events to disclose or record.
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Introduction
The Campbell Fund Trust (the “Trust”) is a business trust organized on January 2, 1996 under the Delaware Business Trust Act, which was replaced by the Delaware Statutory Trust Act as of September 1, 2002. The Trust is a successor to the Campbell Fund Limited Partnership (formerly known as the Commodity Trend Fund) which began trading operations in January 1972. The Trust currently trades in the U.S. and international futures and forward markets under the sole direction of Campbell & Company, Inc., the managing operator of the Trust. Specifically, the Trust trades in a diverse array of global assets, including global interest rates, stock indices, currencies and commodities. The Trust is an actively managed account with speculative trading profits as its objective.
Effective August 31, 2008, the Trust began offering Series A, Series B, and Series W units. The units in the Trust prior to that date became Series B units. Series B units are only available for additional investment by existing holders of Series B units.
As of September 30, 2012, the aggregate capitalization of the Trust was $447,938,771 with Series A, Series B and Series W comprising $224,755,870, $198,405,930 and $24,776,971, respectively, of the total. The Net Asset Value per Unit was $2,617.25 for Series A, $2,683.36 for Series B, and $2,740.86 for Series W.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Trust’s significant accounting policies are described in detail in Note 1 of the Financial Statements.
The Trust records all investments at fair value in its financial statements, with changes in fair value reported as a component of change in unrealized trading gains (losses) in the Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, estimates are involved in determining fair value in the absence of an active market closing price (e.g. forward and option contracts which are traded in the inter-bank market).
Capital Resources
The Trust will raise additional capital only through the sale of Units offered pursuant to the continuing offering, and does not intend to raise any capital through borrowing. Due to the nature of the Trust’s business, it will make no capital expenditures and will have no capital assets which are not operating capital or assets.
The Trust maintains 40-80% of its net asset value in cash, cash equivalents or other liquid positions in its cash management program over and above the amount that is needed to post as collateral for trading. These funds are available to meet redemptions each month. After redemptions and additions are taken into account each month, the trade levels of the Trust are adjusted and positions in the instruments the Trust trades are added or liquidated on a pro-rata basis to meet those increases or decreases in trade levels.
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Liquidity
Most United States futures exchanges limit fluctuations in futures contracts prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Trust from promptly liquidating unfavorable positions and subject the Trust to substantial losses which could exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the Trust may not be able to execute futures trades at favorable prices, if little trading in such contracts is taking place. Other than these limitations on liquidity, which are inherent in the Trust’s futures trading operations, the Trust’s assets are expected to be highly liquid.
The entire offering proceeds, without deductions, will be credited to the Trust’s bank brokerage and/or cash management accounts. The Trust meets margin requirements for its trading activities by depositing cash and U.S. government securities with the futures broker and the over-the-counter counterparties. This does not reduce the risk of loss from trading activities. The Trust receives all interest earned on its assets. No other person shall receive any interest or other economic benefits from the deposit of Trust assets.
Approximately 10% to 30% of the Trust’s net assets normally are committed as required margin for futures contracts and held by the futures broker, although the amount committed may vary significantly. Such assets are maintained in the form of cash or U.S. Treasury bills in segregated accounts with the futures broker pursuant to the Commodity Exchange Act and regulations there under. Approximately 10% to 30% of the Trust’s assets are deposited with over-the-counter counterparties in order to initiate and maintain forward contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is registered as a futures commission merchant. These assets are held either in U.S. government securities or short-term time deposits with U.S.-regulated bank affiliates of the over-the-counter counterparties.
The managing operator deposits the majority of those assets of the Trust that are not required to be deposited as margin with the futures broker and over-the-counter counterparty in a custodial account with Northern Trust Company. The assets deposited in the custodial account with Northern Trust Company are segregated. The custodial account constitutes approximately 40% to 80% of the Trust’s assets and is invested directly by Horizon Cash Management LLC (“Horizon”). Horizon is registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940. Horizon does not guarantee any interest or profits will accrue on the Trust’s assets in the custodial account. Horizon will invest according to agreed upon investment guidelines that are modeled after those investments allowed by the futures broker as defined under The Commodity Exchange Act, Title 17, Part 1, § 1.25 Investment of customer funds. Investments can include, but are not limited to, (i) U.S. Government Securities, Government Agency Securities, Municipal Securities, banker acceptances and certificates of deposits; (ii) commercial paper; and (iii) corporate debt.
The Trust occasionally receives margin calls (requests to post more collateral) from its futures broker or over-the-counter counterparties, which are met by moving the required portion of the assets held in the custody account at Northern Trust to the margin accounts. In the past three years, the Trust has not needed to liquidate any position as a result of a margin call.
The Trust’s assets are not and will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested in or loaned to Campbell & Company or any affiliated entities.
Off-Balance Sheet Risk
The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Trust trades in futures, forward and option contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Trust, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Trust at the same time, and if the Trust’s trading advisor was unable to offset futures interests positions of the Trust, the Trust could lose all of its assets and the Unitholders would realize a 100% loss. Campbell & Company, Inc., the managing operator (who also acts as trading advisor), minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30%.
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In addition to market risk, in entering into futures, forward and option contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Trust. The counterparty for futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.
In the case of forward and option contracts, which are traded on the interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty credit risk. Campbell & Company trades for the Trust only with those counterparties which it believes to be creditworthy. All positions of the Trust are valued each day on a mark-to-market basis. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Trust.
Disclosures About Certain Trading Activities that Include Non-Exchange Traded Contracts Accounted for at Fair Value
The Trust invests in futures and forward currency contracts. Prior to September 2011, the Trust also invested in options on forward currency contracts. The market value of futures (exchange-traded) contracts is determined by the various futures exchanges, and reflects the settlement price for each contract as of the close of the last business day of the reporting period. The market value of swap and forward (non-exchange traded) contracts is extrapolated on a forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) of the last business day of the reporting period or based on the market value of its exchange-traded equivalent. The market value of option (non-exchange traded) contracts is calculated by applying an industry-standard adaptation of the Black-Scholes options valuation model to foreign currency options, using as input, the spot prices, interest rates and option implied volatilities quoted as of 3:00 P.M. (E.T.) on the last business day of the reporting period.
Results of Operations
The returns for Series A for the nine months ended September 30, 2012 and 2011 were 6.32% and (2.52)%. The returns for Series B for the nine months ended September 30, 2012 and 2011 were 6.74% and (2.10)%, respectively. The returns for Series W for the nine months ended September 30, 2012 and 2011 were 7.02% and (1.37)%, respectively.
2012 (For the Nine Months Ending September 30)
Of the 2012 year-to-date increase of 6.32% for Series A, approximately 9.93% was due to trading gains (before commissions) and approximately 0.33% was due to investment income, offset by approximately 3.94% due to brokerage fees, management fees, performance fees, operating costs and offering costs borne by Series A.
Of the 2012 year-to-date increase of 6.74% for Series B, approximately 9.93% was due to trading gains (before commissions) and approximately 0.34% was due to investment income, offset by approximately 3.53% due to brokerage fees, management fees and operating costs borne by Series B.
Of the 2012 year-to-date increase of 7.02% for Series W, approximately 9.93% was due to trading gains (before commissions) and approximately 0.33% was due to investment income, offset by approximately 3.24% due to brokerage fees, management fees, performance fees, service fees, operating costs and offering costs borne by Series W.
During the nine months ended September 30, 2012, the Trust accrued management fees in the amount of $11,904,376 and paid management fees in the amount of $11,692,369. Performance fees were accrued in the amount of $116,877 and paid in the amount of $12,657.
An analysis of the 9.93% gross trading gains for the Trust for the period by sector is as follows:
Sector | % Gain (Loss) | |||
Commodities | 2.51 | % | ||
Currencies | (0.76 | ) | ||
Interest Rates | 5.80 | |||
Stock Indices | 2.38 | |||
9.93 | % |
2012 began on a positive note, providing much needed relief to market participants across most sectors. Improving global economic data, progress with the European sovereign debt crisis, and continued central bank support drove prices higher in many markets, with the notable exception of the U.S. Dollar. The Trust's models were well positioned for these moves, recording gains in all four sectors with fixed income and stock index futures leading the way. Rising global bond prices in the U.S., Europe and Japan drove returns; the interest rates sector gained over 1% for the Trust as yields continued to drop on further monetary easing. Long positions in U.S. and European equity indices were the major source of return in the stock index sector, adding approximately 1% to the Trust, as prices moved higher on positive global manufacturing data, improving sentiment in Europe, and the Fed’s pledge to keep interest rates low until 2014. The commodity sector traded flat recording gains on the Trust’s short position in natural gas offset by losses in industrial metals. The foreign exchange sector was profitable, driven by long positions in the commodity linked currencies of Australia and New Zealand.
February continued to exhibit a sense of global optimism that began 2012. Positive data in global economies and Central Bank support in China, Europe and Japan pushed equity prices and many commodities higher. Fixed income prices and the U.S. Dollar against the G10 currencies, with the notable exception of the Japanese Yen, fell as investors moved towards risk assets. The Trust profited in three of the four major sectors traded, experiencing losses in fixed income, with commodities, equity indices and foreign exchange driving gains. Rising petroleum prices were a major contributor to the Trust’s performance as tensions with Iran, stronger U.S. economic data, and a tightening global supply environment led to the rally in prices, adding almost 2% to the portfolio. Additional gains were recorded in equity indices from a net long position in stock index futures as the upward trend continued. Equity market gains were driven by continued improvement in manufacturing, employment and housing data, as well as friendly Central Bank policies and the approval of the second Greek bailout package. Other gains stemmed from currency trading, where the Japanese Yen was the major contributor. The Trust’s models quickly reacted to a changing trend in the Yen, a result of Japan’s trade balance ending 2011 in deficit territory for the first time in 30 years, and profited on the 6.5% loss in the currency’s value against the Dollar. A portion of these gains were offset by losses experienced in the fixed income sector as investors rotated out of the safety of government debt.
23
March ended an overall profitable first quarter of 2012 with a pullback in performance. The majority of losses stemmed from a mid-month reversal of the longstanding upward trend in fixed income prices. Additional losses in foreign exchange trading were more than offset by gains in the commodities and equity indices sectors. The diversity of markets held in the Trust helped to mitigate losses as the fixed income sector experienced particularly high volatility. Better-than-expected economic data and the U.S. FOMC raising their assessment of the U.S. economy reduced the market’s expectation of additional Fed support and caused a move away from safe haven assets. Fixed income prices tumbled across the curve and the Trust’s long position in the sector suffered. Concerns over demand for commodities also caused losses for the Trust as signs of a slowing economy in China caused the depreciation of the commodity-linked currencies of Australia and New Zealand. Gains in equity indices and energies offset some losses as the Fed reaffirmed its easy-money policy, sending stocks higher, and the existing upward trend in oil and downward trend in natural gas extended.
A profitable April began the second quarter of 2012 with gains coming from the fixed income sector. The other three sectors, commodities, foreign exchange, and stock indices, detracted from the Trust’s performance. Markets continue to exhibit high volatility and a high sensitivity to headlines in the news, creating both challenges and opportunities for participants. Softer economic data, increased expectations of action from central banks, and continued uncertainty in Europe pushed fixed income markets higher in April, leading gains in the Trust’s portfolio. A portion of these gains were offset by losses experienced in the equity markets from long positions in global stock index futures. Additional losses were recorded in the commodity markets from the Trust’s long positions in the energy markets as petroleum prices consolidated through the month of April with gasoline underperforming the complex. The price action in energies revealed a pause in the geopolitical fears that have gripped the markets for much of the year as well as a pause in the excitement over the better than expected economic performance in the US through Q1. Losses were also experienced in the foreign exchange markets from the Trust’s short positions in the Japanese Yen. The value of the Yen strengthened by almost 3% as the Bank of Japan, who was under pressure to deliver more easing at the end of the month, and broadly disappointed the markets.
The Trust’s strategies recorded gains in three of four sectors traded in May. Continued problems in Europe and signs of a slowing global economy helped push safe haven asset prices higher and caused risk assets to fall. The fixed income, foreign exchange, and commodity sectors were profitable for the Trust while the equity indices sector detracted from performance. The primary source of returns in May came from the fixed income sector. Weaker economic numbers and persisting uncertainty across the euro zone drove many fixed income yields to record lows, negative in some cases, and benefited the Trust’s long position in global government bond futures. Increased safe haven demand produced additional gains in the foreign exchange sector from the Trust’s long positions in the U.S. Dollar, particularly vs. the Euro currency. The U.S. Dollar reached its highest level since September 2010 with the Dollar Index (DXY) up over 5% on the month. Ongoing efforts by the Bank of Japan and the Swiss National Bank to limit their currency’s strength helped bolster the appeal of the Dollar. Smaller gains were recorded in the commodity markets from the Trust’s short positions in cotton as the soft commodity sold-off all month and ended the month down 21.5% on increasing global supply and falling demand in China. Additional gains in the commodity markets came from short positions in base and precious metals. A portion of these gains were offset by losses in the equity markets from positions in U.S. and global stock index futures as the markets sold off aggressively on the back of concerns about a possible Greek exit from the European Union, Spain’s struggle to recapitalize its’ banks, and softer global economic data.
The Trust experienced losses in all sectors during the month of June, ending the quarter relatively flat on a gross basis. Global market moves caused by unexpected policy responses from the E.U. summit on the final day of the month reversed gains in profitable sectors and exacerbated losses in unprofitable sectors. Foreign exchange markets led losses in June from a long position in the U.S. Dollar, particularly against the Euro. The Euro rallied into month-end on market optimism from the E.U. summit after European leaders agreed to recapitalize banks directly from the bailout Trust and to remove ESM seniority for Spain. These developments, combined with the formation of a government in Greece, caused a decline in safe haven asset prices and recorded losses in the Trust’s long global government bond and short European stock index positions. In the commodity markets, natural gas prices increased on warmer-than-normal weather, low storage injection numbers from the EIA, and a tropical storm in the Gulf, leading to losses from the Trust’s short position. The rally in coffee prices on supply concerns out of Brazil also led to losses from the Trust’s short position in the soft commodity.
During the month of July, Campbell’s trend following strategies recorded gains in the fixed income markets from our long position in global government bond futures. Weaker than expected global economic data and heightened expectations for central bank action pushed prices higher. Markets were pricing in central bank accommodation from the U.S. Fed, the European Central Bank (ECB), and the People's Bank of China (PBOC) at month end. Additional gains were recorded in the commodity markets from long positions in corn, wheat and soybeans as hot, dry weather in the U.S. Mid-West sent the grain markets soaring to all-time highs. Campbell was long the complex coming into the month and was able to take advantage of the surging prices brought on by the severe drought conditions. In foreign exchange markets, our long position in the U.S. Dollar vs. the Swiss Franc and the Euro Currency was profitable in July. The Euro made a 25 month low at 1.2043 after the ECB cut both the refinancing and the deposit rate in response to the ongoing crisis. The Swiss Franc also weakened as the Swiss National Bank continued to defend the 1.2000 EUR/CHF floor.
During the month of August, Campbell’s strategies experienced losses in the foreign exchange, fixed income, and commodity sectors, partially offset by gains in equity indices. Increased central bank activity in Europe and the U.S. along with better-than-expected economic data in the U.S. caused significant moves in several global markets, driving losses in Campbell’s trend following strategies. Campbell’s non-trend following strategies helped to mitigate losses, particularly in fixed income and equity indices. In the foreign exchange markets, Campbell’s short positions in the Swiss Franc and the Euro currency vs. the U.S. Dollar suffered as rising expectations of ECB action threatened to remove some of the tail risks around the sovereign debt crisis. The Swiss Franc emerged as one of the strongest G10 currencies for the month (+2.9%) as the Swiss National Bank reserves made new highs in an effort to defend the 1.2000 floor in EUR/CHF. Additional losses were recorded in the commodity markets from our short positions in base metals and short position in cotton. Prices increased across the base metals on a general covering of short positions in risk assets due to the anticipation of further central bank action. Deteriorating U.S. crop conditions, Indian production worries, and speculation of Chinese purchases caused an increase in cotton prices and subsequent losses in Campbell’s short position in the soft commodity. Smaller losses came from fixed income markets, resulting in part from Mario Draghi’s “whatever it takes” speech, with partially offsetting gains recorded from long equity indices positions in the sector. Moves in the fixed income and equity indices sectors resulted generally from anticipation of ECB action and improving U.S. economic data.
The majority of September gains in the Trust came from the equity indices sector in both trend and non-trend following strategies. Campbell’s long positions in global stock index futures benefited from rising equity index prices on the back of several central bank announcements of new quantitative easing measures, China’s proposal for new fiscal stimulus, and the German high court’s ruling to uphold the constitutionality of the Euro-zone’s permanent bailout mechanism. Additional gains were recorded in foreign exchange trading, driven mainly by non-trend strategies, from our short positions in the U.S. Dollar vs. a basket of currencies. The DXY index lost 2% in September as unlimited balance sheet expansion in the U.S. led investors to shift into other currencies like the New Zealand Dollar. A portion of these gains were offset by losses experienced by trend following strategies in the fixed income markets from our long position in global government bond futures. During a volatile month for bond prices, the U.S. 30 year contract finished the month almost 2 full points lower, as the market began to worry about the prospects of inflation. Additional losses were recorded by our trend following models in the commodity markets from short positions in base metals as prices rallied sharply following the ECB’s commitment to buy unlimited bonds.
24
Of the 2011 year-to-date decrease of (2.52)% for Series A, approximately (3.80)% was due to brokerage fees, management fees, operating costs and offering costs borne by Series A, offset by approximately 1.10% due to trading gains (before commissions) and approximately 0.18% due to investment income.
Of the 2011 year-to-date decrease of (2.10)% for Series B, approximately (3.41)% was due to brokerage fees, management fees and operating costs borne by Series B, offset by approximately 1.10% due to trading gains (before commissions) and approximately 0.21% due to investment income.
Of the 2011 year-to-date decrease of (1.37)% for Series W, approximately (2.66)% was due to brokerage fees, management fees, service fees, operating costs, offering costs and performance fees borne by Series W, offset by approximately 1.10% due to trading gains (before commissions) and approximately 0.19% due to investment income.
During the nine months ended September 30, 2011, the Trust accrued management fees in the amount of $10,739,070 and paid management fees in the amount of $10,645,326. Performance fees were accrued in the amount of $5,222 and paid in the amount of $386,705.
An analysis of the 1.10% gross trading losses for the Trust for the period by sector is as follows:
Sector | % Gain (Loss) | |||
Commodities | (4.80 | )% | ||
Currencies | (2.76 | ) | ||
Interest Rates | 13.99 | |||
Stock Indices | (5.33 | ) | ||
1.10 | % |
2011 started with global equities trending higher, fueled by improving U.S. labor market conditions, a “pro-business” move toward the center by President Obama, stronger corporate earnings and a general rotation from fixed income into stocks. The Trust’s long equity positions made the sector the best performer for the month of January, in the face of such a rising global equity environment. Commodity trading also produced gains for the month of January from the Trust’s long positions in agricultural and energy contracts. A number of energy contracts reached 24 month highs on strong global demand due to a number of factors, including, cold weather in the U.S. / U.K. and civil unrest in the Middle East. Cotton started 2011 up over 16% for the month of January on surging demand from the world’s biggest consumer, China. Currency trading on the month proved difficult as the Trust’s short position in the U.S. Dollar generated losses as emerging market risk aversion may have been prompted by the Egyptian anti-government protests. Additional losses were recorded in the fixed income markets from the Trust’s long position in short-term European rates. The bond market was choppy during the first part of January until concerns were raised about Euro-zone inflation, contributing to a sell-off in short-term rates as market participants began pricing in future rate hikes.
In February, geopolitical concerns, centering on the growing Middle East/North African ("MENA") populist uprising, may have negatively affected the commodity markets. This regional tension may have generated significant price movements in the energy sector fueling gains for the Trust. Precious Metals, including gold and silver, were also strong contributors, along with soft commodities such as cotton (+17% during February) and coffee as they continued their upward trends. Additional gains were recorded in equity trading due partially to improving macroeconomic data supporting the global recovery theme. While some of the major currencies rallied during the month, others like the New Zealand Dollar fell significantly on the devastation of a massive earthquake in the Christchurch region. In the aggregate, currency trading was marginally positive on the month for the Trust. Fixed Income trading finished slightly negative as price action was choppy across the globe, mainly from better economic data in the early part of the month followed by risk aversion in the second half of February.
The “V–shaped” behavior in most sectors during March may have been caused by global stock market volatility compounded by the devastating earthquake and resulting tsunami in Japan, followed by upside surprises to manufacturing data and other economic activity as the month came to a close. Global stock markets experienced significant volatility as the MENA unrest and Europe’s sovereign debt crisis both worsened prior to the crisis in Japan that concluded with threats of a nuclear reactor emergency. While the Nikkei finished down approximately 8% for March, the U.S. stock market was relatively unchanged despite large mid-month swings. The Trust’s models adjusted to the abrupt price swings by reducing long equity exposure over 50% (region specific) by mid-month across the U.S., Europe and Asia. Stock indices trading was the worst performing sector for March. Commodities were negatively impacted by base metal prices. Gains from long positions in energies and precious metals were not enough to overcome losses in nickel, copper and corn. Currency trading also proved challenging as Central Banks intervened in response to excess volatility and disorderly movements in exchange rates that may have been perceived as having adverse implications for economic and financial stability. In particular, the Trust’s short position in the Japanese Yen suffered as a result of the repatriation of Yen back to Japan. While risk exposures were light in fixed income trading, small losses were incurred in both short-term and long-term rates due to choppy market price action.
While March’s tumultuous markets were highlighted by the tragic events in Japan, April’s theme revolved around a persistently weaker U.S. Dollar coupled with a strong “risk on” appetite in global stock markets. Irrespective of the continued unrest in the Middle East/North Africa, Goldman Sachs’ warning that the commodities boom may be running out of steam and oil at multi-year highs, the bulls prevailed on strong M&A activity, a strong start to the earnings season, and the U.S. Federal Reserve’s continued pledge to keep interest rates low for an “extended period.” The U.S. Dollar Index experienced its largest monthly decline since September of last year as Bernanke maintained an accommodative stance in the U.S., while the European Central Bank raised rates to fight inflation. Additional downward pressure came in the form of an S&P downgrade, mid-month, to the U.S. long-term credit outlook. The Trust recorded solid gains in the currency sector, particularly against the Swiss Franc and commodity-linked currencies such as the Australian Dollar and the New Zealand Dollar. Commodity trading also produced substantial gains as geopolitics contributed to a strong rally in the petroleum complex. Precious metals were also solid performers as Silver came close to its all-time high when the infamous Hunt brothers attempted to corner the market in 1980. In stock indices, the Trust generally increased its net long exposure as bullish trends reasserted themselves following a chaotic March, while only maintaining a marginal short exposure in Japan. Trading in fixed income yielded flat results as gains in long positions were offset by losses from short positions. April’s trading results highlight the importance of a systematic approach that balances diversity of exposure with a steady and measured risk posture.
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In many ways, the commodity markets took center stage in May as we put another volatile month behind us. The petroleum complex sold off substantially on May 5th, despite the lack of any oil-related fundamental data. In addition, precious metals saw a significant decline with the price of silver dropping 24%, giving back the entire April rally. While the Trust suffered losses in these sectors, our models significantly reduced long commodity exposure on the abrupt reversal in price action and spike in volatility throughout the month. Trading in global equities also generated losses on softer economic data, Wall Street lowering U.S. growth forecasts, and renewed European sovereign debt concerns mainly focused on Greece. While positions have been reduced in this sector, regional risk was rotated out of Europe and back to the U.S. Losses were also recorded in currency trading as the U.S. Dollar rallied against most major currencies. The Trust's long Euro position produced the biggest currency loss, as the European Central Bank disappointed expectations of rate hikes at its May policy meeting. Fixed income trading produced strong positive results, helping to mitigate losses in riskier assets as the flight-to-quality theme was dominant in May.
The Greek debt crisis continued to dominate price movement in June, leading to the eventual passage of an austerity plan at month-end. In addition, the U.S. Federal Reserve, which continues to expect that economic conditions are likely to warrant exceptionally low interest rates for an extended period, gave no hint of a new “QE3” program. Commodity trading was difficult in June, particularly in the energy complex, as prices continued to fall from late April/ early May highs. Concerns about the European Sovereign Debt crisis, discord with OPEC, and an unexpected and controversial use of U.S. and European strategic petroleum reserves by the IEA (International Energy Agency) and the DOE (Department of Energy) weighed heavy on prices. Additional losses were recorded in precious and base metals. Trading in global equities also produced negative results as stock markets around the world declined on Greek debt concerns and weak economic data. While the Trust’s models generally reduced overall long stock index exposure throughout the month, concentrations remained in the U.S. and Europe with mixed positioning in Asia. Risky assets rallied and bond prices fell across the globe during the last few days of the month after the austerity package in Greece was finally passed. Small losses were recorded in fixed income trading, particularly on the short-end of the curve. Foreign exchange markets were largely unchanged in June, despite a rollercoaster of headlines that caused the currency markets to fluctuate intra-month. The Trust continues to maintain a short U.S. Dollar exposure versus most major currencies.
During the month of July, the markets were fixated on the ongoing sovereign debt crisis in both Europe and the U.S. As risky assets suffered, bond prices were driven higher from investors flocking to the safety of fixed income, yielding strong gains for the Trust's global long position. While U.S. Treasuries finished the month up over 2%, U.K. Gilts finished up 4%, German Bunds were up 3.5%, Japanese Bonds closed up 5% and Canadian Bonds increased by 2.5%. Additional gains were recorded in foreign exchange trading as the U.S. Dollar continued its downward trend against most major currencies. The U.S. Dollar, in particular, fell to new all-time lows against the Swiss Franc and the New Zealand Dollar, some of the best performing markets for the Trust in July. Commodity trading was also strongly positive in July, particularly from precious metals, as safe-haven buying supported prices in gold and silver. Additional profits came from soft commodities as sugar continued its upward trend, gaining 12% in July, on signs that Brazil’s production would not match expectations. The base metals and energy sector yielded small gains, while grains yielded small losses. The stock index sector was the only losing sector during the month as European sovereign debt remained a concern, economic data was mixed to weaker–than-expected, and the U.S. debt-ceiling and deficit-reduction debate took center stage. While the Trust reduced net long exposure in Europe, position exposure increased in the Pacific Rim and in North America.
Volatility was extremely elevated in August stemming mainly from the S&P downgrade of the United States Triple-A credit rating after weeks of contentious political debate. Strong gains in fixed income were recorded during the month as risk appetite diminished sending yields in both the U.S. and European fixed income markets lower. However, the reduction in risk appetite was a primary driver for losses in currency trading, stock indices and commodities. As a consequence of market volatility, European Union regulators have implemented restrictions on short selling in various stock indices. Indeed, the Trust’s trading on your behalf is also subject to these restrictions and we have taken the appropriate action to be in compliance. While the Trust is still able to short certain stock index contracts in Europe, others have been temporarily removed from the portfolio. The Trust will continue to take advantage of stock market volatility (indirectly) through trading in currencies, bonds and commodities. On this side of the Atlantic, Campbell is also keeping up with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd Frank"), which is considered to be one of the most sweeping changes to financial regulation in the United States since the Great Depression. As currently proposed and interpreted, the only market we trade that will be subject to extensive regulations as a result of Dodd Frank are foreign exchange ("FX") over-the-counter ("OTC") options. As we continue to analyze the regulatory and related market and liquidity implications in these markets, we have made the conservative decision to suspend trading in FX OTC options for the foreseeable future. Trading in FX spot and forward contracts remains outside of the definition of "swaps" in the Dodd-Frank regulation guidelines. As such, we anticipate no change in our ability to continue to trade this sector, which remains a significant contributor to our overall diversified investment approach.
The markets were in risk aversion mode this month as the pressure of implementing fiscal austerity in the Eurozone continued. Negative sentiment in macroeconomic growth stoked fears of recessions and overwhelmed some tentative signs of optimism. The Trust was able to benefit from the flight out of risky assets as bond prices pushed higher. Equity Indices also yielded gains in the Trust, primarily from short positions in Europe and Asia as stocks globally finished lower. These gains were not enough to offset losses experienced in the other sectors. Risk assets struggled during the month, and the recipient of the need for perceived safety was the U.S. Dollar which was up nearly 6% for the month. The Trust, having been positioned with the prevailing trend of a weaker U.S. Dollar, recorded its largest losses in the Foreign Exchange sector as a result of the Greenback’s rally. The Trust’s models adjusted positioning in response to the dramatic move; however, the losses in this sector were difficult to offset. Commodities amplified the theme of bearish global macroeconomic conditions resulting in overall losses in the sector for the Trust. Precious metals reversed significantly, with nearly a 28% decline in silver and 11% in gold, perhaps implying deflation is on the horizon. Base metal positions helped dampen losses from energy trading, despite some well positioned shorts during the month. Uncertainty continues to plague the market which can prove challenging for a portfolio that has trend-following at its core. The Trust’s more nimble strategies helped dampen losses on these significant price reversals proving that diversification across all dimensions, including time horizon, is critical in any market condition.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Introduction
Past Results Not Necessarily Indicative of Future Performance
The Trust is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or a substantial amount of the Trust’s assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Trust’s main line of business.
Market movements result in frequent changes in the fair market value of the Trust’s open positions and, consequently, in its earnings and cash flow. The Trust’s market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Trust’s open positions and the liquidity of the markets in which it trades.
The Trust rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Trust’s past performance is not necessarily indicative of its future results.
Standard of Materiality
Materiality as used in this section, “Qualitative and Quantitative Disclosures About Market Risk,” is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, and multiplier features of the Trust’s market sensitive instruments.
Quantifying the Trust’s Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Trust’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact (such as the dollar amount of the maintenance margin required for market risk sensitive instruments held at the end of the reporting period).
The Trust's risk exposure in the various market sectors traded is estimated in terms of Value at Risk ("VaR"). The Trust estimates VaR using a model based upon realized returns (with a confidence level of 97.5%) which involves constructing a distribution of actual daily changes in the value of a trading portfolio. The VaR model takes into account linear exposures to risks, including equity and commodity prices, interest rates, foreign exchange rates, and correlation among these variables. The changes in portfolio value are based on daily percentage changes observed in key market indices or other market factors to which the portfolio is sensitive. The Trust's VaR at a one day 97.5% confidence level of the Trust's VaR corresponds to the negative change in portfolio value that, based on observed market risk factors, would have been exceeded once in 40 trading days or one day in 40. VaR typically does not represent the worst case outcome.
The Trust uses approximately one quarter of realized portfolio's returns to estimate volatility. Normal distribution assumption is then applied to the volatility to generate the return distribution. The VaR is the 2.5 percentile of this distribution.
The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The current methodology used to calculate the aggregate VaR represents the VaR of the Trust’s open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes.
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The Trust’s VaR computations are based on the risk representation of the underlying benchmark for each instrument or contract and does not distinguish between exchange and non-exchange dealer-based instruments. It is also not based on exchange and/or dealer-based maintenance margin requirements.
VaR models, including the Trust’s, are continually evolving as trading portfolios become more diverse and modeling techniques and systems capabilities improve. Please note that the VaR model is used to numerically quantify market risk for historic reporting purposes only and is not utilized by the Trust in its daily risk management activities. Please further note that VaR as described above may not be comparable to similarly titled measures used by other entities.
Because the business of the Trust is the speculative trading of futures, forwards and options, the composition of the Trust’s trading portfolio can change significantly over any given time period, or even within a single trading day, which could positively or negatively materially impact market risk as measured by VaR.
The Trust’s Trading Value at Risk in Different Market Sectors
The following tables indicate the trading Value at Risk associated with the Trust’s open positions by market category as of September 30, 2012 and December 31, 2011 and the trading gains/losses by market category for the nine months ended September 30, 2012 and the year ended December 31, 2011.
September 30, 2012 | ||||||||
Market Sector | Value at Risk* | Trading Gain/(Loss)** | ||||||
Commodities | 0.65 | % | 2.51 | % | ||||
Currencies | 0.60 | % | (0.76 | )% | ||||
Interest Rates | 0.87 | % | 5.80 | % | ||||
Stock Indices | 0.74 | % | 2.38 | % | ||||
Aggregate/Total | 1.46 | % | 9.93 | % |
* | – The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Trust’s open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. |
** | – Represents the gross trading for the Trust for the nine months ended September 30, 2012. |
Of the 2012 year-to-date increase of 6.32% for Series A, approximately 9.93% was due to trading gains (before commissions) and approximately 0.33% was due to investment income, offset by approximately 3.94% due to brokerage fees, management fees, performance fees, operating costs and offering costs borne by Series A.
Of the 2012 year-to-date increase of 6.74% for Series B, approximately 9.93% was due to trading gains (before commissions) and approximately 0.34% was due to investment income, offset by approximately 3.53% due to brokerage fees, management fees and operating costs borne by Series B.
Of the 2012 year-to-date increase of 7.02% for Series W, approximately 9.93% was due to trading gains (before commissions) and approximately 0.33% was due to investment income, offset by approximately 3.24% due to brokerage fees, management fees, performance fees, service fees, operating costs and offering costs borne by Series W.
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December 31, 2011 | ||||||||
Market Sector | Value at Risk* | Trading Gain/(Loss)** | ||||||
Commodities | 0.66 | % | (7.14 | )% | ||||
Currencies | 0.65 | % | (3.96 | )% | ||||
Interest Rates | 1.07 | % | 16.90 | % | ||||
Stock Indices | 0.37 | % | (6.94 | )% | ||||
Aggregate/Total | 1.34 | % | (1.14 | )% |
* | – The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Trust’s open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. |
** | – Represents the gross trading for the Trust for the year ended December 31, 2011. |
Of the (5.89)% return for the year ended 2011 for Series A, approximately (1.14)% was due to trading losses (before commissions) and approximately (5.08)% was due to brokerage fees, management fees, performance fees, operating costs and offering costs borne by Series A, offset by approximately 0.33% due to investment income.
Of the (5.36)% return for the year ended 2011 for Series B, approximately (1.14)% was due to trading losses (before commissions) and approximately (4.56)% was due to brokerage fees, management fees and operating costs borne by Series B, offset by approximately 0.34% due to investment income.
Of the (4.42)% return for the year ended 2011 for Series W, approximately (1.14)% was due to trading losses (before commissions) and approximately (3.61)% was due to brokerage fees, management fees, performance fees, sales commissions, operating costs and offering costs borne by Series W, offset by approximately 0.33% due to investment income.
Material Limitations on Value at Risk as an Assessment of Market Risk
The following limitations of VaR as an assessment of market risk should be noted:
1) | Past changes in market risk factors will not always result in accurate predictions of the distributions and correlations of future market movements; | |
2) | Changes in portfolio value caused by market movements may differ from those of the VaR model; | |
3) | VaR results reflect past trading positions while future risk depends on future positions; | |
4) | VaR using a one day time horizon does not fully capture the market risk of positions that cannot be liquidated or hedged within one day; and | |
5) | The historical market risk factor data for VaR estimation may provide only limited insight into losses that could be incurred under certain unusual market movements. |
VaR is not necessarily representative of historic risk nor should it be used to predict the Trust’s future financial performance or its ability to manage and monitor risk. There can be no assurance that the Trust’s actual losses on a particular day will not exceed the VaR amounts indicated or that such losses will not occur more than once in 40 trading days.
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Non-Trading Risk
The Trust has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial. The Trust also has non-trading market risk as a result of investing a substantial portion of its available assets in U.S. Treasury Bills held at the broker and over-the-counter counterparty. The market risk represented by these investments is minimal. Finally, the Trust has non-trading market risk on fixed income securities held as part of its cash management program. The cash managers will use their best endeavors in the management of the assets of the Trust but provide no guarantee that any profit or interest will accrue to the Trust as a result of such management.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Trust’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Trust manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Trust’s primary market risk exposures as well as the strategies used and to be used by Campbell & Company for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Trust’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Trust. There can be no assurance that the Trust’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Trust.
The following represent the primary trading risk exposures of the Trust as of September 30, 2012 by market sector.
Currencies
The Trust’s currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Trust trades in a large number of currencies, including cross-rates — i.e., positions between two currencies other than the U.S. Dollar. Campbell & Company does not anticipate that the risk profile of the Trust’s currency sector will change significantly in the future.
Interest Rates
Interest rate movements directly affect the price of the sovereign bond positions held by the Trust and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact the Trust’s profitability. The Trust’s primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries. Campbell & Company anticipates that G-7 interest rates will remain the primary market exposure of the Trust for the foreseeable future. The changes in interest rates which have the most effect on the Trust are changes in long-term, as opposed to short-term rates. Changes in the interest rate environment will have the most impact on longer dated fixed income positions, at points of time throughout the year. The majority of the speculative positions held by the Trust may be held in medium to long-term fixed income positions.
Stock Indices
The Trust’s primary equity exposure is to equity price risk in the G-7 countries and several other countries or regions (Australia, Hong Kong, Spain, Taiwan and the Netherlands). The stock index futures traded by the Trust are limited to futures on broadly based indices. The Trust is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Japanese indices. Markets that trade in a narrow range could result in the Trust’s positions being “whipsawed” into numerous small losses.
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Energy
The Trust’s primary energy market exposure is to natural gas, crude oil and derivative product price movements often resulting from international political developments and ongoing conflicts in the Middle East and the perceived outcome. Oil and gas prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.
Metals
The Trust’s metals market exposure is to fluctuations in the price of aluminum, copper, gold, nickel, silver and zinc.
Agricultural
The Trust’s agricultural exposure is to fluctuations of the price of cattle, coffee, corn, cotton, hogs, soy, sugar and wheat.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the primary non-trading risk exposures of the Trust as of September 30, 2012.
Foreign Currency Balances
The Trust’s primary foreign currency balances are in Australian Dollar, Japanese Yen, British Pounds and Euros. The Trust controls the non-trading risk of these balances by regularly converting these balances back into U.S. dollars (no less frequently than twice a month, and more frequently if a particular foreign currency balance becomes unusually large).
Fixed Income Securities
The Trust’s primary market exposure in instruments (other than treasury positions described in the subsequent section) held other than for trading is in its fixed income portfolio. The cash manager, Horizon, has authority to make certain investments on behalf of the Trust. All securities purchased by the cash manager on behalf of the Trust will be held in the Trust’s custody account at the custodian. The cash manager will use its best endeavors in the management of the assets of the Trust but provides no guarantee that any profit or interest will accrue to the Trust as a result of such management.
Treasury Bill Positions Held for Margin Purposes
The Trust also has market exposure in its Treasury Bill portfolio. The Trust holds Treasury Bills (interest bearing and credit risk-free) with maturities no longer than six months. Violent fluctuations in prevailing interest rates could cause minimal mark-to-market losses on the Trust’s Treasury Bills, although substantially all of these short-term investments are held to maturity.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Trust and Campbell & Company, severally, attempt to manage the risk of the Trust’s open positions is essentially the same in all market categories traded. Campbell & Company applies risk management policies to its trading which generally limit the total exposure that may be taken per “risk unit” of assets under management. In addition, Campbell & Company follows diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as reducing position sizes dynamically in response to trading losses.
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Campbell & Company manages the risk of the Trust’s non-trading instruments of Treasury Bills held for margin purposes by limiting the duration of such instruments to no more than six months. Campbell & Company manages the risk of the Trust’s fixed income securities held for cash management purposes by restricting the cash managers to investing in securities that are modeled after those investments allowed by the futures broker as defined under The Commodity Exchange Act, Title 17, Part 1, § 1.25 Investment of customer funds. Investments can include, but are not limited to, (i) U.S. Government Securities, Government Agency Securities, Municipal Securities, banker acceptances and certificates of deposits; (ii) commercial paper; and (iii) corporate debt.
General
The Trust is unaware of any (i) anticipated known demands, commitments or capital expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii) trends or uncertainties that will have a material effect on operations. From time to time, certain regulatory agencies have proposed increased margin requirements on futures contracts. Because the Trust generally will use a small percentage of assets as margin, the Trust does not believe that any increase in margin requirements, as proposed, will have a material effect on the Trust’s operations.
Item 4. Controls and Procedures
Campbell & Company, Inc., the managing operator of the Trust, with the participation of the managing operator’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Trust as of the end of the period covered by this quarterly report. Based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. Effective August 1, 2012, SEI Global Services, Inc. (SEI) became the administrator for the Trust. The administrator's primary responsibilities are portfolio accounting and fund accounting services including calculation of the Trust's net asset value. There were no additional changes in the managing operator’s internal control over financial reporting applicable to the Trust identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the last fiscal quarter that have materially affected, or is reasonably likely to materially affect, internal control over financial reporting applicable to the Trust.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 1A. Risk Factors.
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
Not applicable
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
None
Item 6. Exhibits.
Exhibit Number | Description of Document | |
3.01 | Articles and Plan of Merger of the Campbell Fund Limited Partnership with and into the Registrant dated January 2, 1996 (1) | |
3.02 | Amended and Restated Declaration of Trust and Trust Agreement of the Registrant dated February 3, 2010 (2) | |
10.01 | Advisory Agreement between the Registrant and Campbell & Company, Inc. (1) | |
10.02 | Global Institutional Master Custody Agreement (2) | |
10.03 | Non-Custody Investment Advisory Agreement with Horizon Cash Management L.L.C., as cash manager (2) | |
31.01 | Certification of G. William Andrews, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securites Exchange Act of 1934. | |
31.02 | Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securites Exchange Act of 1934. | |
32.01 | Certification of G. William Andrews, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. | |
32.02 | Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. | |
101.01 | Interactive data file pursuant to Rule 405 of Regulation S-T: (i) Condensed Schedules of Investments, (ii) Statements of Financial Condition, (iii) Statements of Operations, (iv) Statements of Cash Flows, (v) Statements of Changes in Partners’ Capital (Net Asset Value), (vi) Financial Highlights, and (vii) Notes to Financial Statements, tagged as blocks of text. | |
(1) Incorporated by reference to the respective exhibit to the Registrant’s Form 10 filed on April 30, 2003. | ||
(2) Incorporated by reference to the respective exhibit to the Registrant's Form 10-Q filed on August 15, 2011. | ||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE CAMPBELL FUND TRUST (Registrant) | ||||||
By: | Campbell & Company, Inc. | |||||
Managing Operator | ||||||
Date: November 14, 2012 | By: | /s/ G. William Andrews | ||||
G. William Andrews Chief Executive Officer |
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EXHIBIT INDEX
Exhibit Number | Description of Document | |
31.01 | Certification of G. William Andrews, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | |
31.02 | Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. | |
32.01 | Certification of G. William Andrews, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. | |
32.02 | Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. | |
101.01 | Interactive data file pursuant to Rule 405 of Regulation S-T: (i) Condensed Schedules of Investments, (ii) Statements of Financial Condition, (iii) Statements of Operations, (iv) Statements of Cash Flows, (v) Statements of Changes in Partners’ Capital (Net Asset Value), (vi) Financial Highlights, and (vii) Notes to Financial Statements, tagged as blocks of text. |