| TRADING ACTIVITIES AND RELATED RISKS | Note 12. TRADING ACTIVITIES AND RELATED RISKS The Trust engages in the speculative trading of U.S. and foreign futures contracts, forward currency contracts and centrally cleared swap
contracts (collectively, “derivatives”). Specifically, the Trust trades a portfolio focused on futures, forward, credit default index swap and interest rate swap contracts, which are instruments designed to hedge changes in interest rates,
currency exchange rates, stock index values, metals, energy, agriculture values, and credit risks. 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. In July 2020, the Trust began trading centrally cleared swap contracts. Market Risk 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. The value of an interest rate swap will change as market interest rates rise and fall in conjunction with whether the
contract is to receive or pay a fixed interest rate. As a purchaser of credit default index swaps, the Trust’s risk of loss is limited to any cash payments required under the swap contracts. Written credit default contracts (i.e., sell
protection) expose the Trust to a market risk equal to the notional value of such swap contracts and any cash payments required under the swap contracts. 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, 2021 and December
31, 2020 is as follows:
Type of Instrument *
Statements of Financial Condition Location
Asset Derivatives at September 30, 2021 Fair Value
Liability Derivatives at September 30, 2021 Fair Value
Net
Agriculture Contracts
Net unrealized gain (loss) on open futures contracts
$
2,498,867
$
(2,366,536
)
$
132,331
Energy Contracts
Net unrealized gain (loss) on open futures contracts
913,840
(153,131
)
760,709
Metal Contracts
Net unrealized gain (loss) on open futures contracts
8,855,404
(9,727,858
)
(872,454
)
Stock Indices Contracts
Net unrealized gain (loss) on open futures contracts
161,181
(3,148,248
)
(2,987,067
)
Short-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
385,466
(1,219,378
)
(833,912
)
Long-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
6,021,486
(5,878,115
)
143,371
Forward Currency Contracts
Net unrealized gain (loss) on open Forward Currency Contracts
41,815,606
(37,664,004
)
4,151,602
Credit Default Index Swap Contracts**
Credit default index swaps
3,779,734
(600,029
)
3,179,705
Interest Rate Swap Contracts**
Interest rate swaps
2,140,761
(297,571
)
1,843,190
Totals
$
66,572,345
$
(61,054,870
)
$
5,517,475
*
Derivatives not designated as hedging instruments under ASC 815
**
Amount of centrally cleared swap contracts is not reconciled with the
statements of financial condition due to variation margin amount included within cash at swaps broker in the statements of financial condition.
Type of Instrument *
Statements of Financial Condition Location
Asset Derivatives at December 31, 2020 Fair Value
Liability Derivatives at December 31, 2020 Fair Value
Net
Agriculture Contracts
Net unrealized gain (loss) on open futures contracts
$
2,986,269
$
(329,832
)
$
2,656,437
Energy Contracts
Net unrealized gain (loss) on open futures contracts
990,714
(383,457
)
607,257
Metal Contracts
Net unrealized gain (loss) on open futures contracts
5,414,162
(3,112,947
)
2,301,215
Stock Indices Contracts
Net unrealized gain (loss) on open futures contracts
2,656,249
(688,867
)
1,967,382
Short-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
405,598
(31
)
405,567
Long-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
2,144,323
(380,862
)
1,763,461
Forward Currency Contracts
Net unrealized gain (loss) on open Forward Currency Contracts
12,145,055
(9,818,336
)
2,326,719
Credit Default Index Swap Contracts**
Credit default index swaps
2,946,685
(335,520
)
2,611,165
Interest Rate Swap Contracts**
Interest rate swaps
1,140,930
(331,260
)
809,670
Totals
$
30,829,985
$
(15,381,112
)
$
15,448,873
*
Derivatives not designated as hedging instruments under ASC 815
**
Amount of centrally cleared swap contracts is not reconciled with the statements of financial condition due to variation margin amount included within cash at swaps broker in the
statements of financial condition. The trading gains and losses 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, 2021 and 2020 is as follows:
Type of Instrument
Trading Gains/(Losses) for the Three Months Ended September 30, 2021
Trading Gains/(Losses) for the Three Months Ended September 30, 2020
Agriculture Contracts
$
(2,117,388
)
$
(6,064,325
)
Energy Contracts
3,244,110
(2,844,671
)
Metal Contracts
407,512
7,813,156
Stock Indices Contracts
570,182
(7,291,044
)
Short-Term Interest Rate Contracts
(10,424
)
(55,287
)
Long-Term Interest Rate Contracts
(2,032,017)
(2,769,114
)
Forward Currency Contracts
(1,019,242
)
(4,568,196
)
Credit default index swap contracts
3,030
142,020
Interest rate swap contracts
1,057,437
566,176
Total
$
103,200
$
(15,071,285
)
Type of Instrument
Trading Gains/(Losses) for the Nine Months Ended September 30, 2021
Trading Gains/(Losses) for the Nine Months Ended September 30, 2020
Agriculture Contracts
$
11,911,128
$
(5,761,777
)
Energy Contracts
17,238,164
5,543,929
Metal Contracts
2,517,362
14,711,177
Stock Indices Contracts
19,296,167
(51,620,545
)
Short-Term Interest Rate Contracts
(3,565,052
)
16,033,843
Long-Term Interest Rate Contracts
(13,810,593
)
1,932,113
Forward Currency Contracts
13,287,804
7,160,482
Credit default index swap contracts
967,575
142,020
Interest rate swap contracts
(4,535,925
)
566,176
Total
$
43,306,630
$
(11,292,582
)
Line Item in the Statements of Operations
Trading Gains/(Losses) for the Three Months Ended September 30, 2021
Trading Gains/(Losses) for the Three Months Ended September 30, 2020
Futures trading gains (losses):
Realized**
$
4,554,366
$
(14,195,388
)
Change in unrealized
(4,492,391
)
2,984,104
Forward currency trading gains (losses):
Realized**
(8,095,369
)
(6,854,797
)
Change in unrealized
7,076,126
2,286,601
Swap trading gains (losses):
Realized
660,156
525,424
Change in unrealized
400,312
182,771
Total
$
103,200
$
(15,071,285
)
Line Item in the Statements of Operations
Trading Gains/(Losses) for the Nine Months Ended September 30, 2021
Trading Gains/(Losses) for the Nine Months Ended
September 30, 2020
Futures trading gains (losses):
Realized***
$
46,945,515
$
(31,780,779
)
Change in unrealized
(13,358,341
)
12,619,520
Forward currency trading gains (losses):
Realized***
11,462,922
5,916,594
Change in unrealized
1,824,883
1,243,888
Swap trading gains (losses):
Realized
(2,886,435
)
525,424
Change in unrealized
(681,914
)
182,771
Total
$
43,306,630
$
(11,292,582
)
**
For the three months ended September 30, 2021 and 2020,
the amounts above include gains (losses) on foreign currency cash balances at the futures brokers of $122,452 and $11,066, respectively; and gains (losses) on spot trades in connection with forward currency trading at the interbank market makers
of $643,572 and $1,167,357, respectively .
***
For
the nine months ended September 30, 2021 For the three months ended September 30, 2021 and 2020, the monthly average of futures contracts bought and sold was approximately 58,900 and 59,400, respectively;
the monthly average of notional value of centrally cleared swap contracts was approximately $7,818,600,000 and $534,400,000, respectively; and the monthly average of notional value of forward currency contracts was $3,941,100,000 and $2,471,300,000, respectively. For the nine months
ended September 30, 2021 and 2020,
the monthly average of futures contracts bought and sold was approximately 57,100 and 52,400, respectively; the monthly average of notional value of centrally cleared swap contracts was approximately $6,067,200,000 and $534,400,000, respectively; and the
monthly average of notional value of forward currency contracts was $3,185,800,000 and $2,237,700,000, respectively. Open contracts generally mature within three months; as of September 30, 2021, the latest maturity date for open futures contracts is December 2022 December 2021 December 2026 Credit Risk The Trust trades futures contracts on exchanges that require margin deposits with the futures brokers and centrally cleared swap contracts
that require margin deposits with the swaps broker. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a futures broker or swaps broker to segregate all customer transactions and assets
from such futures broker’s or swaps broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury Bills) deposited with a futures broker or swaps broker are considered commingled with all other customer
funds subject to the futures broker’s or swaps broker’s segregation requirements. In the event of a futures broker’s or swaps 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 Trust trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty
nonperformance. Accordingly, the risks associated with forward 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 contracts typically involves delayed cash settlement. The Trust has a portion of its assets on deposit with PNC Bank. In the event of a financial institution’s insolvency, recovery of the Trust’s
assets on deposit may be limited to account insurance or other protection afforded such deposits. The Trust has entered into ISDA Agreements with NatWest. Under the terms of the ISDA Agreement, upon the designation of an Event of Default, as
defined in the ISDA Agreement, the non-defaulting party may set-off any sum or obligation owed by the defaulting party to the non-defaulting party against any sum or obligation owed by the non-defaulting party to the defaulting party. If
any sum or obligation is unascertained, the non-defaulting party may in good faith estimate that sum or obligation and set-off in respect to that estimate, accounting to the other party when such sum or obligation is ascertained. Under the terms of each master netting agreement with UBS Securities LLC and Goldman, Sachs & Co., upon occurrence of a default by the
Trust, as defined in respective account documents, UBS Securities LLC and Goldman, Sachs & Co. have the right to close out any or all open contracts held in the Trust’s account; sell any or all of the securities held; and borrow or buy
any securities, contracts or other property for the Trust’s account. The Trust would be liable for any deficiency in its account resulting from such transactions. The amount of required margin and good faith deposits with the futures brokers, swaps broker, and interbank market maker usually range from 10% to 30% of Net Asset Value.
The fair value of securities held to satisfy such requirements at September 30, 2021 and December 31, 2020 was $42,158,052 and $44,874,023, respectively, which equals approximately 14% and 16% of Net Asset Value, respectively. Included in cash deposits with the futures
brokers, swaps broker and interbank market maker at September 30, 2021 and December 31, 2020 was restricted cash for margin requirements of $41,355,813 and $27,965,902, respectively, which equals approximately 14% and 10% of Net Asset Value,
respectively. Set forth below are tables which disclose both gross information and net information about instruments and transactions eligible for
offset in the Statements of Financial Condition and instruments and transactions that are subject to a master netting agreement as well as amounts related to financial collateral (including U.S. Treasury Bills and cash collateral) held at
clearing brokers and counterparties. Margin reflected in the collateral tables is limited to the net amount of unrealized loss at each counterparty. Actual margin amounts required at each counterparty are based on the notional amounts or
the number of contracts outstanding and may exceed the margin presented in the collateral tables.
Offsetting of Derivative Assets by Counterparty
As of September 30, 2021
Type of Instrument
Counterparty
Gross Amounts of Recognized Assets
Gross Amounts Offset in the Statements of Financial Condition
Net Amounts of Unrealized Gain Presented in the Statements of Financial Condition
Futures contracts
UBS Securities LLC
$
9,764,843
$
(9,764,843
)
$
0
Futures contracts
Goldman, Sachs & Co.
9,071,401
(9,071,401
)
0
Forward currency contracts
NatWest Markets Plc
41,815,606
(37,664,004
)
4,151,602
Centrally cleared swap contracts*
Centrally Cleared
5,920,495
(897,600
)
5,022,895
Total derivatives
$
66,572,345
$
(57,397,848
)
$
9,174,497
*
Amount of centrally cleared swap contracts is not reconciled with the statements of financial
condition due to variation margin amount included within cash at swaps broker in the statements of financial condition.
Derivative Assets and Collateral Received by Counterparty
As of September 30, 2021
Net Amounts of Unrealized Gain Presented in the
Gross Amounts Not Offset in the Statements of Financial Condition
Counterparty
Statements of Financial Condition
Financial Instruments
Cash Collateral Received
Net Amount
UBS Securities LLC
$
0
$
0
$
0
$
0
Goldman, Sachs & Co.
0
0
0
0
NatWest Markets Plc
4,151,602
0
0
4,151,602
Centrally Cleared
5,022,895
0
0
5,022,895
Total
$
9,174,497
$
0
$
0
$
9,174,497
Offsetting of Derivative Liabilities by Counterparty
As of September 30, 2021
Type of Instrument
Counterparty
Gross Amounts of Recognized Liabilities
Gross Amounts Offset in the Statements of Financial Condition
Net Amounts of Unrealized Loss Presented in the Statements of Financial Condition
Futures contracts
UBS Securities LLC
$
11,346,894
$
(9,764,843
)
$
1,582,051
Futures contracts
Goldman, Sachs & Co.
11,146,372
(9,071,401
)
2,074,971
Forward currency contracts
NatWest Markets Plc
37,664,004
(37,664,004
)
0
Centrally cleared swap contracts
Centrally Cleared
897,600
(897,600
)
0
Total derivatives
$
61,054,870
$
(57,397,848
)
$
3,657,022
Derivative Liabilities and Collateral Pledged by Counterparty
As of September 30, 2021
Net Amounts of Unrealized Loss Presented in the
Gross Amounts Not Offset in the Statements of Financial Condition
Counterparty
Statements of Financial Condition
Financial Instruments
Cash Collateral Pledged
Net Amount
UBS Securities LLC
$
1,582,051
$
0
$
(1,582,051
)
$
0
Goldman, Sachs & Co.
2,074,971
0
(2,074,971
)
0
NatWest Markets Plc
0
0
0
0
Centrally Cleared
0
0
0
0
Total
$
3,657,022
$
0
$
(3,657,022
)
$
0
Offsetting of Derivative Assets by Counterparty
As of December 31, 2020
Type of Instrument
Counterparty
Gross Amounts of Recognized Assets
Gross Amounts Offset in the Statements of Financial Condition
Net Amounts of Unrealized Gain Presented in the Statements of Financial Condition
Futures contracts
UBS Securities LLC
$
7,300,844
$
(2,648,871
)
$
4,651,973
Futures contracts
Goldman, Sachs & Co.
7,296,471
(2,247,125
)
5,049,346
Forward currency contracts
NatWest Markets Plc
12,145,055
(9,818,336
)
2,326,719
Centrally cleared swap contracts*
Centrally Cleared
4,087,615
(666,780
)
3,420,835
Total derivatives
$
30,829,985
$
(15,381,112
)
$
15,448,873
*
Amount of centrally cleared swap contracts is not reconciled with the statements of financial condition due to variation margin amount included within cash at swaps broker in the
statements of financial condition.
Derivative Assets and Collateral Received by Counterparty
As of December 31, 2020
Net Amounts of Unrealized Gain Presented in the
Gross Amounts Not Offset in the Statements of Financial Condition
Counterparty
Statements of Financial Condition
Financial Instruments
Cash Collateral Received
Net Amount
UBS Securities LLC
$
4,651,973
$
0
$
0
$
4,651,973
Goldman, Sachs & Co.
5,049,346
0
0
5,049,346
NatWest Markets Plc
2,326,719
0
0
2,326,719
Centrally Cleared
3,420,835
0
0
3,420,835
Total
$
15,448,873
$
0
$
0
$
15,448,873
Offsetting of Derivative Liabilities by Counterparty
As of December 31, 2020
Type of Instrument
Counterparty
Gross Amounts of Recognized Liabilities
Gross Amounts Offset in the Statements of Financial Condition
Net Amounts of Unrealized Loss Presented in the Statements of Financial Condition
Futures contracts
UBS Securities LLC
$
2,648,871
$
(2,648,871
)
$
0
Futures contracts
Goldman, Sachs & Co.
2,247,125
(2,247,125
)
0
Forward currency contracts
NatWest Markets Plc
9,818,336
(9,818,336
)
0
Centrally cleared swap contracts
Centrally Cleared
666,780
(666,780
)
0
Total derivatives
$
15,381,112
$
(15,381,112
)
$
0
Derivative Liabilities and Collateral Pledged by Counterparty
As of December 31, 2020
Net Amounts of Unrealized Loss Presented in the
Gross Amounts Not Offset in the Statements of Financial Condition
Counterparty
Statements of Financial Condition
Financial Instruments
Cash Collateral Pledged Net Amount
UBS Securities LLC
$
0
$
0
$
0
$
0
Goldman, Sachs & Co.
0
0
0
0
NatWest Markets Plc
0
0
0
0
Centrally Cleared
0
0
0
0
Total
$
0
$
0
$
0
$
0 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. |
