| 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. 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 following tables summarize quantitative information required by 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 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, 2023 and December 31, 2022 are as follows:
Type of Instrument *
Statements of Financial Condition Location
Asset Derivatives at September 30, 2023 Fair Value
Liability Derivatives at September 30, 2023 Fair Value
Net
Agriculture Contracts
Net unrealized gain (loss) on open futures contracts
$
6,072,957
$
(3,113,318
)
$
2,959,639
Energy Contracts
Net unrealized gain (loss) on open futures contracts
1,250,091
(1,421,749
)
(171,658
)
Metal Contracts
Net unrealized gain (loss) on open futures contracts
11,782,773
(10,401,713
)
1,381,060
Stock Indices Contracts
Net unrealized gain (loss) on open futures contracts
1,104,918
(1,009,872
)
95,046
Short-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
802,765
(428,551
)
374,214
Long-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
5,934,979
(1,533,825
)
4,401,154
Forward Currency Contracts
Net unrealized gain (loss) on open forward currency contracts
14,418,154
(16,533,818
)
(2,115,664
)
Credit Default Index Swap Contracts**
Credit default index swaps
4,251,991
(474,769
)
3,777,222
Interest Rate Swap Contracts**
Interest rate swaps
3,449,073
(2,402,622
)
1,046,451
Totals
$
49,067,701
$
(37,320,237
)
$
11,747,464
*
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, 2022 Fair Value
Liability Derivatives at December 31, 2022 Fair Value
Net
Agriculture Contracts
Net unrealized gain (loss) on open futures contracts
$
2,362,910
$
(4,530,228
)
$
(2,167,318
)
Energy Contracts
Net unrealized gain (loss) on open futures contracts
2,696,056
(291,953
)
2,404,103
Metal Contracts
Net unrealized gain (loss) on open futures contracts
6,724,134
(4,773,071
)
1,951,063
Stock Indices Contracts
Net unrealized gain (loss) on open futures contracts
1,794,093
(3,944,508
)
(2,150,415
)
Short-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
2,220,136
(374,153
)
1,845,983
Long-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
6,290,661
(5,547,673
)
742,988
Forward Currency Contracts
Net unrealized gain (loss) on open forward currency contracts
23,501,515
(21,533,765
)
1,967,750
Credit Default Index Swap Contracts**
Credit default index swaps
508,868
(127,621
)
381,247
Interest Rate Swap Contracts** Interest rate swaps 4,972,588 (1,685,351 ) 3,287,237
Totals
$
51,070,961
$
(42,808,323
)
$
8,262,638
*
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, 2023 and 2022 are as follows:
Type of Instrument
Trading Gains (Losses) for the Three Months Ended September 30, 2023
Trading Gains (Losses) for the Three Months Ended September 30, 2022
Agriculture Contracts
$
2,692,666
$
(2,073,812
)
Energy Contracts
18,273,654
(6,630,220
)
Metal Contracts
(7,220,993
)
2,998,702
Stock Indices Contracts
(8,172,516
)
5,386,513
Short-Term Interest Rate Contracts
(187,840
)
12,893,245
Long-Term Interest Rate Contracts
2,222,239
5,467,639
Forward Currency Contracts
(783,865
)
26,311,139
Credit default index swap contracts
(38,931
)
(524,041
)
Interest rate swap contracts
1,752,829
3,001,876
Total
$
8,537,243
$
46,831,041
Type of Instrument
Trading Gains (Losses) for the Nine Months Ended September 30, 2023
Trading Gains (Losses) for the Nine Months Ended September 30, 2022
Agriculture Contracts
$
3,939,320
$
6,363,678
Energy Contracts
9,714,969
16,737,144
Metal Contracts
4,246,216
8,828,009
Stock Indices Contracts
(1,883,810
)
9,745,805
Short-Term Interest Rate Contracts
5,999,068
17,293,993
Long-Term Interest Rate Contracts
(2,737,841
)
35,500,813
Forward Currency Contracts
1,119,836
75,144,516
Credit default index swap contracts
2,955,219
(4,748,190
)
Interest rate swap contracts
7,320,129
9,324,491
Total
$
30,673,106
$
174,190,259
Line Item in the Statements of Operations
Trading Gains (Losses) for the Three Months Ended September 30, 2023
Trading Gains (Losses) for the Three Months Ended September 30, 2022
Futures trading gains (losses):
Realized**
$
8,679,135
$
12,935,168
Change in unrealized
(1,071,925
)
5,106,899
Forward currency trading gains (losses):
Realized**
(635,051
)
21,056,227
Change in unrealized
(148,814
)
5,254,912
Swap trading gains (losses):
Realized**
7,199,407
1,799,372
Change in unrealized
(5,485,509
)
678,463
Total
$
8,537,243
$
46,831,041
Line Item in the Statements of Operations
Trading Gains (Losses) for the Nine Months Ended September 30, 2023
Trading Gains (Losses) for the Nine Months Ended
September 30, 2022
Futures trading gains (losses):
Realized***
$
12,864,871
$
89,739,889
Change in unrealized
6,413,051
4,729,553
Forward currency trading gains (losses):
Realized***
5,203,250
56,273,970
Change in unrealized
(4,083,414
)
18,870,546
Swap trading gains (losses):
Realized***
14,965,963
3,405,812
Change in unrealized
(4,690,615
)
1,170,489
Total
$
30,673,106
$
174,190,259
**
For the three months ended September 30, 2023 and 2022,
the amounts above include gains (losses) on foreign currency cash balances at the futures brokers of $166,486 and $(198,324), respectively, and gains (losses) on spot trades in connection with forward currency trading at the interbank market maker
of $(584,566) and $(3,752,735), respectively .
***
For
the nine months ended September 30, 2023 For the three months ended September 30, 2023 and 2022, the monthly average of futures contracts bought and sold was approximately 68,200 and 35,900, respectively;
the monthly average of notional value of centrally cleared swap contracts was approximately $6,389,300,000, and $3,152,300,000, respectively; and the monthly average of notional value of forward currency contracts was $4,047,200,000 and $3,461,000,000, respectively. For the nine months
ended September 30, 2023 and 2022,
the monthly average of futures contracts bought and sold was approximately 63,700 and 33,100, respectively; the monthly average of notional value of centrally cleared swap contracts was approximately $5,193,400,000, and $1,987,000,000, respectively; and the
monthly average of notional value of forward currency contracts was $5,081,200,000 and $3,229,100,000, respectively. Open contracts generally mature within three months; as of September 30, 2023, the latest maturity date for open futures contracts is December 2024 December 2023 December 2028 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, 2023 and December 31, 2022 was $49,050,634 and $55,308,662, respectively, which equals approximately 9%
and 12% of Net Asset Value, respectively. Included in cash deposits with the futures brokers, swaps broker and interbank market
maker at September 30, 2023 and December 31, 2022 was restricted cash for margin requirements of $79,109,041 and $64,050,963, respectively, which equals approximately 15%
and 13% 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, 2023
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
$
13,658,091
$
(9,146,612
)
$
4,511,479
Futures contracts
Goldman, Sachs & Co.
13,290,392
(8,762,416
)
4,527,976
Forward currency contracts
NatWest Markets Plc
14,418,154
(14,418,154
)
0
Centrally cleared swap contracts*
Centrally Cleared
7,701,064
(2,877,391
)
4,823,673
Total derivatives
$
49,067,701
$
(35,204,573
)
$
13,863,128
*
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, 2023
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
$
4,511,479
$
0
$
0
$
4,511,479
Goldman, Sachs & Co.
4,527,976
0
0
4,527,976
Centrally Cleared
4,823,673
0
0
4,823,673
Total
$
13,863,128
$
0
$
0
$
13,863,128
Offsetting of Derivative Liabilities by Counterparty
As of September 30, 2023
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
$
9,146,612
$
(9,146,612
)
$
0
Futures contracts
Goldman, Sachs & Co.
8,762,416
(8,762,416
)
0
Forward currency contracts
NatWest Markets Plc
16,533,818
(14,418,154
)
2,115,664
Centrally cleared swap contracts
Centrally Cleared
2,877,391
(2,877,391
)
0
Total derivatives
$
37,320,237
$
(35,204,573
)
$
2,115,664
Derivative Liabilities and Collateral Pledged by Counterparty
As of September 30, 2023
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
2,115,664
0
(2,115,664
)
0
Centrally Cleared
0
0
0
0
Total
$
2,115,664
$
0
$
(2,115,664
)
$
0
Offsetting of Derivative Assets by Counterparty
As of December 31, 2022
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
$
11,125,617
$
(9,805,944
)
$
1,319,673
Futures contracts
Goldman, Sachs & Co.
10,962,373
(9,655,642
)
1,306,731
Forward currency contracts
NatWest Markets Plc
23,501,515
(21,533,765
)
1,967,750
Centrally cleared swap contracts*
Centrally Cleared
5,481,456
(1,812,972
)
3,668,484
Total derivatives
$
51,070,961
$
(42,808,323
)
$
8,262,638
*
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, 2022
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
$
1,319,673
$
0
$
0
$
1,319,673
Goldman, Sachs & Co.
1,306,731
0
0
1,306,731
NatWest Markets Plc
1,967,750
0
0
1,967,750
Centrally Cleared
3,668,484
0
0
3,668,484
Total
$
8,262,638
$
0
$
0
$
8,262,638
Offsetting of Derivative Liabilities by Counterparty
As of December 31, 2022
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
$
9,805,944
$
(9,805,944
)
$
0
Futures contracts
Goldman, Sachs & Co.
9,655,642
(9,655,642
)
0
Forward currency contracts
NatWest Markets Plc
21,533,765
(21,533,765
)
0
Centrally cleared swap contracts
Centrally Cleared
1,812,972
(1,812,972
)
0
Total derivatives
$
42,808,323
$
(42,808,323
)
$
0
Derivative Liabilities and Collateral Pledged by Counterparty
As of December 31, 2022
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. |
