Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Basis of Presentation | (a) Basis of Presentation |
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The financial statements of the Fund have been prepared using U.S. generally accepted accounting principles (“U.S. GAAP”). |
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In June 2013, the Financial Accounting Standards Board (“FASB”) issued updated guidance clarifying the characteristics of an investment company and requiring new disclosures. Under the guidance, all entities regulated under the Investment Company Act of 1940 automatically qualify as investment companies, while all other entities need to consider both the fundamental and typical characteristics of an investment company in determining whether they qualify as investment companies. This new guidance is effective for interim or annual reporting periods that begin after December 15, 2013, and should be applied prospectively. The Fund adopted this guidance effective January 1, 2014. The Fund has determined that it meets the definition of an investment company and has prepared the financial statements in conformity with accounting and reporting guidance of the FASB Accounting Standards Codification Topic 946—Investment Companies, which is part of U.S. GAAP. The adoption of this guidance had no effect on the Fund’s statements of financial condition, including the schedule of investments, and the related statements of income and expenses, changes in shareholders’ equity and of cash flows. |
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In August 2014, the FASB issued a new standard, Accounting Standards Update No. 2014-15 Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which will explicitly require management to assess an entity’s ability to continue as a going concern and to provide related footnote disclosure in certain circumstances. This new guidance is effective for all entities in the first annual reporting period ending after December 15, 2016. The Fund is currently evaluating this guidance and its impact on the Fund’s financial statement disclosures. |
Use of Estimates | (b) Use of Estimates |
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The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities during the reporting period of the financial statements and accompanying notes. Actual results could differ from those estimates. There were no significant estimates used in the preparation of these financial statements. |
Financial Instruments and Fair Value | (c) Financial Instruments and Fair Value |
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United States Treasury Obligations and commodity futures contracts are recorded in the statements of financial condition on a trade date basis at fair value with changes in fair value recognized in earnings in each period. The fair value of a financial instrument is the amount 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 (the exit price). The brokerage agreement with the Commodity Broker provides for the net settlement of all financial instruments covered by the agreement in the event of default or termination of any one contract. |
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Financial Accounting Standards Board (FASB) Accounting Standards Codification fair value measurement and disclosure guidance requires a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: |
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Basis of Fair Value Measurement |
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Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | | | | | | | | | | | | | | | | | | | | | | | | | |
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Level 2: | Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; | | | | | | | | | | | | | | | | | | | | | | | | | |
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Level 3: | Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. | | | | | | | | | | | | | | | | | | | | | | | | | |
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A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. |
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In determining fair value of United States Treasury Obligations, the Fund uses unadjusted quoted market prices in active markets. United States Treasury Obligations are classified within Level 1 of the fair value hierarchy. The Fund does not adjust the quoted prices for United States Treasury Obligations. |
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In determining fair value of LME commodity futures contracts, the Fund uses valuation pricing based on action of a committee that incorporates prices from the most liquid trading sessions of the day and can also rely on other inputs such as trades, bids and offers (including indicative bids and offers) transacted throughout the whole day. During the year ended December 31, 2013, management changed the classification of LME commodity futures from Level 1 to Level 2. |
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Assets and Liabilities Measured at Fair Value were as follows: |
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| | December 31, 2014 | | | December 31, 2013 | | | | | | | | | | | | | | | | | | | |
United States Treasury Obligations (Level 1) | | $ | 236,994,724 | | | $ | 227,989,243 | | | | | | | | | | | | | | | | | | | |
Commodity Futures Contracts (Level 2) | | $ | (13,474,175 | ) | | $ | (4,049,888 | ) | | | | | | | | | | | | | | | | | | |
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There were no Level 3 holdings during the years ended December 31, 2014, 2013 and 2012. The Fund’s policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. Futures contracts in a net depreciation position of $4,049,888 were transferred from Level 1 to Level 2 during the year ended December 31, 2013 as described above. |
Deposits with Commodity Broker | (d) Deposits with Commodity Broker |
The Fund deposits cash and United States Treasury Obligations with its Commodity Broker subject to CFTC regulations and various exchange and Commodity broker requirements. The combination of the Fund’s deposits with its Commodity Broker of cash and United States Treasury Obligations and the unrealized profit or loss on open futures contracts (variation margin) represents the Fund’s overall equity in its broker trading account. To meet the Fund’s initial margin requirements, the Fund holds United States Treasury Obligations. The Fund uses its cash held by the Commodity Broker to satisfy variation margin requirements. The Fund earns interest on its cash deposited with the Commodity Broker. |
United States Treasury Obligations | (e) United States Treasury Obligations |
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The Fund records purchases and sales of United States Treasury Obligations on a trade date basis. These holdings are marked to market based on quoted market closing prices. The Fund holds United States Treasury Obligations for deposit with the Fund’s Commodity Broker to meet margin requirements and for trading purposes. Interest income is recognized on an accrual basis when earned. Premiums and discounts are amortized or accreted in interest income over the life of the United States Treasury Obligations. The Fund purchased $23,000,000 face amount of United States Treasury Obligations valued at $22,997,987 which was recorded as a payable for securities puchased as of December 31, 2014. The Fund purchased $3,000,000 face amount of United States Treasury Obligations valued at $2,999,507 which was recorded as a payable for securities purchased as of December 31, 2013. |
Cash Held by Commodity Broker | (f) Cash Held by Commodity Broker |
The Fund’s arrangement with the Commodity Broker requires the Fund to meet its variation margin requirement related to the price movements, both positive and negative, on futures contracts held by the Fund by keeping cash on deposit with the Commodity Broker. The Fund defines cash and cash equivalents to be highly liquid investments, with original maturities of three months or less when purchased. As of December 31, 2014 and 2013, the Fund had cash held with the Commodity Broker of $27,364,752 and $24,778,734, respectively. There were no cash equivalents held by the Fund as of December 31, 2014 and 2013. |
Receivable/ (Payable) for LME Contracts | (g) Receivable/ (Payable) for LME Contracts |
The Fund trades aluminum, copper and zinc commodity future contracts on the London Metals Exchange (“LME”). For settlement of futures contracts traded on the LME, cash is not transferred until the settled futures contracts expire. As of December 31, 2014 and 2013, the Fund had payables to the Commodity Broker for contracts on the LME $7,104,250 and $10,668,706, respectively, related to net realized losses on LME contracts which have been closed out but the contract is not yet expired. |
Income Taxes | (h) Income Taxes |
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The Fund is classified as a partnership for U.S. federal income tax purposes. Accordingly, the Fund will not incur U.S. federal income taxes. No provision for federal, state, and local income taxes has been made in the accompanying financial statements, as investors are individually liable for income taxes, if any, on their allocable share of the Fund’s income, gain, loss, deductions and other items. |
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Management of the Fund has reviewed all open tax years and major jurisdictions and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. On an ongoing basis, management will monitor its tax positions taken under the interpretation (and consult with its tax counsel from time to time when appropriate) to determine if adjustments to conclusions are necessary based on factoring including, but not limited to, on-going analysis of tax law, regulation, and interpretations thereof. The major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States, 2010. |
Futures Contracts | (i) Futures Contracts |
All commodity futures contracts are held and used for trading purposes. The commodity futures contracts are recorded on a trade date basis and open contracts are recorded in the statement of financial condition at fair value on the last business day of the period, which represents market value for those commodity futures for which market quotes are readily available. However, when market closing prices are not available, the Managing Owner may value an asset of the Fund pursuant to policies the Managing Owner has adopted, which are consistent with normal industry standards. Realized gains (losses) and changes in unrealized appreciation (depreciation) on open positions are determined on a specific identification basis and recognized in the statement of income and expenses in the period in which the contract is closed or the changes occur, respectively. For the years ended December 31, 2014 and 2013, the average notional market value of futures contracts held was $306.6 million and $304.7 million, respectively. |
The Fair Value of Derivative Instruments as of December 31, 2014 is as follows: |
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Derivatives not Accounted for as Hedging Instruments | | Statements of Financial Condition Location | | Net Unrealized | | | | | | | | | | | | | | | | | | | | | |
Appreciation / | | | | | | | | | | | | | | | | | | | | |
(Depreciation) | | | | | | | | | | | | | | | | | | | | |
Commodity Futures Contracts | | Net Unrealized Appreciation (Depreciation) on Futures Contracts | | $ | (13,474,175 | ) | | | | | | | | | | | | | | | | | | | | |
The Fair Value of Derivative Instruments as of December 31, 2013 is as follows: |
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Derivatives not Accounted for as Hedging Instruments | | Statements of Financial Condition Location | | Net Unrealized | | | | | | | | | | | | | | | | | | | | | |
Appreciation / | | | | | | | | | | | | | | | | | | | | |
(Depreciation) | | | | | | | | | | | | | | | | | | | | |
Commodity Futures Contracts | | Net Unrealized Appreciation (Depreciation) on Futures Contracts | | $ | (4,049,888 | ) | | | | | | | | | | | | | | | | | | | | |
The Effect of Derivative Instruments on the Statements of Income and Expenses is as follows: |
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| | | | For the Year Ended | | | For the Year Ended | | | For the Year Ended | |
December 31, 2014 | December 31, 2013 | December 31, 2012 |
Derivatives not | | Location of Gain or (Loss) on | | Realized Gain | | | Change in | | | Realized Gain | | | Change in | | | Realized Gain | | | Change in | |
Accounted for as | Derivatives Recognized in Income | or (Loss) on | Unrealized Gain | or (Loss) on | Unrealized Gain | or (Loss) on | Unrealized Gain |
Hedging | | Derivatives | or (Loss) on | Derivatives | or (Loss) on | Derivatives | or (Loss) on |
Instruments | | Recognized in | Derivatives | Recognized in | Derivatives | Recognized in | Derivatives |
| | Income | Recognized in | Income | Recognized in | Income | Recognized in |
| | | Income | | Income | | Income |
Commodity Futures Contracts | | Net Realized Gain (Loss) on Futures | | $ | (684,350 | ) | | | — | | | $ | (39,635,482 | ) | | | — | | | $ | (84,992,271 | ) | | | — | |
| | Net Change in Unrealized Gain (Loss) on Futures | | | — | | | $ | (9,424,287 | ) | | | — | | | $ | (5,121,223 | ) | | | — | | | $ | 92,457,166 | |
The Fund utilizes derivative instruments to achieve its investment objective. For financial reporting purposes, the Fund offsets financial assets and financial liabilities that are subject to netting arrangements. In order for an arrangement to be eligible for netting, the Fund must have a basis to conclude that such netting arrangements are legally enforceable. The following table presents derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of December 31, 2014, net by contract: |
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| | | | | | | | | | | Gross Amounts Not Offset in the | | | | | | |
Statement of Financial Condition | | |
| | Gross Amounts | | | Gross Amounts | | | Net Amounts | | | Financial | | | Cash Collateral | | | Net Amount | | | |
Recognized | Offset in the | Presented in | Instruments* | Pledged* | | |
| Statement of | the Statement of | | | | |
| Financial Condition | Financial Condition | | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity Futures Contracts | | $ | (13,474,175 | ) | | $ | — | | | $ | (13,474,175 | ) | | $ | — | | | $ | 13,474,175 | | | $ | — | | | |
The following table presents derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of December 31, 2013: |
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| | | | | | | | | | | Gross Amounts Not Offset in the | | | | | | |
Statement of Financial Condition | | |
| | Gross Amounts | | | Gross Amounts | | | Net Amounts | | | Financial | | | Cash Collateral | | | Net Amount | | | |
Recognized | Offset in the | Presented in the | Instruments* | Pledged* | | |
| Statement of | Statement of | | | | |
| Financial Condition | Financial Condition | | | | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity Futures Contracts | | $ | 4,657,800 | | | $ | (4,657,800 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity Futures Contracts | | $ | (8,707,688 | ) | | $ | 4,657,800 | | | $ | (4,049,888 | ) | | $ | — | | | $ | 4,049,888 | | | $ | — | | | |
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* | As of December 31, 2014 and December 31, 2013, a portion of the Fund’s cash and US Treasury Obligations were required to be deposited as margin in support of the Fund’s futures positions as described in Note 2. | | | | | | | | | | | | | | | | | | | | | | | | | |
Brokerage Commissions and Fees | (j) Brokerage Commissions and Fees |
The Fund incurs all brokerage commissions, including applicable exchange fees, National Futures Association (the “NFA”) fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities by the Commodity Broker. These costs are recorded as brokerage commissions and fees in the statement of income and expenses as incurred. The Commodity Broker’s brokerage commissions and trading fees are determined on a contract-by-contract basis. On average, total charges paid to the Commodity Broker were less than $10.00 per round-turn trade for the Years Ended December 31, 2014, 2013 and 2012. |
Routine Operational, Administrative and Other Ordinary Expenses | (k) Routine Operational, Administrative and Other Ordinary Expenses |
Effective as of the Closing Date, the Managing Owner assumes all routine operational, administrative and other ordinary expenses of the Fund, including, but not limited to, computer services, the fees and expenses of the Trustee, legal and accounting fees and expenses, tax preparation expenses, filing fees and printing, mailing and duplication costs. For purposes of the reporting period of this Form 10-K and up to the Closing Date, the Predecessor Managing Owner assumed all routine operational, administrative and other ordinary expenses of the Fund. Accordingly, all such expenses are not reflected in the statement of income and expenses of the Fund. |
Organizational and Offering Costs | (l) Organizational and Offering Costs |
Prior to the Closing Date, all organizational and offering expenses (including continuous offering expenses for the offering of the Shares) incurred by the Fund was assumed by the Predecessor Managing Owner. Effective as of the Closing Date, all offering expenses (including continuous offering expenses for the offering of the Shares) incurred by the Fund were assumed by the Managing Owner. The Fund is not responsible to either the Predecessor Managing Owner or the Managing Owner for the reimbursement of organizational and offering costs (including continuous offering expenses for the offering of the Shares). |
Non-Recurring Fees and Expenses | (m) Non-Recurring Fees and Expenses |
The Fund pays all non-recurring and unusual fees and expenses (referred to as extraordinary fees and expenses in the Trust Declaration), if any, of itself, as determined by the Managing Owner. Non-recurring and unusual fees and expenses are fees and expenses which are non-recurring and unusual in nature, such as legal claims and liabilities, litigation costs or indemnification or other unanticipated expenses. Such non-recurring and unusual fees and expenses, by their nature, are unpredictable in terms of timing and amount. For the Years Ended December 31, 2014, 2013 and 2012, the Fund did not incur such expenses. |