UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
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 0-52505
MAN FRM MANAGED FUTURES STRATEGIES LLC
(Exact name of registrant as specified in its charter)
Delaware |
| 30-0408280 |
(State or other jurisdiction of |
| (I.R.S. Employer Identification No.) |
incorporation or organization) |
|
|
c/o FRM Investment Management (USA) LLC
452 Fifth Avenue, 27th Floor
New York, New York 10018
(Address of principal executive offices)
(Zip Code)
212-649-6600
(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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 x 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.
Large accelerated filer o |
| Accelerated filer o |
|
|
|
Non-accelerated filer x |
| Smaller reporting company o |
(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 x
As of March 31, 2015, 175,485,190 units of limited liability company interest were outstanding.
MAN FRM MANAGED FUTURES STRATEGIES LLC
QUARTERLY REPORT FOR MARCH 31, 2015 ON FORM 10-Q
Table of Contents
|
| PAGE |
|
|
|
PART I—FINANCIAL INFORMATION | ||
|
|
|
Item 1. | Financial Statements | 1 |
|
|
|
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
|
|
|
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 |
|
|
|
Item 4. | Controls and Procedures | 30 |
|
|
|
PART II—OTHER INFORMATION | ||
|
|
|
Item 1. | Legal Proceedings | 30 |
|
|
|
Item 1A. | Risk Factors | 30 |
|
|
|
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 30 |
|
|
|
Item 3. | Defaults Upon Senior Securities | 31 |
|
|
|
Item 4. | Mine Safety Disclosures | 31 |
|
|
|
Item 5. | Other Information | 31 |
|
|
|
Item 6. | Exhibits | 31 |
PART I - FINANCIAL INFORMATION
MAN FRM MANAGED FUTURES STRATEGIES LLC
(Formerly Systematic Momentum FuturesAccess LLC)
(a Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
(unaudited)
|
| March 31, |
| December 31, |
| ||
|
| 2015 |
| 2014 |
| ||
ASSETS: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 308,986 |
| $ | 243,678 |
|
Investment in Portfolio Funds (Cost $179,338,476 for 2015 and $189,276,756 for 2014) |
| 221,709,644 |
| 219,599,631 |
| ||
Receivable from Portfolio Funds |
| 2,872,582 |
| 4,280,060 |
| ||
Other assets |
| 4,322 |
| 6,915 |
| ||
|
|
|
|
|
| ||
TOTAL ASSETS |
| $ | 224,895,534 |
| $ | 224,130,284 |
|
|
|
|
|
|
| ||
LIABILITIES AND MEMBERS’ CAPITAL: |
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Sponsor fee payable |
| $ | 385,995 |
| $ | 380,550 |
|
Redemptions payable |
| 2,702,938 |
| 3,946,883 |
| ||
Other liabilities |
| 345,970 |
| 302,140 |
| ||
|
|
|
|
|
| ||
Total liabilities |
| 3,434,903 |
| 4,629,573 |
| ||
|
|
|
|
|
| ||
MEMBERS’ CAPITAL: |
|
|
|
|
| ||
Members’ Capital (175,485,190 Units and 185,070,253 Units outstanding; unlimited Units authorized) |
| 221,460,631 |
| 219,500,711 |
| ||
Total members’ capital |
| 221,460,631 |
| 219,500,711 |
| ||
|
|
|
|
|
| ||
TOTAL LIABILITIES AND MEMBERS’ CAPITAL |
| $ | 224,895,534 |
| $ | 224,130,284 |
|
|
|
|
|
|
| ||
NET ASSET VALUE PER UNIT: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Class A |
| $ | 1.2826 |
| $ | 1.2045 |
|
Class C |
| $ | 1.2382 |
| $ | 1.1656 |
|
Class D |
| $ | 1.6145 |
| $ | 1.5105 |
|
Class I |
| $ | 1.3818 |
| $ | 1.2963 |
|
Class M |
| $ | 1.1927 |
| $ | 1.1158 |
|
See notes to financial statements.
MAN FRM MANAGED FUTURES STRATEGIES LLC
(Formerly Systematic Momentum FuturesAccess LLC)
(a Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
(unaudited)
|
| For the three |
| For the three |
| ||
|
| months ended |
| months ended |
| ||
|
| March 31, 2015 |
| March 31, 2014 |
| ||
TRADING PROFIT (LOSS): |
|
|
|
|
| ||
|
|
|
|
|
| ||
Realized, net |
| $ | 3,074,328 |
| $ | (14,114,525 | ) |
Change in unrealized, net |
| 12,048,293 |
| 2,260,878 |
| ||
|
|
|
|
|
| ||
Total trading profit (loss), net |
| 15,122,621 |
| (11,853,647 | ) | ||
|
|
|
|
|
| ||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
| ||
Interest, net |
| 2 |
| — |
| ||
|
|
|
|
|
| ||
EXPENSES: |
|
|
|
|
| ||
Sponsor fee |
| 1,160,476 |
| 1,425,247 |
| ||
Other |
| 181,087 |
| 232,643 |
| ||
Total expenses |
| 1,341,563 |
| 1,657,890 |
| ||
|
|
|
|
|
| ||
NET INVESTMENT INCOME (LOSS) |
| (1,341,561 | ) | (1,657,890 | ) | ||
|
|
|
|
|
| ||
NET INCOME (LOSS) |
| $ | 13,781,060 |
| $ | (13,511,537 | ) |
|
|
|
|
|
| ||
NET INCOME (LOSS) PER UNIT: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Weighted average number of Units outstanding |
|
|
|
|
| ||
Class A |
| 26,326,426 |
| 41,896,704 |
| ||
Class C |
| 128,669,546 |
| 198,878,371 |
| ||
Class D |
| 3,270,753 |
| 10,103,544 |
| ||
Class I |
| 15,464,032 |
| 19,029,214 |
| ||
Class M |
| 8,360,972 |
| 6,928,708 |
| ||
|
|
|
|
|
| ||
Net income (loss) per weighted average Unit |
|
|
|
|
| ||
Class A |
| $ | 0.0790 |
| $ | (0.0475 | ) |
Class C |
| $ | 0.0730 |
| $ | (0.0490 | ) |
Class D |
| $ | 0.1040 |
| $ | (0.0527 | ) |
Class I |
| $ | 0.0857 |
| $ | (0.0493 | ) |
Class M |
| $ | 0.0770 |
| $ | (0.0454 | ) |
See notes to financial statements.
MAN FRM MANAGED FUTURES STRATEGIES LLC
(Formerly Systematic Momentum FuturesAccess LLC)
(a Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(unaudited) (in Units)
|
| Members’ Capital |
| Subscriptions |
| Redemptions |
| Members’ Capital |
| Members’ Capital |
| Subscriptions |
| Redemptions |
| Members’ Capital |
|
Class A |
| 44,919,355 |
| 96,126 |
| (7,930,095 | ) | 37,085,386 |
| 26,447,606 |
| 385,112 |
| (1,288,973 | ) | 25,543,745 |
|
Class C |
| 208,733,990 |
| 2,243,083 |
| (28,168,170 | ) | 182,808,903 |
| 131,433,730 |
| 668,561 |
| (9,049,091 | ) | 123,053,200 |
|
Class D |
| 10,103,544 |
| — |
| (1,934,868 | ) | 8,168,676 |
| 3,270,753 |
| — |
| — |
| 3,270,753 |
|
Class I |
| 19,789,101 |
| 127,853 |
| (1,902,194 | ) | 18,014,760 |
| 15,579,536 |
| 14,465 |
| (314,613 | ) | 15,279,388 |
|
Class M |
| 4,445,192 |
| 7,888,020 |
| (1,200,759 | ) | 11,132,453 |
| 8,338,628 |
| 123,985 |
| (124,509 | ) | 8,338,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members’ Units |
| 287,991,182 |
| 10,355,082 |
| (41,136,086 | ) | 257,210,178 |
| 185,070,253 |
| 1,192,123 |
| (10,777,186 | ) | 175,485,190 |
|
See notes to financial statements.
MAN FRM MANAGED FUTURES STRATEGIES LLC
(Formerly Systematic Momentum FuturesAccess LLC)
(a Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(unaudited)
|
| Members’ Capital |
| Subscriptions |
| Redemptions |
| Net Income |
| Members’ Capital |
| Members’ Capital |
| Subscriptions |
| Redemptions |
| Net Income (Loss) |
| Members’ Capital |
| ||||||||||
Class A |
| $ | 46,575,864 |
| $ | 95,040 |
| $ | (7,947,676 | ) | $ | (1,989,352 | ) | $ | 36,733,876 |
| $ | 31,855,022 |
| $ | 473,065 |
| $ | (1,644,293 | ) | $ | 2,078,575 |
| $ | 32,762,369 |
|
Class C |
| 211,561,932 |
| 2,192,000 |
| (27,457,896 | ) | (9,736,571 | ) | 176,559,465 |
| 153,204,368 |
| 811,000 |
| (11,049,281 | ) | 9,393,287 |
| 152,359,374 |
| ||||||||||
Class D |
| 12,941,674 |
| — |
| (2,376,405 | ) | (532,130 | ) | 10,033,139 |
| 4,940,417 |
| — |
| — |
| 340,286 |
| 5,280,703 |
| ||||||||||
Class I |
| 21,996,156 |
| 138,000 |
| (2,047,305 | ) | (939,047 | ) | 19,147,804 |
| 20,196,513 |
| 19,625 |
| (427,740 | ) | 1,325,161 |
| 21,113,559 |
| ||||||||||
Class M |
| 4,206,402 |
| 7,300,070 |
| (1,090,955 | ) | (314,437 | ) | 10,101,080 |
| 9,304,391 |
| 145,000 |
| (148,516 | ) | 643,751 |
| 9,944,626 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Total Members’ Capital |
| $ | 297,282,028 |
| $ | 9,725,110 |
| $ | (40,920,237 | ) | $ | (13,511,537 | ) | $ | 252,575,364 |
| $ | 219,500,711 |
| $ | 1,448,690 |
| $ | (13,269,830 | ) | $ | 13,781,060 |
| $ | 221,460,631 |
|
See notes to financial statements.
MAN FRM MANAGED FUTURES STRATEGIES LLC
(Formerly Systematic Momentum FuturesAccess LLC)
(a Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE THREE MONTHS ENDED MARCH 31, 2015 (unaudited)
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
| Class A |
| Class C |
| Class D |
| Class I |
| Class M |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net asset value, beginning of period |
| $ | 1.2045 |
| $ | 1.1656 |
| $ | 1.5105 |
| $ | 1.2963 |
| $ | 1.1158 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Realized and net unrealized change in trading profit (loss) |
| 0.0839 |
| 0.0811 |
| 0.1053 |
| 0.0903 |
| 0.0778 |
| |||||
Expenses |
| (0.0058 | ) | (0.0085 | ) | (0.0013 | ) | (0.0048 | ) | (0.0009 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net asset value, end of period |
| $ | 1.2826 |
| $ | 1.2382 |
| $ | 1.6145 |
| $ | 1.3818 |
| $ | 1.1927 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Return: (a) (c) |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total return |
| 6.48 | % | 6.23 | % | 6.88 | % | 6.59 | % | 6.90 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Ratios to Average Member’s Capital: (b)(c) |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Expenses |
| 0.46 | % | 0.71 | % | 0.08 | % | 0.36 | % | 0.08 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net investment income (loss) |
| -0.46 | % | -0.71 | % | -0.08 | % | -0.36 | % | -0.08 | % |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual member’s return may vary from these returns based on timing of capital transactions.
(b) The ratios do not reflect the proportionate share of expense from the Portfolio Funds.
(c) The ratios and total return are not annualized.
See notes to financial statements.
MAN FRM MANAGED FUTURES STRATEGIES LLC
(Formerly Systematic Momentum FuturesAccess LLC)
(a Delaware Limited Liability Company)
FINANCIAL DATA HIGHLIGHTS
FOR THE THREE MONTHS ENDED MARCH 31, 2014 (unaudited)
The following per Unit data and ratios have been derived from information provided in the financial statements.
|
| Class A |
| Class C |
| Class D |
| Class I |
| Class M |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Per Unit Operating Performance: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net asset value, beginning of period |
| $ | 1.0369 |
| $ | 1.0135 |
| $ | 1.2809 |
| $ | 1.1115 |
| $ | 0.9463 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Realized and net unrealized change in trading profit (loss) |
| (0.0418 | ) | (0.0408 | ) | (0.0516 | ) | (0.0448 | ) | (0.0381 | ) | |||||
Expenses |
| (0.0046 | ) | (0.0069 | ) | (0.0011 | ) | (0.0038 | ) | (0.0008 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net asset value, end of period |
| $ | 0.9905 |
| $ | 0.9658 |
| $ | 1.2282 |
| $ | 1.0629 |
| $ | 0.9074 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Return: (a) (c) |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total return |
| -4.47 | % | -4.71 | % | -4.11 | % | -4.38 | % | -4.11 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Ratios to Average Member’s Capital: (b)(c) |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Expenses |
| 0.46 | % | 0.71 | % | 0.08 | % | 0.36 | % | 0.08 | % | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net investment income (loss) |
| -0.46 | % | -0.71 | % | -0.08 | % | -0.36 | % | -0.08 | % |
(a) The total return is based on compounded monthly returns and is calculated for each class taken as a whole. An individual member’s return may vary from these returns based on timing of capital transactions.
(b) The ratios do not reflect the proportionate share of expense from the Portfolio Funds.
(c) The ratios and total return are not annualized.
See notes to financial statements.
MAN FRM MANAGED FUTURES STRATEGIES LLC
(Formerly Systematic Momentum FuturesAccess LLC)
(a Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. ORGANIZATION
Systematic Momentum FuturesAccess LLC (the “Fund”), a FuturesAccessSM Program (“FuturesAccess”) fund, which is an investment company as defined by Accounting Standards Codification (“ASC”) guidance, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced operations on April 2, 2007. The Fund operates as a “fund of funds”, allocating and reallocating its capital, under the direction of Merrill Lynch Alternative Investments LLC (“MLAI”, or “Sponsor” or “Managing Member”), the sponsor and manager of the Fund, among underlying FuturesAccess Funds (each a “Portfolio Fund”, and collectively the “Portfolio Funds”) (See Note 2). Presently there are seven Portfolio Funds. MLAI is the sponsor and manager of the Portfolio Funds.
MLAI is an indirect wholly-owned subsidiary of Bank of America Corporation. Bank of America Corporation and its affiliates are referred to herein as “BAC”. Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) is currently the exclusive clearing broker for the Portfolio Funds. MLAI may select other parties as clearing broker(s). Merrill Lynch International (“MLI”) is the primary foreign exchange (“F/X”) forward prime broker for the Portfolio Funds. MLAI may select other of its affiliates or third parties as F/X or other over-the-counter (“OTC”) prime brokers. MLPF&S and MLI are BAC affiliates.
FuturesAccess is a group of managed futures funds sponsored by MLAI (“FuturesAccess Funds”). FuturesAccess is exclusively available to investors that have investment accounts with Merrill Lynch Wealth Management, U.S. Trust and other divisions or affiliates of BAC. FuturesAccess Funds currently are composed of direct-trading funds advised by a single trading advisor or funds of funds for which MLAI acts as the advisor and allocates capital among multiple trading advisors. Although redemption terms vary among FuturesAccess Funds, FuturesAccess applies with some exceptions, the same minimum investment amounts, fees and other operational criteria across all FuturesAccess Funds. Each trading advisor for the Portfolio Funds participating in FuturesAccess employs different technical, fundamental, systematic and/or discretionary trading strategies.
Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by, BAC or by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.
The Fund considers all highly liquid investments, with a maturity of three months or less when acquired, to be cash equivalents. As of March 31, 2015 the Fund holds cash equivalents. Cash was held at a nationally recognized financial institution.
In the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of the Fund as of March 31, 2015 and December 31, 2014 and the results of its operations for the three month periods ended March 31, 2015 and 2014. However, the operating results for the interim periods may not be indicative of the results for the full year.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund’s report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2014.
Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material.
Change of Fund Manager and Name
Effective as of May 1, 2015, FRM Investment Management (USA) LLC (“FRM”), which forms a part of Man FRM investment division of Man Group plc, replaced MLAI as the manager of the Fund.
Effective as of May 1, 2015, the name of the Fund changed to “Man FRM Managed Futures Strategies LLC”.
2. INVESTMENTS IN PORTFOLIO FUNDS
The seven Portfolio Funds in which the Fund is invested in as of March 31, 2015 are: Aspect FuturesAccess LLC (“Aspect”), ML BlueTrend FuturesAccess LLC (“BlueTrend”), John Locke FuturesAccess LLC (“John Locke”), Lynx FuturesAccess LLC (“Lynx”), ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”), Tudor Tensor FuturesAccess LLC (“Tudor Tensor”) and ML Winton FuturesAccess LLC (“Winton”). Each of the Portfolio Funds uses a systematic-based managed futures strategy under the direction of a trading advisor unaffiliated with MLAI (each a “Trading Advisor”). MLAI, in its discretion, may change the Portfolio Funds at any time. MLAI, also at its discretion, may vary the percentage of the Fund’s total portfolio allocated to the different Portfolio Funds. There is no pre-established range for the minimum and maximum allocations that may be made to any individual Portfolio Fund.
The investment transactions were accounted for on trade date. The investments in the Portfolio Funds are valued at fair value and are reflected in the Statements of Financial Condition. In determining fair value, MLAI utilized the net asset value of the underlying Portfolio Funds which approximates fair value. The fair value was net of all fees relating to the Portfolio Funds, paid or accrued. Additionally, MLAI monitored the performance of the Portfolio Funds. Such monitoring procedures included, but were not limited to: monitoring market movements in the Portfolio Funds’ investments, comparing performance to industry benchmarks, and conference calls and site visits with the Portfolio Funds’ respective Trading Advisors.
The details of investments in Portfolio Funds at and for the three month period ended March 31, 2015 are as follows:
|
| Percentage of |
| Fair Value |
| Profit (Loss) |
| Cost @ 03/31/15 |
| Management |
| Performance |
| Redemptions Permitted |
| |||||
Transtrend |
| 16.02 | % | $ | 35,482,423 |
| $ | 1,679,822 |
| $ | 29,137,116 |
| $ | (135,937 | ) | $ | (487,644 | ) | Semi -Monthly |
|
Winton |
| 20.03 | % | 44,353,027 |
| 1,965,783 |
| 33,704,084 |
| (226,196 | ) | (491,454 | ) | Semi -Monthly |
| |||||
Aspect |
| 11.02 | % | 24,394,165 |
| 1,869,138 |
| 17,862,779 |
| (125,661 | ) | (467,119 | ) | Semi -Monthly |
| |||||
John Locke |
| 10.99 | % | 24,338,672 |
| 1,605,327 |
| 19,841,593 |
| (125,600 | ) | (401,306 | ) | Semi -Monthly |
| |||||
BlueTrend |
| 16.02 | % | 35,482,422 |
| 3,472,361 |
| 32,931,945 |
| (140,521 | ) | (749,178 | ) | Monthly |
| |||||
Tudor |
| 11.02 | % | 24,394,165 |
| 1,609,665 |
| 22,034,888 |
| (125,094 | ) | (315,060 | ) | Semi -Monthly |
| |||||
Lynx |
| 15.02 | % | 33,264,770 |
| 2,920,525 |
| 23,826,071 |
| (172,013 | ) | (730,132 | ) | Semi -Monthly |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| 100.12 | % | $ | 221,709,644 |
| $ | 15,122,621 |
| $ | 179,338,476 |
| $ | (1,051,022 | ) | $ | (3,641,893 | ) |
|
|
The details of investments in Portfolio Funds at and for the year ended December 31, 2014 are as follows:
|
| Percentage of |
| Fair Value |
| Profit (Loss) |
| Cost @ 12/31/14 |
| Management |
| Performance |
| Redemptions Permitted |
| |||||
Transtrend |
| 16.01 | % | $ | 35,135,941 |
| $ | 6,109,429 |
| $ | 30,017,854 |
| $ | (585,850 | ) | $ | (607,438 | ) | Semi -Monthly |
|
Altis* |
| 0.00 | % | — |
| (2,921,043 | ) | — |
| (136,040 | ) | — |
| Semi -Monthly |
| |||||
Winton |
| 20.01 | % | 43,919,926 |
| 5,371,945 |
| 34,600,181 |
| (904,471 | ) | (1,370,947 | ) | Semi -Monthly |
| |||||
Aspect |
| 11.00 | % | 24,155,959 |
| 6,196,491 |
| 18,962,783 |
| (507,815 | ) | (636,239 | ) | Semi -Monthly |
| |||||
John Locke |
| 11.00 | % | 24,155,960 |
| 5,249,513 |
| 21,004,423 |
| (507,204 | ) | (556,901 | ) | Semi -Monthly |
| |||||
BlueTrend |
| 16.01 | % | 35,135,941 |
| 2,681,711 |
| 35,682,511 |
| (778,856 | ) | — |
| Monthly |
| |||||
Tudor |
| 11.00 | % | 24,155,959 |
| 3,350,358 |
| 23,243,054 |
| (504,442 | ) | — |
| Semi -Monthly |
| |||||
Lynx |
| 15.01 | % | 32,939,945 |
| 7,623,039 |
| 25,765,950 |
| (644,656 | ) | (2,020,123 | ) | Semi -Monthly |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| 100.04 | % | $ | 219,599,631 |
| $ | 33,661,443 |
| $ | 189,276,756 |
| $ | (4,569,334 | ) | $ | (5,191,648 | ) |
|
|
*Altis liquidated as of March 31, 2014
There are no investments held by the Portfolio Funds that in the aggregate exceed 5% of the Fund’s members’ capital. The following is summarized financial information for each of the Portfolio Funds:
|
| As of March 31, 2015 |
| |||||||
|
| Total Assets |
| Total Liabilities |
| Total Capital |
| |||
Aspect |
| 167,624,110 |
| 9,971,019 |
| 157,653,091 |
| |||
BlueTrend |
| 97,164,921 |
| 7,467,123 |
| 89,697,798 |
| |||
John Locke |
| 25,492,815 |
| 1,154,143 |
| 24,338,672 |
| |||
Lynx |
| 48,527,921 |
| 3,129,474 |
| 45,398,447 |
| |||
Transtrend |
| 80,039,282 |
| 3,822,660 |
| 76,216,622 |
| |||
Tudor |
| 29,177,766 |
| 4,783,601 |
| 24,394,165 |
| |||
Winton |
| 1,166,221,818 |
| 35,025,852 |
| 1,131,195,966 |
| |||
|
|
|
|
|
|
|
| |||
Total |
| $ | 1,614,248,633 |
| $ | 65,353,872 |
| $ | 1,548,894,761 |
|
|
| As of December 31, 2014 |
| |||||||
|
| Total Assets |
| Total Liabilities |
| Total Capital |
| |||
Aspect |
| 160,883,084 |
| 13,082,365 |
| 147,800,719 |
| |||
BlueTrend |
| 91,645,985 |
| 5,126,658 |
| 86,519,327 |
| |||
John Locke |
| 25,813,795 |
| 2,245,315 |
| 23,568,480 |
| |||
Lynx |
| 49,332,652 |
| 4,574,525 |
| 44,758,127 |
| |||
Transtrend |
| 77,843,044 |
| 4,857,981 |
| 72,985,063 |
| |||
Tudor |
| 28,570,872 |
| 4,673,264 |
| 23,897,608 |
| |||
Winton |
| 1,030,271,728 |
| 49,186,671 |
| 981,085,057 |
| |||
|
|
|
|
|
|
|
| |||
Total |
| $ | 1,464,361,160 |
| $ | 83,746,779 |
| $ | 1,380,614,381 |
|
|
| For the three months ended March 31, 2015 |
| ||||||||||
|
|
|
|
|
|
|
| Net |
| ||||
|
| Income (Loss) |
| Commissions |
| Expenses |
| Income (Loss) |
| ||||
Aspect |
| 15,676,944 |
| (129,118 | ) | (4,406,698 | ) | 11,141,128 |
| ||||
BlueTrend |
| 11,103,105 |
| (123,868 | ) | (2,553,172 | ) | 8,426,065 |
| ||||
John Locke |
| 2,220,738 |
| (55,487 | ) | (559,924 | ) | 1,605,327 |
| ||||
Lynx |
| 5,319,196 |
| (56,977 | ) | (1,260,896 | ) | 4,001,323 |
| ||||
Transtrend |
| 5,068,618 |
| (127,925 | ) | (1,514,629 | ) | 3,426,064 |
| ||||
Tudor |
| 2,179,703 |
| (96,866 | ) | (473,172 | ) | 1,609,665 |
| ||||
Winton |
| 64,124,236 |
| (259,900 | ) | (20,975,691 | ) | 42,888,645 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ | 105,692,540 |
| $ | (850,141 | ) | $ | (31,744,182 | ) | $ | 73,098,217 |
|
|
| For the three months ended March 31, 2014 |
| ||||||||||
|
|
|
|
|
|
|
| Net |
| ||||
|
| Income (Loss) |
| Commissions |
| Expenses |
| Income (Loss) |
| ||||
Altis* |
| $ | (2,692,878 | ) | $ | (50,824 | ) | $ | (177,341 | ) | $ | (2,921,043 | ) |
Aspect |
| (8,321,018 | ) | (164,304 | ) | (1,528,321 | ) | (10,013,643 | ) | ||||
BlueTrend |
| (4,371,007 | ) | (177,958 | ) | (894,207 | ) | (5,443,172 | ) | ||||
John Locke |
| (413,183 | ) | (59,089 | ) | (175,479 | ) | (647,751 | ) | ||||
Lynx |
| (1,116,753 | ) | (35,949 | ) | (187,084 | ) | (1,339,786 | ) | ||||
Transtrend |
| (1,667,889 | ) | (150,832 | ) | (547,846 | ) | (2,366,567 | ) | ||||
Tudor |
| (990,426 | ) | (178,269 | ) | (172,478 | ) | (1,341,173 | ) | ||||
Winton |
| (477,967 | ) | (315,428 | ) | (8,762,745 | ) | (9,556,140 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ | (20,051,121 | ) | $ | (1,132,653 | ) | $ | (12,445,501 | ) | $ | (33,629,275 | ) |
*Altis liquidated as of March 31, 2014
3. FAIR VALUE OF INVESTMENTS
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). Purchase and sale of investments are recorded on a trade date basis. Realized profits and losses on investments are recognized when the investments are sold. Any change in net unrealized profit or loss from the preceding period/year is reported in the respective Statements of Operations.
The fair value measurement guidance established by U.S. GAAP is a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I — Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance in U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.
Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data and investments in Portfolio Funds valued using the reported net asset value from the Portfolio Fund.
Level III — Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAI’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The following is a description of the valuation methodologies used for investments, as well as the general classification of such investments pursuant to the valuation hierarchy.
Investments in Portfolio Funds are valued using the net asset value reported by the Portfolio Funds, which management believes approximates fair value. These net asset values are the prices used to execute trades with these Portfolio Funds. As the Fund can transact with the Portfolio Funds on a
monthly/semi-monthly basis, the Fund determined that its investments in these Portfolio Funds in this case, would be classified as Level II. Transfers of investments between different levels of the fair value hierarchy, if any, are recorded as of the beginning of the reporting period. There were no transfers to or from any level during the periods presented.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of March 31, 2015 and December 31, 2014:
Investment in |
|
|
|
|
|
|
|
|
| ||||
Portfolio Funds |
| Total |
| Level I |
| Level II |
| Level III |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
March 31, 2015 |
| $ | 221,709,644 |
| $ | — |
| $ | 221,709,644 |
| $ | — |
|
December 31, 2014 |
| $ | 219,599,631 |
| $ | — |
| $ | 219,599,631 |
| $ | — |
|
4. MARKET, CREDIT AND CONCENTRATION RISKS
The nature of this Fund has certain risks, which cannot all be presented on the financial statements. The following summarizes some of those risks.
Market Risk
Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Portfolio Funds’ unrealized profit (loss) on open contracts on such derivative instruments as reflected in the Statements of Financial Condition of the Portfolio Funds. The Fund’s exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Portfolio Funds as well as the volatility and liquidity of the markets in which the derivative instruments are traded. Investments in foreign markets may also entail legal and political risks.
MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that it will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of the Portfolio Funds, calculating the Net Asset Value of the Fund and the Portfolio Funds as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLAI does not intervene in the markets to hedge or diversify the Portfolio Funds’ market exposure, MLAI may urge the respective Trading Advisors to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are expected to be unusual. It is expected that MLAI’s basic risk control procedures will consist of the ongoing process of monitoring the Trading Advisors, with the market risk controls being applied by the respective Trading Advisors.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.
The credit risk associated with these instruments from counterparty nonperformance is the unrealized profit (loss) on open contracts, if any, included in the Portfolio Funds’ Statements of Financial Condition.
MLAI, as sponsor of the Portfolio Funds, has a general policy of maintaining clearing and prime brokerage arrangements with BAC affiliates, such as MLPF&S and MLI, although MLAI may engage non-BAC affiliated service providers as clearing brokers or prime brokers for the Portfolio Funds. This policy may increase risk to the Portfolio Funds by preventing the diversification of brokers used by the Portfolio Funds.
The Portfolio Funds, in their normal course of business, enter into various contracts, with MLPF&S acting as their futures clearing broker. Due to the relationship with MLPF&S, in the event of default, all futures balances are eligible for offset with a net settlement due to MLPF&S. Due to the relationship with MLI, in the event of default, all forward balances are eligible for offset with a net settlement due to MLI.
Concentration Risk
The Fund’s investments in the Portfolio Funds are subject to the market and credit risk of the Portfolio Funds. Because the majority of the Fund’s capital is invested in the Portfolio Funds, any changes in the market conditions that would adversely affect the Portfolio Funds could significantly impact the solvency of the Fund.
Indemnifications
In the normal course of business the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify certain parties, including BAC affiliates. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Fund’s experience, MLAI expects the risk of loss to be remote and, therefore, no provision has been recorded.
5. RELATED PARTY TRANSACTIONS
MLAI and the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the “Transfer Agent”), a wholly-owned subsidiary of BAC and affiliate of MLAI. The Transfer Agent provides registrar, distribution disbursing agent, transfer agent and certain other services related to the issuance, redemption, exchange and transfer of Units. The fees charged by the Transfer Agent for its services are based on the aggregate net assets of funds managed or sponsored by MLAI. The fee rate ranges from 0.016% to 0.02% per year of the aggregate net assets managed or sponsored by MLAI. During the quarter ended March 31, 2015, the rate ranged from 0.018% to 0.02%. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed or sponsored funds, including the Fund, on a monthly basis based on each fund’s net assets. The Transfer Agent fee allocated to the Fund for the three month periods ended March 31, 2015 and 2014 amounted to $11,156 and $14,658, respectively, of which $7,277 and $6,615 was payable to the Transfer Agent as of March 31, 2015 and December 31, 2014, respectively.
The Fund charges Sponsor fees on the month-end net assets, after all other charges at annual rates equal to 1.5% for Class A Units, 2.5% for Class C Units, and 1.1% for Class I Units. Class D Units and Class M Units are not charged a Sponsor fee.
6. RECENT ACCOUNTING PRONOUNCEMENTS
In May 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent. ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. It also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. ASU 2015-07 will be effective for the Fund beginning in the first quarter of 2016, with early adoption permitted, and will be applied retrospectively. MLAI is currently evaluating the standard and does not believe it will have a material impact on the Fund’s financial statements.
7. SUBSEQUENT EVENTS
Effective as of May 1, 2015, FRM Investment Management (USA) LLC, a Delaware limited liability company (“FRM”), became the manager of the Fund. FRM is an indirect, wholly-owned subsidiary of Man Group plc. Effective as of May 1, 2015, MLAI ceased serving as sponsor and manager of the Fund.
Effective as of May 1, 2015, the name of the Fund changed from “Systematic Momentum FuturesAccess LLC” to “Man FRM Managed Futures Strategies LLC.”
Effective as of April 30, 2015, the Fund fully redeemed its investment in each of Aspect, BlueTrend, John Locke, Lynx, Transtrend, Tudor Tensor and Winton. Effective as of May 11, 2015, the Fund invested in a new group of underlying portfolio funds described below, provided that the Fund’s investment in Carlisle Delaware Feeder LLC was effective as of May 6, 2015. The new group of underlying portfolio funds and their respective trading advisors are: (i) Blakeney Delaware Feeder LLC, Winton Capital Management Limited as trading advisor; (ii) Campbell Delaware Feeder LLC, Campbell & Company, LP as trading advisor; (iii) Carlisle Delaware Feeder LLC, Transtrend B.V. as trading advisor; (iv) CCP Core Macro Delaware Feeder LLC, Cantab Capital Partners LLP as trading advisor; (v) Quantica MF Delaware Feeder LLC, Quantica Capital AG as trading advisor; and (vi) Silver Delaware Feeder LLC, Lynx Asset Management AB as trading advisor. Reference to Portfolio Funds in the below Items of this Form 10-Q refer to the new group of underlying portfolio funds, except for provisions that specifically, or according to the context, refer to the underlying portfolio funds as of the March 31 quarter-end. Reference to Trading Advisors in the below Items of this Form 10-Q refer to the trading advisors of the new group of underlying portfolio funds as applicable.
Management has evaluated the impact of subsequent events on the Fund through the date the financial statements were issued and has determined that there were no other subsequent events that require adjustments to, or disclosure in, the financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
MONTH-END NET ASSET VALUE PER UNIT
The Net Asset Value is used to calculate subscription and redemption value and to report performance to investors is a useful performance measure for the investors of the Fund. Therefore, the charts below referencing Net Asset Value and performance measurements are based on the Net Asset Value for financial reporting purposes.
The Fund calculates the Net Asset Value per Unit of each Class of Units as of the last calendar day of each month, the fifteenth calendar day of each month and as of any other dates FRM may determine in its discretion (each, a “Calculation Date”). The Fund’s Net Asset Value as of any Calculation Date generally equals the value of the Fund’s interests in the Portfolio Funds as of that date plus any other assets held by the Fund, minus accrued Sponsor fees, any offering or operating costs and all other liabilities of the Fund. FRM or its delegates are authorized to make all Net Asset Value determinations.
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A
|
| Jan. 15th |
| Jan. |
| Feb. 15th |
| Feb. |
| Mar. 15th |
| Mar. |
| ||||||
2014 |
| $ | 1.0154 |
| $ | 0.9920 |
| $ | 0.9901 |
| $ | 1.0116 |
| $ | 0.9877 |
| $ | 0.9905 |
|
2015 |
| $ | 1.2304 |
| $ | 1.2611 |
| $ | 1.2311 |
| $ | 1.2593 |
| $ | 1.2846 |
| $ | 1.2826 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C
|
| Jan. 15th |
| Jan. |
| Feb. 15th |
| Feb. |
| Mar. 15th |
| Mar. |
| ||||||
2014 |
| $ | 0.9921 |
| $ | 0.9689 |
| $ | 0.9666 |
| $ | 0.9872 |
| $ | 0.9635 |
| $ | 0.9658 |
|
2015 |
| $ | 1.1903 |
| $ | 1.2195 |
| $ | 1.1899 |
| $ | 1.2167 |
| $ | 1.2406 |
| $ | 1.2382 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D
|
| Jan. 15th |
| Jan. |
| Feb. 15th |
| Feb. |
| Mar. 15th |
| Mar. |
| ||||||
2014 |
| $ | 1.2551 |
| $ | 1.2270 |
| $ | 1.2254 |
| $ | 1.2528 |
| $ | 1.2240 |
| $ | 1.2282 |
|
2015 |
| $ | 1.5440 |
| $ | 1.5835 |
| $ | 1.5468 |
| $ | 1.5832 |
| $ | 1.6160 |
| $ | 1.6145 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I
|
| Jan. 15th |
| Jan. |
| Feb. 15th |
| Feb. |
| Mar. 15th |
| Mar. |
| ||||||
2014 |
| $ | 1.0887 |
| $ | 1.0638 |
| $ | 1.0619 |
| $ | 1.0852 |
| $ | 1.0597 |
| $ | 1.0629 |
|
2015 |
| $ | 1.3245 |
| $ | 1.3578 |
| $ | 1.3257 |
| $ | 1.3563 |
| $ | 1.3838 |
| $ | 1.3818 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS M
|
| Jan. 15th |
| Jan. |
| Feb. 15th |
| Feb. |
| Mar. 15th |
| Mar. |
| ||||||
2014 |
| $ | 0.9272 |
| $ | 0.9065 |
| $ | 0.9053 |
| $ | 0.9255 |
| $ | 0.9042 |
| $ | 0.9074 |
|
2015 |
| $ | 1.1406 |
| $ | 1.1698 |
| $ | 1.1426 |
| $ | 1.1695 |
| $ | 1.1938 |
| $ | 1.1927 |
|
Liquidity and Capital Resources
The Fund and the Portfolio Funds borrow only to a limited extent and only on a strictly short-term basis in order to finance losses on non-U.S. dollar denominated trading positions pending the conversion of the Fund’s and Portfolio Funds’ U.S. dollar deposits. These borrowings are at a prevailing short-term rate in the relevant currency.
Substantially all of the Portfolio Funds’ assets are held in cash. The net asset value of the Portfolio Funds’ cash is not affected by inflation. However, changes in interest rates could cause periods of strong up or down price trends, during which the profit potential generally increases. Inflation in commodity prices could also generate price movements, which the strategies might successfully follow.
A Portfolio Fund should be able to close out its open trading positions and liquidate its holdings relatively quickly and at market prices, except in unusual circumstances. This typically permits the Portfolio Fund to limit losses as well as reduce market exposure on short notice should its strategies indicate doing so.
There is no established public trading market for the Units. Investors in the Fund generally may redeem any or all of their Units at Net Asset Value, in whole or fractional Units, effective as of (i) the 15th calendar day of each month and/or (ii) the last calendar day of each month (each a “Redemption Date”), upon submitting a redemption request by the “Redemption Notice Date,” which is eight business days prior to the 1st and 16th of every month. FRM may eliminate investors’ mid-month redemption right at any time. The Net Asset Value of redeemed Units is determined as of the Redemption Date. Investors will remain exposed to fluctuations in Net Asset Value during the period between submission of their redemption request and the applicable Redemption Date.
As a commodity pool, the Fund maintains an extremely large percentage of its assets in cash at the underlying Portfolio Funds, which they must have available to post initial and variation margin on futures contracts. This cash is also used to fund redemptions. While the Portfolio Fund has the ability to fund redemption proceeds from liquidating positions, as a practical matter positions are not liquidated to fund redemptions. In the event that positions were liquidated to fund redemptions, FRM or its affiliate, as the manager of the Portfolio Fund, has the ability to override decisions of the Trading Advisor to fund redemptions if necessary, but in practice the respective Trading Advisors would determine, in its discretion which investments should be liquidated.
For the three months ended March 31, 2015 the Fund’s capital increased .89% from $219,500,711 to $221,460,631. This increase was attributable to the net profit from operations of $13,781,060, coupled with the redemption of 10,777,186 Redeemable Units resulting in an outflow of $13,269,830. The cash outflow was offset with cash inflow of $1,448,690 due to subscriptions of 1,192,123 Units. Future redemptions could impact the amount of funds available for investment in the Portfolio Funds in subsequent months.
Critical Accounting Policies
Statement of Cash Flows
The Fund is not required to provide a Statement of Cash Flows.
Investments
Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). Purchase and sale of investments are recorded on a trade date basis. Realized profits and losses on investments are recognized when the investments are sold. Any change in net unrealized profit or loss from the preceding period is reported in the respective Statements of Operations.
Fair Value Measurements
Fair value is defined 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. For more information on the Fund’s treatment of fair value, see Financial Statements Note 3, Fair Value of Investments.
Income Taxes
No provision for income taxes has been made in the accompanying financial statements as each member is individually responsible for reporting income or loss based on such member’s share of the Fund’s income and expenses as reported for income tax purposes.
The Fund follows the ASC guidance on accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions with respect to tax at the Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value of the Fund, including reducing the net asset value of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund. This could cause benefits or detriments to
certain investors, depending upon the timing of their entry and exit from the Fund. The manager has analyzed the Fund’s tax positions and has concluded that no provision for income tax is required in the Fund’s financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States — 2011.
Reform Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the definition of “eligible contract participant,” and the Portfolio Fund expects to meet the amended definition as it applies to trading in “retail forex” transactions so long as its total assets exceed $10 million. If the Portfolio Fund does not meet the definition of “eligible contract participant” for purposes of trading in “retail forex” transactions, it could lead to the Portfolio Fund being unable to trade such transactions in the interbank market and bearing higher upfront and mark-to-market margin, less favorable trade pricing, and the possible imposition of new or increased fees. “Retail forex” markets available to parties that do not meet the definition of “eligible contract participant” could also be significantly less liquid than the interbank market. Moreover, the creditworthiness of the counterparties with whom the Portfolio Fund may be required to trade in such circumstances could be significantly weaker than the creditworthiness of the currency forward counterparties with which the Portfolio Fund would otherwise engage for its currency forward transactions.
Results of Operations
January 1, 2015 to March 31, 2015
January 1, 2015 to March 31, 2015
The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund level and the allocation to each underlying Portfolio Fund as of March 31, 2015:
March 31, 2015
|
|
|
| Percent of |
| |
|
| Net Unrealized |
| Net Unrealized |
| |
Commodity Industry |
| Profit (Loss) |
| Profit (Loss) |
| |
Sector |
| on Open Positions |
| on Open Positions |
| |
|
|
|
|
|
| |
Agriculture |
| 1,613,161 |
| 32.86 | % | |
Currencies - Futures |
| (26,105 | ) | -0.53 | % | |
Currencies - Forwards |
| (177,860 | ) | -3.62 | % | |
Energy |
| 306,419 |
| 6.24 | % | |
Interest rates |
| 3,328,997 |
| 67.81 | % | |
Metals |
| (673,049 | ) | -13.71 | % | |
Stock indices |
| 537,484 |
| 10.95 | % | |
|
|
|
|
|
| |
Total |
| $ | 4,909,047 |
| 100.00 | % |
The Fund experienced a net trading profit for the first quarter ended March 31, 2015 of $15,122,621.
In the first quarter, returns were positive in January and March, with a slight dip in February. Continuing trends in fixed income, equity indices, currencies and energies drove performance.
Reference herein to the Fund’s trading and portfolio refer to such trading conducted, and portfolios held, through the Fund’s Portfolio Funds. Reference herein to the trading and portfolio of the Portfolio Funds refers to such trading and portfolios generally.
In equity indices, the Portfolio Funds came into the first quarter with long exposure, with positions across geographies. The largest exposures were in U.S. indices, based on recent trends. Equity markets saw some divergence in the first three months of the year. U.S. markets had roughly flat returns, taking a break from the strong performance they had put in the previous two years as rate hikes approached, a strong U.S. dollar began to weigh on earnings, and the energy sector continued to struggle. On the other hand, European markets took off strongly as quantitative easing became a reality and a weaker currency buoyed earnings. Japanese equities also performed well due to similar reasons. The Portfolio Funds generally adjusted their portfolios, reducing allocations to U.S. indices and increasing their long positions in Europe and Asia. The asset class finished the first quarter with gains, driven primarily by rising equity prices in non-U.S. markets.
Fixed income was also profitable. The falling yields drove performance in 2014. The Portfolio Funds were long fixed income markets across geographies and maturities at the start of 2015, even as yields were low in many areas. Yields fell further, with big moves registered in January, especially in Europe. These moves were in part due to the concerns over slow growth and deflation, and the easing bias adopted by many central banks as evidenced by rate cuts in several countries and the quantitative easing decision from the European Central Bank. Yields did come back up some in February, but were down again in March. Overall, the direction was downward and the moves benefited long positions, resulting in profits for trend followers.
Currencies were another profitable asset class. Following some big moves in the second half of 2014, the Portfolio Funds were broadly long the U.S. dollar against most major foreign currencies, with especially large short exposure in the euro. The first quarter generally saw a continuation of the strong dollar trend. Continuing divergence across economies and monetary policy versus the U.S. led to the euro being down in the first quarter and many foreign currencies fell in tandem. These moves led to gains.
In commodities, there was a short bias across portfolios. Energy positions had been profitable in the latter part of 2014 as oil and related markets fell precipitously due to acute supply and demand imbalances. The moves in oil continued in January, but there was a choppy period in February when oil markets rebounded strongly, followed by another down leg in March. WTI crude oil was down over the first quarter and short positions made additional gains. In metals and agricultural markets, price moves were more mixed and there were some losses due to choppiness and an absence of strong trends. Sugar and nickel were two trending markets where the Portfolio Funds did make some money. Looking at the asset class as a whole, commodities attribution was roughly flat.
Overall, even as some trends have looked a little extended, market moves generally continued in the direction of existing trends during the first quarter. There were gains in fixed income, equity indices and FX. Commodities were close to flat. As a result, the first quarter was profitable for the Fund.
January 1, 2014 to March 31, 2014
January 1, 2014 to March 31, 2014
The following table is an allocation by sector as a percentage of net unrealized profits and losses on open positions for the Fund as a whole taking into account the positions at the underlying Portfolio Fund level and the allocation to each underlying Portfolio Fund as of March 31, 2014:
March 31, 2014
|
|
|
| Percent of |
| |
|
| Net Unrealized |
| Net Unrealized |
| |
Commodity Industry |
| Profit (Loss) |
| Profit (Loss) |
| |
Sector |
| on Open Positions |
| on Open Positions |
| |
|
|
|
|
|
| |
Agriculture |
| 2,117,741 |
| 47.63 | % | |
Currencies - Futures |
| 95,667 |
| 2.15 | % | |
Currencies - Forwards |
| 828,532 |
| 18.63 | % | |
Energy |
| (186,834 | ) | -4.20 | % | |
Interest rates |
| 253,043 |
| 5.69 | % | |
Metals |
| (205,062 | ) | -4.61 | % | |
Stock indices |
| 1,543,252 |
| 34.71 | % | |
|
|
|
|
|
| |
Total |
| $ | 4,446,339 |
| 100.00 | % |
The Fund experienced a net trading loss for the first quarter ended March 31, 2014 of $11,853,647.
References herein to the Fund’s trading and portfolio refer to such trading conducted, and portfolio held, through the Fund’s Portfolio Funds. References herein to the trading and portfolio of the Portfolio Funds refer to such trading and portfolios generally.
In equity indices, the Portfolio Funds came into the first quarter with long exposure, given the strong rally in global equity prices during 2013. Positioning was greatest in U.S. and European indices. The upward trend in equities did not continue in the first quarter. Markets quickly reversed in January, rallied back in February, then showed some v-shaped moves in March. They generally ended the quarter not far from where they began, but the reversals and choppiness proved costly to trend followers, making equity indices the worst performing asset class.
Commodities also performed poorly in the first quarter. The Portfolio Funds had long positions in energies and industrial metals, but short positions in grains and precious metals coming into the first quarter. Commodities fell in January, rallied in February, and then fell again in March, exhibiting reversals and several directional shifts along the way. The largest losses were incurred in the energy sector.
In currencies, the Portfolio Funds had mixed positioning coming into the first quarter. Long positions in European currencies like the euro, British pound and Swiss franc were balanced against short positions in the Japanese yen, Canadian dollar and Australian dollar. The downward trend in the Japanese yen continued for part of the quarter and the Portfolio Funds made money, but there were reversals in the remaining major currency positions, leading to small losses.
In fixed income, the Portfolio Funds had long positioning in both interest rates and bonds. Fixed income proved to be the only profitable asset class. Yields generally moved lower over the course of the first quarter. The moves were not very large, but they benefited long positions.
In summary, the first quarter saw reversals in several asset classes. Trends in equity indices, commodities and many currency markets were interrupted. With market moves going against positioning, the Portfolio Funds saw losses in those asset classes. Gains in fixed income markets only partially made up for the losses.
(The Fund has no applicable off-balance sheet arrangements or tabular disclosure of contractual obligations of the type described in Items 303(a)(4) and 303(a)(5) of Regulation S-K.)
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Introduction
The Portfolio Funds are speculative commodity pools. The market sensitive instruments held by the Portfolio Funds are acquired for speculative trading purposes and all or substantially all of the Portfolio Funds’ 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 Portfolio Funds’ main line of business.
Market movements result in frequent changes in the fair market value of the Portfolio Funds’ open positions and, consequently, in its earnings and cash flow. The Portfolio Funds’ market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Portfolio Funds’ open positions and the liquidity of the markets in which it trades.
The Portfolio Funds, under the direction of their respective Trading Advisors rapidly acquire and liquidate both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a possible future market scenario will affect performance and the Fund’s and the Portfolio Funds’ past performance is not necessarily indicative of its future results.
Value at Risk (“VaR”) is a measure of the maximum amount which the Fund and the Portfolio Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund’s and the Portfolio Funds’ speculative trading and the recurrence in the markets traded by the Fund and the Portfolio Funds of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated VaR or the Fund’s and the Portfolio Funds’ experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Fund’s and the Portfolio Funds’ losses in any market sector will be limited to VaR or by the Fund’s and the Portfolio Funds’ attempts to manage its market risk.
Quantifying the Fund’s Trading Value and Risk
Quantitative Forward Looking Statements
The following quantitative disclosures regarding the Fund’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 (“Securities Act”) and and Section 21E of the Securities Exchange Act of 1934 (“Securities Exchange Act”.) 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.
The Fund’s risk exposure in the various market sectors traded by the Portfolio Funds is quantified below in terms of VaR. Due to the Portfolio Funds’ fair value accounting, any loss in the fair value of the Portfolio Funds’ open positions is directly reflected in the Portfolio Funds�� earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).
Exchange maintenance margin requirements have been used by the Portfolio Funds as the measure of their VaR. Maintenance margin requirements are set by exchanges to equal or exceed the maximum loss in the fair value of any given contract incurred in 95% to 99% of the one-day time periods included in the
historical sample (approximately one year, generally) researched for purposes of establishing margin levels. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.
In the case of market sensitive instruments which are not exchange-traded (almost exclusively currencies in the case of the Portfolio Funds), the margin requirements for the equivalent futures positions have been used as VaR. In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.
100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have been aggregated to determine each trading category’s aggregate VaR. The diversification effects (which would reduce the VaR estimates) resulting from the fact that the Portfolio Funds’ positions are rarely, if ever, 100% positively correlated have not been reflected.
The Portfolio Funds’ Trading Value at Risk in Different Market Sectors
The following information with respect to VaR is set forth in respect of the Portfolio Funds separately, rather than for the Fund basis.
The following tables indicate the average, highest, and lowest trading VaR associated with the Portfolio Funds’ open positions by market category for the three month periods ended March 31, 2015 and 2014.
Lynx Class DS (1)
|
| March 31, 2015 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 1,076,053 |
| 3.22 | % | $ | 1,181,392 |
| 967,293 |
| |
Energy |
| 319,028 |
| 0.96 | % | 350,259 |
| 286,783 |
| |||
Interest Rates |
| 2,721,222 |
| 8.15 | % | 2,987,613 |
| 2,446,180 |
| |||
Metals |
| 264,176 |
| 0.79 | % | 290,037 |
| 237,475 |
| |||
Stock Indices |
| 462,477 |
| 1.38 | % | 507,751 |
| 415,733 |
| |||
Currencies |
| 64,971 |
| 0.19 | % | 71,331 |
| 58,404 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 4,907,927 |
| 14.69 | % | $ | 5,388,383 |
| $ | 4,411,868 |
|
(1) Average capitalization of Lynx Class DS is $45,496,263.
Lynx Class DS (1)
|
| March 31, 2014 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 1,295,558 |
| 4.72 | % | $ | 1,566,590 |
| $ | 1,128,706 |
|
Energy |
| 75,201 |
| 0.27 | % | 90,933 |
| 65,516 |
| |||
Interest Rates |
| 216,303 |
| 0.79 | % | 261,554 |
| 188,446 |
| |||
Metals |
| 1,097,696 |
| 4.00 | % | 1,327,335 |
| 956,326 |
| |||
Stock Indices |
| 1,494,088 |
| 5.45 | % | 1,806,653 |
| 1,301,668 |
| |||
Currencies |
| 700,881 |
| 2.56 | % | 847,506 |
| 610,616 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 4,879,727 |
| 17.79 | % | $ | 5,900,571 |
| $ | 4,251,278 |
|
(1) Average capitalization of Lynx Class DS is $27,427,548.
Transtrend Class DS (2)
|
| March 31, 2015 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 2,262,772 |
| 6.37 | % | $ | 2,495,016 |
| $ | 2,080,525 |
|
Energy |
| 273,189 |
| 0.77 | % | 301,229 |
| 251,186 |
| |||
Interest Rates |
| 1,809,636 |
| 5.09 | % | 1,995,372 |
| 1,663,885 |
| |||
Metals |
| 62,429 |
| 0.18 | % | 68,836 |
| 57,401 |
| |||
Stock Indices |
| 823,604 |
| 2.32 | % | 908,136 |
| 757,269 |
| |||
Currencies |
| 167,218 |
| 0.47 | % | 184,380 |
| 153,750 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 5,398,848 |
| 15.20 | % | $ | 5,952,969 |
| $ | 4,964,016 |
|
(2) Average capitalization of Transtrend Class DS is $35,544,456.
Transtrend Class DS (2)
|
| March 31, 2014 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 2,413,738 |
| 5.52 | % | $ | 2,754,315 |
| $ | 2,219,377 |
|
Energy |
| 353,434 |
| 0.81 | % | 403,303 |
| 324,974 |
| |||
Interest Rates |
| 1,456,558 |
| 3.33 | % | 1,662,077 |
| 1,339,271 |
| |||
Metals |
| 117,198 |
| 0.27 | % | 133,734 |
| 107,761 |
| |||
Stock Indices |
| 776,297 |
| 1.78 | % | 885,832 |
| 713,787 |
| |||
Currencies |
| 1,700,449 |
| 3.89 | % | 1,940,382 |
| 1,563,524 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 6,817,674 |
| 15.60 | % | $ | 7,779,643 |
| $ | 6,268,694 |
|
(2) Average capitalization of Transtrend Class DS is $43,717,919.
Aspect Class DS (3)
|
| March 31, 2015 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 678,016 |
| 2.79 | % | $ | 725,790 |
| $ | 606,666 |
|
Energy |
| 148,829 |
| 0.61 | % | 159,316 |
| 133,168 |
| |||
Interest Rates |
| 915,775 |
| 3.77 | % | 980,302 |
| 819,405 |
| |||
Metals |
| 105,153 |
| 0.43 | % | 112,563 |
| 94,088 |
| |||
Stock Indices |
| 141,087 |
| 0.58 | % | 151,028 |
| 126,240 |
| |||
Currencies |
| 315,343 |
| 1.30 | % | 337,563 |
| 282,159 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 2,304,203 |
| 9.48 | % | $ | 2,466,562 |
| $ | 2,061,726 |
|
(3) Average Capitalization of Aspect Class DS is $24,293,973.
Aspect Class DS (3)
|
| March 31, 2014 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 712,044 |
| 2.61 | % | $ | 776,945 |
| $ | 606,159 |
|
Energy |
| 292,792 |
| 1.07 | % | 319,480 |
| 249,252 |
| |||
Interest Rates |
| 404,735 |
| 1.49 | % | 441,626 |
| 344,548 |
| |||
Metals |
| 302,913 |
| 1.11 | % | 330,523 |
| 257,868 |
| |||
Stock Indices |
| 863,256 |
| 3.17 | % | 941,940 |
| 734,884 |
| |||
Currencies |
| 356,595 |
| 1.31 | % | 389,098 |
| 303,567 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 2,932,335 |
| 10.76 | % | $ | 3,199,612 |
| $ | 2,496,278 |
|
(3) Average Capitalization of Aspect Class DS is $27,250,842.
Winton Class DS (4)
|
| March 31, 2015 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 371,134 |
| 0.83 | % | $ | 426,939 |
| $ | 286,710 |
|
Energy |
| 188,283 |
| 0.42 | % | 216,593 |
| 145,453 |
| |||
Interest Rates |
| 1,913,874 |
| 4.30 | % | 2,201,648 |
| 1,478,509 |
| |||
Metals |
| 406,887 |
| 0.91 | % | 468,067 |
| 314,329 |
| |||
Stock Indices |
| 232,921 |
| 0.52 | % | 267,943 |
| 179,936 |
| |||
Currencies |
| 111,983 |
| 0.25 | % | 128,821 |
| 86,509 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 3,225,082 |
| 7.23 | % | $ | 3,710,011 |
| $ | 2,491,446 |
|
(4) Average capitalization of Winton Class DS is $44,475,814.
Winton Class DS (4)
|
| March 31, 2014 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 1,575,290 |
| 3.37 | % | $ | 1,613,469 |
| $ | 1,549,254 |
|
Energy |
| 128,243 |
| 0.27 | % | 131,351 |
| 126,123 |
| |||
Interest Rates |
| 180,272 |
| 0.39 | % | 184,641 |
| 177,292 |
| |||
Metals |
| 395,975 |
| 0.85 | % | 405,571 |
| 389,430 |
| |||
Stock Indices |
| 961,918 |
| 2.06 | % | 985,231 |
| 946,020 |
| |||
Currencies |
| 285,849 |
| 0.61 | % | 292,776 |
| 281,124 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 3,527,547 |
| 7.55 | % | $ | 3,613,039 |
| $ | 3,469,243 |
|
(4) Average capitalization of Winton Class DS is $46,716,436.
John Locke Class DS (5)
|
| March 31, 2015 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 1,189,626 |
| 4.88 | % | $ | 1,258,388 |
| $ | 1,052,845 |
|
Energy |
| 220,250 |
| 0.90 | % | 232,981 |
| 194,926 |
| |||
Interest Rates |
| 1,723,369 |
| 7.07 | % | 1,822,982 |
| 1,525,219 |
| |||
Metals |
| 262,751 |
| 1.08 | % | 277,938 |
| 232,540 |
| |||
Stock Indices |
| 241,105 |
| 0.99 | % | 255,041 |
| 213,383 |
| |||
Currencies |
| 38,559 |
| 0.16 | % | 40,787 |
| 34,125 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 3,675,660 |
| 15.08 | % | $ | 3,888,117 |
| $ | 3,253,038 |
|
(5) Average capitalization of John Locke Class DS is $24,370,582.
John Locke Class DS (5)
|
| March 31, 2014 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 1,904,875 |
| 6.96 | % | $ | 1,973,890 |
| $ | 1,845,931 |
|
Energy |
| 2,544 |
| 0.01 | % | 2,636 |
| 2,466 |
| |||
Interest Rates |
| 52,518 |
| 0.19 | % | 54,421 |
| 50,893 |
| |||
Metals |
| 502,131 |
| 1.83 | % | 520,324 |
| 486,594 |
| |||
Stock Indices |
| 1,058,422 |
| 3.87 | % | 1,096,769 |
| 1,025,670 |
| |||
Currencies |
| 270,607 |
| 0.99 | % | 280,411 |
| 262,233 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 3,791,097 |
| 13.85 | % | $ | 3,928,451 |
| $ | 3,673,787 |
|
(5) Average capitalization of John Locke Class DS is $27,380,491.
BlueTrend Class DS (6)
|
| March 31, 2015 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 35,234 |
| 0.10 | % | $ | 38,151 |
| $ | 29,569 |
|
Energy |
| 282,700 |
| 0.79 | % | 306,109 |
| 237,251 |
| |||
Interest Rates |
| 2,248,933 |
| 6.31 | % | 2,435,153 |
| 1,887,379 |
| |||
Metals |
| 100,152 |
| 0.28 | % | 108,444 |
| 84,050 |
| |||
Stock Indices |
| 397,691 |
| 1.12 | % | 430,622 |
| 333,756 |
| |||
Currencies |
| 572,401 |
| 1.61 | % | 619,798 |
| 480,378 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 3,637,111 |
| 10.21 | % | $ | 3,938,277 |
| $ | 3,052,383 |
|
(6) Average capitalization of BlueTrend Class DS is $35,655,442.
BlueTrend Class DS (6)
|
| March 31, 2014 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 1,281,937 |
| 2.78 | % | $ | 1,466,662 |
| $ | 1,175,363 |
|
Energy |
| 276,623 |
| 0.60 | % | 316,484 |
| 253,626 |
| |||
Interest Rates |
| 720,351 |
| 1.56 | % | 824,152 |
| 660,464 |
| |||
Metals |
| 191,435 |
| 0.42 | % | 219,021 |
| 175,520 |
| |||
Stock Indices |
| 1,257,819 |
| 2.73 | % | 1,439,068 |
| 1,153,250 |
| |||
Currencies |
| 1,564,385 |
| 3.40 | % | 1,789,810 |
| 1,434,330 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 5,292,550 |
| 11.49 | % | $ | 6,055,197 |
| $ | 4,852,553 |
|
(6) Average capitalization of BlueTrend Class DS is $46,037,996.
Tudor Tensor Class DS (7)
|
| March 31, 2015 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 596,419 |
| 2.44 | % | $ | 628,215 |
| $ | 567,932 |
|
Energy |
| 11,913 |
| 0.05 | % | 12,548 |
| 11,344 |
| |||
Interest Rates |
| 371,158 |
| 1.52 | % | 390,945 |
| 353,431 |
| |||
Metals |
| 1,491,889 |
| 6.10 | % | 1,571,426 |
| 1,420,633 |
| |||
Stock Indices |
| 165,102 |
| 0.68 | % | 173,904 |
| 157,216 |
| |||
Currencies |
| 333,667 |
| 1.37 | % | 351,455 |
| 317,730 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 2,970,148 |
| 12.16 | % | $ | 3,128,493 |
| $ | 2,828,286 |
|
(7) Average capitalization of Tudor Tensor Class DS is $24,437,583.
Tudor Tensor Class DS (7)
|
| March 31, 2014 |
| |||||||||
|
| Average |
| % of Average |
| Highest Value |
| Lowest Value |
| |||
Market Sector |
| Value at Risk |
| Capitalization |
| At Risk |
| At Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agricultural Commodities |
| $ | 633,227 |
| 2.31 | % | $ | 793,444 |
| $ | 496,517 |
|
Energy |
| 276,683 |
| 1.01 | % | 346,689 |
| 216,949 |
| |||
Interest Rates |
| 161,081 |
| 0.59 | % | 201,838 |
| 126,305 |
| |||
Metals |
| 315,520 |
| 1.15 | % | 395,351 |
| 247,401 |
| |||
Stock Indices |
| 677,541 |
| 2.48 | % | 848,970 |
| 531,263 |
| |||
Currencies |
| 385,781 |
| 1.41 | % | 483,390 |
| 302,493 |
| |||
|
|
|
|
|
|
|
|
|
| |||
TOTAL |
| $ | 2,449,833 |
| 8.95 | % | $ | 3,069,682 |
| $ | 1,920,928 |
|
(7) Average capitalization of Tudor Tensor Class DS is $27,375,276.
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Fund and the Portfolio Funds are typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund and the Portfolio Funds. The magnitude of the Fund’s and the Portfolio Funds’ open positions creates a “risk of ruin” not typically found in most other investment vehicles. Because of the size of their positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Fund and the Portfolio Funds to incur severe losses over a short period of time. The foregoing VaR table — as well as the past performance of the Fund’s and the Portfolio Funds — gives no indication of this “risk of ruin.”
Non-Trading Risk
The Portfolio Funds have non-trading market risk on its foreign cash balances not needed for margin. These balances (as well as the market risk they represent) are generally immaterial.
The Portfolio Funds also have non-trading market risk on its assets which are held in cash at the clearing broker. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Fund’s market risk exposures through the Portfolio Funds after the change in structure — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund 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 Fund’s primary market risk exposures as well as the strategies used and to be used by FRM and the Trading Advisors of the Portfolio Funds for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the risk controls for the Fund and for the trading conducted through Portfolio Funds 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 Fund. There can be no assurance that the Fund’s 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 the value of their investment in the Fund.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
Each Portfolio Fund and its Trading Advisor are monitored by FRM’s investment team. This coverage provides that each Portfolio Fund and its Trading Advisor are monitored by individuals who have an understanding of the Portfolio Fund and its Trading Advisor, as well as knowledge of the market environment affecting that particular strategy.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
FRM’s President and Principal Financial Officer, on behalf of the Fund, have evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act) with respect to the Fund as of and for the quarter which ended March 31, 2015, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
No change in internal control over financial reporting (in connection with Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act) occurred during the quarter ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.
None.
There are no material changes from risk factors as previously disclosed in the Fund’s report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 20, 2015.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Units are privately offered and sold to “accredited investors” (as defined in Rule 501(a) under the Securities Act) in reliance on the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 thereunder. The selling agent of the Units was MLPF&S.
CLASS A
|
| Subscription |
| ||||||
|
| Amount |
| Units |
| NAV (1) |
| ||
1/01/2015 |
| $ | 47,365 |
| 39,323 |
| $ | 1.2045 |
|
1/16/2015 |
| — |
| — |
| 1.2304 |
| ||
2/1/2015 |
| — |
| — |
| 1.2611 |
| ||
2/16/2015 |
| 425,700 |
| 345,789 |
| 1.2311 |
| ||
3/01/2015 |
| — |
| — |
| 1.2593 |
| ||
3/16/2015 |
| — |
| — |
| 1.2846 |
| ||
4/01/2015 |
| 114,840 |
| 89,537 |
| 1.2826 |
| ||
CLASS C
|
| Subscription |
| ||||||
|
| Amount |
| Units |
| NAV (1) |
| ||
1/01/2015 |
| $ | 100,000 |
| 85,793 |
| $ | 1.1656 |
|
1/16/2015 |
| — |
| — |
| 1.1903 |
| ||
2/1/2015 |
| 310,000 |
| 254,203 |
| 1.2195 |
| ||
2/16/2015 |
| 124,000 |
| 104,209 |
| 1.1899 |
| ||
3/01/2015 |
| 68,000 |
| 55,889 |
| 1.2167 |
| ||
3/16/2015 |
| 209,000 |
| 168,467 |
| 1.2406 |
| ||
4/01/2015 |
| 42,000 |
| 33,920 |
| 1.2382 |
| ||
CLASS D
|
| Subscription |
| ||||||
|
| Amount |
| Units |
| NAV (1) |
| ||
1/01/2015 |
| $ | — |
| — |
| $ | 1.5105 |
|
1/16/2015 |
| — |
| — |
| 1.5440 |
| ||
2/1/2015 |
| — |
| — |
| 1.5835 |
| ||
2/16/2015 |
| — |
| — |
| 1.5468 |
| ||
3/01/2015 |
| — |
| — |
| 1.5832 |
| ||
3/16/2015 |
| — |
| — |
| 1.6160 |
| ||
4/01/2015 |
| — |
| — |
| 1.6145 |
| ||
CLASS I
|
| Subscription |
| ||||||
|
| Amount |
| Units |
| NAV (1) |
| ||
1/01/2015 |
| $ | — |
| — |
| $ | 1.2963 |
|
1/16/2015 |
| — |
| — |
| 1.3245 |
| ||
2/1/2015 |
| 5,000 |
| 3,682 |
| 1.3578 |
| ||
2/16/2015 |
| — |
| — |
| 1.3257 |
| ||
3/01/2015 |
| 14,625 |
| 10,783 |
| 1.3563 |
| ||
3/16/2015 |
| — |
| — |
| 1.3838 |
| ||
4/01/2015 |
| 215,000 |
| 155,594 |
| 1.3818 |
| ||
CLASS M
|
| Subscription |
| ||||||
|
| Amount |
| Units |
| NAV (1) |
| ||
1/01/2015 |
| $ | — |
| — |
| $ | 1.1158 |
|
1/16/2015 |
| — |
| — |
| 1.1406 |
| ||
2/1/2015 |
| — |
| — |
| 1.1698 |
| ||
2/16/2015 |
| — |
| — |
| 1.1426 |
| ||
3/01/2015 |
| 145,000 |
| 123,985 |
| 1.1695 |
| ||
3/16/2015 |
| — |
| — |
| 1.1938 |
| ||
4/01/2015 |
| — |
| — |
| 1.1927 |
| ||
(1) Beginning of the period Net Asset Value
Class A Units were subject to upfront sales commissions paid to MLPF&S ranging from 1.0% to 2.5% of an investor’s gross subscription amount. Class D Units and Class I Units were subject to upfront sales commissions paid to MLPF&S up to 2.5% of an investor’s gross subscription amount. Sales commissions were directly deducted from subscription amounts. Class C Units and Class M Units were not subject to upfront sales commissions.
(b) Not applicable.
(c) Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed herewith to this Quarterly Report on Form 10-Q:
3.02(i) Amendment dated as of May 1, 2015 to the Third Amended and Restated Limited Liability Company Operating Agreement of Systematic Momentum FuturesAccess LLC.
3.02 (ii) Amendment dated as of September 30, 2013 to the Third Amended and Restated Limited Liability Company Operating Agreement of Systematic Momentum FuturesAccess LLC
3.02(iii) Third Amended and Restated Limited Liability Company Operating Agreement of Systematic Momentum FuturesAccess LLC dated as of November 30, 2012
Exhibit 3.02(i), 3.02(ii)
and 3.02(iii): Are filed herewith
31.01 and
31.02 Rule 13a-14(a)/15d-14(a) Certifications
Exhibit 31.01
and 31.02: Are filed herewith.
32.01 and
32.02 Section 1350 Certifications
Exhibit 32.01
and 32.02 Are filed herewith.
Exhibit 101 Are filed herewith.
The following materials from the Fund’s quarterly Report on Form 10-Q for the three month period ended March 31, 2015 formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Financial Condition (ii) Statements of Operations (iii) Statements of Changes in Members’ Capital (iv) Financial Data Highlights and (v) Notes to Financial Statements, tagged as blocks of text.
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.
| MAN FRM MANAGED FUTURES STRATEGIES LLC | ||
|
| ||
|
| ||
| By: | FRM INVESTMENT | |
|
| MANAGEMENT (USA) LLC | |
|
| (Manager) | |
|
|
| |
|
|
| |
Date: May 15, 2015 | By: | /s/ Michelle McCloskey | |
|
| Michelle McCloskey | |
|
| President | |
|
| (Principal Executive Officer) | |
|
|
| |
|
|
| |
Date: May 15, 2015 | By: | /s/ Linzie Steinbach | |
|
| Linzie Steinbach | |
|
| Principal Financial Officer | |