Graham Alternative Investment Trading LLC
Unaudited Statements of Changes in
Members’ Capital
For the Three and Six Months Ended June 30, 2021
| | Class 0 | | | Class 2 | | | Class M | | | Total | |
| | Units | | | Capital | | | Units | | | Capital | | | Units | | | Capital | | | Capital | |
| | | | | | | | | | | | | | | | | | | | | |
Members’ capital, December 31, 2020 | | | 203,816.771 | | | $ | 35,272,482 | | | | 184,460.524 | | | $ | 22,915,191 | | | | 4,671.470 | | | $ | 1,556,178 | | | $ | 59,743,851 | |
| Subscriptions | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
| Redemptions | | | (3,043.519 | ) | | | (538,957 | ) | | | (3,178.647 | ) | | | (411,629 | ) | | | – | | | | (692,262 | ) | | | (1,642,848 | ) |
| Incentive allocation | | | – | | | | (424,238 | ) | | | – | | | | (268,024 | ) | | | – | | | | 692,262 | | | | – | |
| Net income | | | – | | | | 2,119,121 | | | | – | | | | 1,340,122 | | | | – | | | | 102,665 | | | | 3,561,908 | |
Members’ capital, March 31, 2021 | | | 200,773.252 | | | $ | 36,428,408 | | | | 181,281.877 | | | $ | 23,575,660 | | | | 4,671.470 | | | $ | 1,658,843 | | | $ | 61,662,911 | |
| Subscriptions | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
| Redemptions | | | (5,148.509 | ) | | | (949,508 | ) | | | (10,229.362 | ) | | | (1,366,841 | ) | | | – | | | | (163,263 | ) | | | (2,479,612 | ) |
| Incentive allocation | | | – | | | | (101,431 | ) | | | – | | | | (61,832 | ) | | | – | | | | 163,263 | | | | – | |
| Net income | | | – | | | | 507,150 | | | | – | | | | 309,160 | | | | – | | | | 31,016 | | | | 847,326 | |
Members’ capital, June 30, 2021 | | | 195,624.743 | | | $ | 35,884,619 | | | | 171,052.515 | | | $ | 22,456,147 | | | | 4,671.470 | | | $ | 1,689,859 | | | $ | 60,030,625 | |
See accompanying notes.
Graham Alternative Investment Trading LLC
Unaudited Statements of Changes in Members’ Capital (continued)
For the Three and Six Months Ended June 30, 2020
| | Class 0 | | | Class 2 | | | Class M | | | Total | |
| | Units | | | Capital | | | Units | | | Capital | | | Units | | | Capital | | | Capital | |
| | | | | | | | | | | | | | | | | | | | | |
Members’ capital, December 31, 2019 | | | 213,162.414 | | | $ | 32,409,897 | | | | 201,355.180 | | | $ | 21,816,766 | | | | 4,671.470 | | | $ | 1,307,992 | | | $ | 55,534,655 | |
| Subscriptions | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
| Redemptions | | | (5,366.145 | ) | | | (816,202 | ) | | | (6,097.039 | ) | | | (673,152 | ) | | | – | | | | (139,069 | ) | | | (1,628,423 | ) |
| Incentive allocation | | | – | | | | (139,069 | ) | | | – | | | | – | | | | – | | | | 139,069 | | | | – | |
| Net income | | | – | | | | 1,650,675 | | | | – | | | | 1,075,378 | | | | – | | | | 75,147 | | | | 2,801,200 | |
Members’ capital, March 31, 2020 | | | 207,796.269 | | | | 33,105,301 | | | | 195,258.141 | | | | 22,218,992 | | | | 4,671.470 | | | | 1,383,139 | | | | 56,707,432 | |
| Subscriptions | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | |
| Redemptions | | | (1,773.039 | ) | | | (282,562 | ) | | | (2,988.460 | ) | | | (339,451 | ) | | | – | | | | (11,712 | ) | | | (633,725 | ) |
| Incentive allocation | | | – | | | | (11,712 | ) | | | – | | | | – | | | | – | | | | 11,712 | | | | – | |
| Net income (loss) | | | – | | | | 58,386 | | | | – | | | | (2,677 | ) | | | – | | | | 9,371 | | | | 65,080 | |
Members’ capital, June 30, 2020 | | | 206,023.230 | | | $ | 32,869,413 | | | | 192,269.681 | | | $ | 21,876,864 | | | | 4,671.470 | | | $ | 1,392,510 | | | $ | 56,138,787 | |
See accompanying notes.
Graham Alternative Investment Trading LLC
Unaudited Statements of
Cash Flows
| | | Six Months Ended June 30, | |
| | | 2021 | | | 2020 | |
| Cash flows provided by operating activities | | | | | | |
Net income | | $ | 4,409,234 | | | $ | 2,866,280 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Net (income) allocated from investments in Master Funds | | | (5,251,070 | ) | | | (3,270,518 | ) |
| Net (income) allocated from investment in Graham Cash Assets LLC | | | (32,634 | ) | | | (374,155 | ) |
| Proceeds from sale of investments in Master Funds | | | 35,557,695 | | | | 32,747,567 | |
| Proceeds from sale of investment in Graham Cash Assets LLC | | | 28,466,809 | | | | 22,911,926 | |
| Purchases of investments in Master Funds | | | (31,949,856 | ) | | | (28,650,545 | ) |
| Purchases of investment in Graham Cash Assets LLC | | | (27,262,735 | ) | | | (23,689,846 | ) |
| Changes in assets and liabilities: | | | | | | | | |
| Decrease in accrued professional fees | | | (46,864 | ) | | | (101,107 | ) |
| Decrease in accrued advisory fees | | | (1,760 | ) | | | (2,013 | ) |
| Decrease in accrued sponsor fees | | | (1,462 | ) | | | (1,174 | ) |
| Decrease in accrued administrator’s fee | | | (262 | ) | | | (35 | ) |
Net cash provided by operating activities | | | 3,887,095 | | | | 2,436,380 | |
| | | | | | | | | |
| Cash flows used in financing activities | | | | | | | | |
| Subscriptions | | | – | | | | – | |
| Redemptions (net of redemptions payable) | | | (3,887,095 | ) | | | (2,436,380 | ) |
Net cash used in financing activities | | | (3,887,095 | ) | | | (2,436,380 | ) |
| | | | | | | | | |
Net change in cash and cash equivalents | | | – | | | | – | |
| | | | | | | | | |
Cash and cash equivalents, beginning of period | | | – | | | | – | |
Cash and cash equivalents, end of period | | $ | – | | | $ | – | |
| | | | | | | | | |
| Supplemental cash flow information | | | | | | | | |
Interest paid | | $ | 6,951 | | | $ | 6,792 | |
See accompanying notes.
Graham Alternative Investment Trading LLC
N
otes to Unaudited Financial Statements
June 30, 2021
1. Organization and Business
Graham Alternative Investment Trading LLC (“GAIT”) was formed on May 18, 2006, commenced operations on August 1, 2006 and is organized as a Delaware Limited Liability Company. Graham Capital Management, L.P. (the “Managing Member” or “Manager”) is the Managing Member and the sole investment advisor. The Managing Member is registered as a Commodity Pool Operator and Commodity Trading Advisor with the U.S. Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association. The Managing Member is also registered with the Securities and Exchange Commission as an investment adviser. GAIT is a commodity pool, and as such is subject to the oversight and jurisdiction of the CFTC.
The investment objective of GAIT is to achieve long-term capital appreciation through professionally managed trading through its investment in various master trading vehicles (“Master Funds”). As more fully described in Notes 2 and 3, these Master Funds invest in a broad range of derivative instruments such as currency forward and futures contracts; bond, interest rate, and index futures contracts; commodity forward and futures contracts, and options and swaps thereon traded on U.S. and foreign exchanges, as well as over-the-counter (“OTC”).
Graham Alternative Investment Fund I LLC Blended Strategies Portfolio and Graham Alternative Investment Fund II LLC Blended Strategies Portfolio (through its investment in Graham Alternative Investment Ltd.) are the primary investors of GAIT.
SEI Global Services, Inc. (“SEI”) is GAIT’s independent administrator and transfer agent. SEI is responsible for certain matters pertaining to the administration of GAIT.
GAIT will terminate on December 31, 2050 or at an earlier date if certain conditions occur as outlined in the Limited Liability Company Agreement (“LLC Agreement”).
Duties of the Managing Member
Subject to the terms and conditions of the LLC Agreement, the Managing Member has complete and exclusive responsibility for managing and administering the affairs of GAIT and for directing the investment and reinvestment of the assets of GAIT.
2. Summary of Significant Accounting Policies
These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars. GAIT is an investment company and applies specialized accounting guidance as outlined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies. The preparation of these financial statements requires the Manager to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Investments in Master Funds
GAIT invests in various Master Funds which are managed by the Managing Member. These investments are valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP based upon GAIT’s proportionate share of the Master Funds’ reported net asset values. Gains and losses are allocated monthly by each Master Fund to GAIT based upon GAIT’s proportionate share of the net asset value of each Master Fund and are included in the statements of operations and incentive allocation.
2. Summary of Significant Accounting Policies (continued)
Due from/to Brokers
Due from/to brokers on the Master Funds’ financial statements primarily consist of cash balances carried as margin deposits with clearing brokers for the purpose of trading in futures contracts, foreign currency contracts and other derivative financial instruments and securities, and receivables/payables for unsettled transactions. Substantially all of the Master Funds’ cash and investments are held as collateral by its brokers to secure derivative instruments and securities.
Revenue Recognition
All positions in financial instruments are recorded on the trade date at fair value. Net unrealized appreciation or depreciation on open derivative financial instruments is included in the Master Funds’ statements of financial condition as the difference between the original purchase price and the current market value at year end. Any change in net unrealized appreciation or depreciation from the preceding period is reported in the Master Funds’ statements of operations. Interest income and expense are recorded on the accrual basis. Dividends are recorded on the ex-dividend date and are net of applicable withholding taxes. All other expenses are recorded on the accrual basis. Realized gains and losses are calculated based on the specific identification method.
Brokerage Commissions and Fees
Brokerage commissions and fees on the Master Funds’ financial statements represent all brokerage commissions and other fees incurred in connection with the Master Funds’ trading activity and are recorded on the accrual basis.
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated using the exchange rates at June 30, 2021 and December 31, 2020. Gains and losses resulting from foreign currency transactions are calculated using daily exchange rates prevailing on the transaction date. The Master Funds do not isolate the portion of results of operations from changes in foreign exchange rates on investments and cash from fluctuations arising from changes in market prices held. The Master Funds’ currency translation gains and losses are included in the statements of operations and incentive allocation within net realized gain and net (decrease) increase in unrealized appreciation on investments.
Fair Value
The fair value of GAIT’s assets and liabilities, which qualify as financial instruments under U.S. GAAP, approximates the carrying amounts presented in the statements of financial condition. Changes in these carrying amounts are included in the statements of operations and incentive allocation.
GAIT follows U.S. GAAP for fair value measurements, which defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAIT reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. U.S. GAAP uses a three-level hierarchy for fair value measurement based on the activeness of the market and the transparency and independence of inputs used in the valuation of an asset or liability as of the measurement date.
2. Summary of Significant Accounting Policies (continued)
Fair Value (continued)
The fair value hierarchy categorizes asset and liability positions into one of three levels, as summarized below, based on the inputs and assumptions used in deriving fair value.
| • | Level 1 inputs are unadjusted closing or settlement prices for such assets or liabilities as published by the primary exchange upon which they are traded. |
| • | Level 2 inputs include quoted prices for similar assets and liabilities obtained from independent brokers and/or market makers in each security. |
| • | Level 3 inputs are those which are considered unobservable and are significant in arriving at fair value. |
GAIT’s investments in the Master Funds and Graham Cash Assets LLC (“Cash Assets”) have been valued at net asset value using the practical expedient. Accordingly, under U.S. GAAP, these investments are excluded from categorization in the fair value hierarchy. GAIT’s investments in the Master Funds and Cash Assets are discussed in Notes 3 and 4. There were no Level 3 assets or liabilities held at any point during the six months ended June 30, 2021 or the year ended December 31, 2020 by GAIT, the Master Funds, or Cash Assets.
Derivative Instruments
In the normal course of business, the Master Funds utilize derivative financial instruments in connection with their trading activities. Derivative instruments derive their value from underlying assets, indices, reference rates or a combination of these factors. Investments in derivative financial instruments are subject to additional risks that can result in a loss of all or part of an investment. The Master Funds’ derivative financial instruments are classified by the following primary underlying risks: interest rate, foreign currency exchange rate, commodity price, and equity price risks. These risks can be in excess of the amounts recognized in the statements of financial condition. In addition, the Master Funds are also subject to additional counterparty risk should their counterparties fail to meet the terms of their contracts. Management of counterparty risk involves a number of considerations, such as the financial profile of the counterparty, specific terms and duration of the contractual agreement, and the value of collateral held, if any. The Master Funds have established initial credit approval, credit limits, and collateral requirements and may reduce their exposure to any counterparties they deem necessary. Trading in non-U.S. dollar denominated derivative instruments may subject the value of, and gains and losses associated with, such contracts to additional risks related to adverse changes in the applicable exchange rates.
Unrealized appreciation and depreciation from derivative financial instruments are recorded based on changes in their fair value. Realized gains and losses are recorded when the positions are closed. All unrealized and realized gains and losses related to derivative financial instruments are included in net realized gain on investments in the Master Funds’ statements of operations.
Futures Contracts
The Master Funds use futures contracts in an attempt to take advantage of changes in the value of equities, commodities, interest rates, bonds and foreign currencies. Futures contracts are valued based upon the closing price as of the valuation date established by the primary exchange upon which they are traded.
2. Summary of Significant Accounting Policies (continued)
Derivative Instruments (continued)
Futures Contracts (continued)
A futures contract represents a commitment for the future purchase or sale of an asset or cash settlement based on the value of an asset on a specified date. The purchase and sale of futures contracts are executed on an exchange which requires margin deposits with a Futures Commission Merchant (“FCM”). Subsequent payments are made or received by the Master Funds each day, depending on the daily fluctuations in the value of the contract. These changes in valuation are recorded for financial statement purposes as unrealized appreciation and depreciation by the Master Funds. Relative to over-the-counter derivative financial instruments, futures contracts provide reduced counterparty risk to the Master Funds since futures are exchange-traded and the exchanges’ clearing house guarantees the futures against default. However, some non-U.S. exchanges are “principals’ markets” in which no common clearing facility exists, and the Master Funds may look only to the clearing broker for performance of the contract. The U.S. Commodity Exchange Act requires an FCM to segregate all funds received from such FCM’s customers in respect of regulated futures transactions. If the FCM were not to do so to the full extent required by law, the assets of the Master Funds might not be fully protected in the event of the bankruptcy or insolvency of the FCM. In that case, the Master Funds would be limited to recovering only a pro-rata share of all available funds segregated on behalf of the FCM’s combined customer accounts, even though certain property specifically traceable to the Master Funds was held by the FCM. In addition, in the event of bankruptcy or insolvency of an exchange or an affiliated clearing house, the Master Funds might experience a loss of funds deposited through its FCM as margin with such exchange or affiliated clearing house, the loss of unrealized profits on its open positions, and the loss of funds owed to it as realized profits on closed positions.
Forward Contracts
The Master Funds enter into foreign currency forward contracts in an attempt to take advantage of changes in exchange rates. Forward currency transactions are contracts or agreements for delivery of specific currencies or the cash equivalent value at a specified future date and an agreed upon price. Forward contracts are not guaranteed by an exchange or clearing house and therefore the risks include the inability of counterparties to meet their obligations under the terms of the contracts as well as the risks associated with movements in fair value.
Exchange-traded forward contracts are valued based upon the settlement prices as of the valuation date, established by the primary exchange upon which they are traded. All other forward contracts are valued based upon a forward curve constructed using independently quoted forward points. Changes in fair value of each forward contract are recognized as unrealized appreciation and depreciation.
2. Summary of Significant Accounting Policies (continued)
Derivative Instruments (continued)
Swap Contracts
The Master Funds may enter into various swap contracts in an attempt to take advantage of changes in interest rates and asset values. Exchange-traded interest rate swap contracts are executed on an exchange which requires margin deposits with a Central Clearing Counterparty (“CCP”). Subsequent payments are made or received by the Master Funds each day, depending on the daily fluctuations in the value of the contract. These changes in valuation are recorded for financial statement purposes as unrealized appreciation or depreciation by the Master Funds. Relative to over-the-counter interest rate swap contracts, exchange-traded interest rate swap contracts provide reduced counterparty risk since they are exchange-traded and the exchange’s clearinghouse guarantees against default. The Commodity Exchange Act requires a CCP to segregate all funds received from such CCP’s customers in respect of exchange-traded interest rate swaps. If the CCP were not to do so to the full extent required by law, the assets of the Master Funds might not be fully protected in the event of the bankruptcy or insolvency of the CCP. In that case, the Master Funds would be limited to recovering only a pro-rata share of all available funds segregated on behalf of the CCP’s combined customer accounts, even though certain property specifically traceable to the Master Funds is held by the CCP. In addition, in the event of bankruptcy or insolvency of an exchange or an affiliated clearing house, the Master Funds could experience a loss of funds deposited through its CCP as margin with such exchange or affiliated clearing house, the loss of unrealized profits on its open positions, and the loss of funds owed to it as realized profits on closed positions. All funds deposited with both U.S. and non-U.S. CCPs are included in due from brokers on the Master Funds’ statements of financial condition. Over the counter swap contracts are not guaranteed by an exchange or an affiliated clearing house or regulated by any U.S. or foreign government authorities. Failure of a counterparty to meet its obligation under the terms of the swap contract could result in the loss of any unrealized appreciation on open positions. It may not be possible to dispose of or close out a swap position without the consent of the counterparty, and the Master Funds may not be able to enter into an offsetting contract in order to cover its risk.
An interest rate swap contract is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified rates for a specified notional amount of the underlying assets. The payment flows are usually netted against each other, with the difference being paid by one party to another. Interest rate swap positions are generally valued as the present value of the net future cash flows as estimated by the Manager using a discount curve constructed from independently obtained future interest rate assumptions.
A total return swap contract is an agreement that obligates two parties to exchange cash flows calculated by reference to changes in specified prices for a specified notional amount of the underlying assets. The payment flows are usually netted against each other, with the difference being paid by one party to another. Total return swaps are generally valued based upon the value of the underlying instruments as determined by the primary exchange on which they are traded.
Exchange-traded swaps are valued based upon the closing prices established by the primary exchange upon which they are traded. Changes in fair value of each swap are recognized as unrealized appreciation or depreciation. The Master Funds record realized gains or losses when a swap contract resets or is terminated.
2. Summary of Significant Accounting Policies (continued)
Derivative Instruments (continued)
Options
The Master Funds may buy and sell covered and uncovered exchange-traded and over-the-counter options on futures, foreign currencies, commodities, interest rates and equities to take advantage of the price movements of the financial instrument underlying the option or to hedge positions in the underlying assets. Option contracts give one party the right, but not the obligation, to buy or sell within a limited time or on a specified date, a financial instrument, commodity or currency at a contracted price. Options may also be settled in cash, based on differentials between specified indices or prices.
When purchasing options, the Master Funds are exposed to counterparty risk to the extent that a seller of an over-the-counter option does not meet its obligations under the terms of the option contract. The maximum risk of loss to the Master Funds is the unrealized appreciation of the contracts and the premiums paid to purchase its open option contracts. Relative to over-the-counter options, exchange-traded options provide reduced counterparty risk to the Master Funds since the exchanges’ clearinghouse guarantees the option against default.
Selling uncovered options may subject the Master Funds to unlimited risk of loss. As the writer of an option, the Master Funds bear the market risk of an unfavorable change in the price of the underlying instrument.
Exchange-traded options are valued based upon the settlement prices published as of the valuation date by the principal exchange upon which they are traded. In the absence of an exchange published settlement price, the option will be valued using the last reported sales price reported on the exchange for the valuation date. Over-the-counter options and exchange-traded options with no reported sales price on the valuation date will generally be valued at the average of the last reported bid and offer quotes from independent brokers or from the exchange, respectively.
Credit Risk Related Contingent Features
OTC derivative instruments are subject to ISDA Master Agreements which generally require among other things, that the Master Funds maintain a predetermined level of net assets or rate of return and provide limits with respect to any decline in value over 1-month, 3-month and 12-month periods. If the Master Funds were to violate such provisions, the counterparty to these instruments could demand liquidation of the outstanding positions. There were no events that occurred throughout the six months ended June 30, 2021 and the year ended December 31, 2020 which caused any counterparty to demand liquidation of any outstanding positions. Graham K4D Trading Ltd. had derivative instruments subject to credit risk related contingent features in a net liability position in the amount of $0 and $901,487 at June 30, 2021 and December 31, 2020, respectively. Graham Commodity Strategies LLC had no derivative instruments subject to credit risk related contingent features in a net liability position at June 30, 2021 and December 31, 2020.
New York Mercantile Exchange Corporate Membership
Graham Commodity Strategies LLC, a Master Fund in which GAIT invests, is a member of the New York Mercantile Exchange (“NYMEX”). As a result of its membership, Graham Commodity Strategies LLC owns two NYMEX seats and 30,000 shares of the CME Group. Graham Commodity Strategy LLC’s policy is to value the NYMEX seats and the shares of the CME Group at fair value. As of June 30, 2021 and December 31, 2020, the two NYMEX seats were valued at $350,500 and $283,000, respectively, and the 30,000 shares of CME Group were valued at $6,380,400 and $5,461,500, respectively, all of which are included within Exchange memberships on Graham Commodity Strategies LLC’s statements of financial condition. The NYMEX seats and CME Group shares are considered Level 1 assets as described in the Fair Value section of Note 2.
2. Summary of Significant Accounting Policies (continued)
Chicago Mercantile Exchange Membership
Graham Commodity Strategies LLC, a Master Fund in which GAIT invests, is also a member of the Chicago Mercantile Exchange (“CME”). As a result of its membership, Graham Commodity Strategies LLC owns two CME seats and 2,232 shares of the CME Group. Graham Commodity Strategies LLC’s policy is to value the CME seats and the shares of the CME Group at fair value. As of June 30, 2021 and December 31, 2020, the two CME seats were valued at $399,250 and $295,050, respectively. As of June 30, 2021 and December 31, 2020, the 2,232 shares of CME Group were valued at $474,702 and $406,336, respectively. The CME seats and shares are included within Exchange memberships on Graham Commodity Strategies LLC’s statement of financial condition. The CME seats and CME Group shares are considered Level 1 assets as described in the Fair Value section of Note 2.
Graham K4D Trading Ltd., a Master Fund in which GAIT invests, is also a member of the CME. As a result of its membership, Graham K4D Trading Ltd. owns one CME seat and 4,085 shares of the CME Group. Graham K4D Trading Ltd.’s policy is to value the CME seat and the shares of the CME Group at fair value. As of June 30, 2021 and December 31, 2020, the CME seat was valued at $61,000 and $51,000, respectively. As of June 30, 2021 and December 31, 2020, the 4,085 shares of the CME Group were valued at $868,797 and $743,674, respectively. The CME seats and shares are included in Exchange memberships on Graham K4D Trading Ltd.’s statement of financial condition. The CME seat and CME Group shares are considered Level 1 assets as described in the Fair Value section of Note 2.
Chicago Board of Trade Membership
Graham K4D Trading Ltd. is a member of the Chicago Board of Trade (“CBOT”) under Rule 106.S and owns two B-1/Full seats and one B-2/Associate seat (collectively, “CBOT memberships”). Graham K4D Trading Ltd.’s policy is to value the CBOT memberships at fair value. As of June 30, 2021 and December 31, 2020, the two B-1/Full seats were valued at a total of $414,000 and $373,000, respectively, and the B-2/Associate seat was valued at $28,250 and $32,250, respectively, all of which are included in Exchange memberships on the statements of financial condition. Additionally, Graham K4D Trading Ltd. owns 970 shares of the CME Group as a result of its CBOT membership. Graham K4D Trading Ltd.’s policy is to value the CME Group shares at fair value. As of June 30, 2021 and December 31, 2020, the 970 shares of the CME Group were valued at $206,300 and $176,589, respectively. The CBOT memberships and shares of the CME Group are considered Level 1 assets as described in the Fair Value section of Note 2.
As of June 30, 2021, Graham Commodity Strategies LLC, a Master Fund in which GAIT invests, is also a member of the CBOT under Rule 106.S and owns 3,265 shares of the CME Group as a result of its CBOT membership. Graham Commodity Strategies LLC’s policy is to value the CME shares at fair value. As of June 30, 2021 and December 31, 2020, the 3,265 shares of the CME Group were valued at $694,400 and $594,393, respectively. The CME Group shares are included in Exchange memberships on Graham Commodity LLC’s statement of financial condition. The CBOT memberships and CME seat are considered Level 1 assets as described in the Fair Value section of Note 2.
Commodity Exchange Membership
As of June 30, 2021, Graham Commodity Strategies LLC, a Master Fund in which GAIT invests, is also a member of the Commodity Exchange (“COMEX”) and owns two COMEX seats. Graham Commodity Strategies LLC’s policy is to value the COMEX seats at fair value. As of June 30, 2021 and December 31, 2020, the two COMEX seats were valued at $167,500 and $177,000, respectively. The COMEX seats are included in Exchange memberships on Graham Commodity Strategies LLC’s statement of financial condition. The COMEX seats are considered Level 1 assets as described in the Fair Value section of Note 2.
2. Summary of Significant Accounting Policies (continued)
Fixed Income Securities
The fixed income securities positions are valued at the mean between the last reported bid and ask quotations received from independent brokers. GAIT is exposed to credit risk relating to whether the issuers will meet their obligations when they come due until the fixed income securities are sold or reach maturity.
Cash and Cash Equivalents
GAIT classifies all highly liquid investments with a maturity of three months or less at the time of purchase as cash equivalents. Cash deposited with a bank is subject to credit risk. In the event of the bank's insolvency, recovery of the GAIT’s cash would be limited to account insurance or other protection afforded by such deposit. At June 30, 2021 and December 31, 2020, GAIT did not have any cash or cash equivalents.
Indemnifications
In the normal course of business, the Master Funds, Cash Assets, and GAIT enter into contracts that contain a variety of indemnifications. Such contracts may include those by Cash Assets and the Master Funds with their brokers and trading counterparties. GAIT’s maximum exposure under these arrangements is unknown; however, GAIT has not had prior claims or losses with respect to such indemnifications and considers the risk of loss to be remote. At June 30, 2021 and December 31, 2020, no accruals have been recorded by GAIT for indemnifications.
3. Investments in Master Funds
As of June 30, 2021 and December 31, 2020, GAIT invested in various Master Funds, all of which were managed by the Manager. GAIT’s investments in these Master Funds, as well as the investment objectives of each Master Fund, are summarized below. Master Funds in which GAIT invested 5% or more of its Members’ Capital are individually identified. All of the Master Funds and GAIT are related parties. The Master Funds do not charge management fees or incentive allocation, and all offer monthly subscriptions and redemptions.
June 30, 2021
| |
| Investment – Objective | | Percent of Members’ Capital | | Fair Value | | | Net Income (six months ended June 2021) | |
| | | | | | | | | | |
| Global Macro Funds | | | | | | | | | |
| Graham Commodity Strategies LLC | | | 6.60 | % | | $ | 3,964,962 | | | $ | 3,854,656 | |
| | | | | | | | | | | | | |
| Systematic Macro Funds | | | | | | | | | | | | |
| Graham K4D Trading Ltd. | | | 6.87 | % | | | 4,124,021 | | | | 1,396,414 | |
| | | | 13.47 | % | | $ | 8,088,983 | | | $ | 5,251,070 | |
December 31, 2020
| |
| Investment – Objective | | Percent of Members’ Capital | | Fair Value | | | Net Income (Loss) (six months ended June 2020) | |
| | | | | | | | | | |
| Global Macro Funds | | | | | | | | | |
| Graham Commodity Strategies LLC | | | 3.52 | % | | $ | 2,103,213 | | | $ | 5,339,793 | |
| | | | | | | | | | | | | |
| Systematic Macro Funds | | | | | | | | | | | | |
| Graham K4D Trading Ltd. | | | 7.27 | % | | | 4,342,854 | | | | (2,090,848 | ) |
| | | | 10.79 | % | | $ | 6,446,067 | | | $ | 3,248,945 | |
3. Investments in Master Funds (continued)
The following table summarizes the financial position of each Master Fund as of June 30, 2021:
| | | Graham Commodity Strategies LLC (Delaware) | | | Graham K4D Trading Ltd. (BVI) | |
| Assets: | | | | | | |
| Fixed income securities, at fair value (cost $27,500,000) | | $ | – | | | $ | 27,499,806 | |
| Due from brokers | | | 118,378,764 | | | | 23,540,984 | |
| Derivative financial instruments, at fair value | | | 12,354,726 | | | | 1,539,203 | |
| Exchange memberships, at fair value | | | 8,466,752 | | | | 1,578,347 | |
| Interest receivable | | | 4,087 | | | | 1,521 | |
Total assets | | | 139,204,329 | | | | 54,159,861 | |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Derivative financial instruments, at fair value | | | 3,033,856 | | | | – | |
| Interest payable | | | 19,112 | | | | 3,202 | |
Total liabilities | | | 3,052,968 | | | | 3,202 | |
Members’ Capital / Net Assets | | $ | 136,151,361 | | | $ | 54,156,659 | |
| | | | | | | | | |
Percentage of Master Fund held by GAIT | | | 2.91 | % | | | 7.61 | % |
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2021:
| Description | Number of Contracts | | Fair Value | | | Percentage of Members’ Capital of Master Fund | |
| Graham Commodity Strategies LLC | | | | | | | |
| Exchange memberships (cost $3,649,411) | | | | | | | |
| United States (cost $3,649,411) | | | | | | | |
Financial services (cost $3,649,411) | | | $ | 8,466,752 | | | | 6.22 | % |
| Total exchange memberships | | | $ | 8,466,752 | | | | 6.22 | % |
| | | | | | | | | | |
| Derivative financial instruments | | | | | | | | | |
| Long contracts | | | | | | | | | |
| Futures | | | | | | | | | |
| Commodity | | | $ | 2,377,996 | | | | 1.75 | % |
| Foreign bond | | | | 189,408 | | | | 0.14 | % |
| Foreign index | | | | (568,473 | ) | | | (0.42 | )% |
| Interest rate | | | | 159,963 | | | | 0.12 | % |
| U.S. bond | | | | | | | | | |
| U.S. long bond September 2021 | | | | 360,781 | | | | 0.26 | % |
| U.S. 10 yr note September 2021 | | | | (1,297 | ) | | | (0.00 | )% |
| U.S. index | | | | 5,210,203 | | | | 3.83 | % |
| Total futures | | | | 7,728,581 | | | | 5.68 | % |
| | | | | | | | | | |
| Forwards | | | | | | | | | |
| Foreign currency | | | | (3,224,103 | ) | | | (2.37 | )% |
| Total forwards | | | | (3,224,103 | ) | | | (2.37 | )% |
| | | | | | | | | | |
| Options (cost $33,266,987) | | | | | | | | | |
| Commodity futures | | | | 3,126,301 | | | | 2.30 | % |
| Currency futures | | | | 9,414,502 | | | | 6.91 | % |
| Interest rate futures | | | | 6,562,881 | | | | 4.82 | % |
| U.S. bond futures | | | | | | | | | |
| U.S. 10 yr September 2021, $130.50 - $131.00 Put | 2 | | | 920,156 | | | | 0.68 | % |
| U.S. 5 yr September 2021, $122.25 - $123.25 Put | 2 | | | 1,734,148 | | | | 1.27 | % |
| U.S. index futures | | | | 5,282,980 | | | | 3.88 | % |
| Total options | | | | 27,040,968 | | | | 19.86 | % |
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2021:
| Description | | Number of Contracts / Notional Amounts | | | Fair Value | | | Percentage of Members’ Capital of Master Fund | |
| Graham Commodity Strategies LLC (continued) | | | | | | | | | |
| Derivative financial instruments (continued) | | | | | | | | | |
| Short contracts | | | | | | | | | |
| Futures | | | | | | | | | |
| Commodity | | | | | $ | (429,900 | ) | | | (0.32 | )% |
| Foreign bond | | | | | | (1,528,550 | ) | | | (1.12 | )% |
| Foreign index | | | | | | 111,196 | | | | 0.08 | % |
| Interest rate | | | | | | 665,740 | | | | 0.49 | % |
| U.S. bond | | | | | | | | | | | |
| U.S. 5 yr note September 2021 | | | (10,446 | ) | | | (199,797 | ) | | | (0.15 | )% |
| U.S. 10 yr note September 2021 | | | (16,941 | ) | | | (5,713,344 | ) | | | (4.20 | )% |
| U.S. 10 yr Ultra bond September 2021 | | | (202 | ) | | | (520,781 | ) | | | (0.39 | )% |
| U.S. long bond September 2021 | | | (670 | ) | | | (137,969 | ) | | | (0.10 | )% |
| U.S. Ultra September 2021 | | | (617 | ) | | | (2,031,906 | ) | | | (1.49 | )% |
| U.S. index | | | | | | | (1,690,848 | ) | | | (1.24 | )% |
| Total futures | | | | | | | (11,476,159 | ) | | | (8.44 | )% |
| | | | | | | | | | | | | |
| Forwards | | | | | | | | | | | | |
| Foreign currency | | | | | | | 1,847,187 | | | | 1.36 | % |
| Total forwards | | | | | | | 1,847,187 | | | | 1.36 | % |
| | | | | | | | | | | | | |
| Options (proceeds $17,561,248) | | | | | | | | | | | | |
| Commodity futures | | | | | | | (1,653,338 | ) | | | (1.21 | )% |
| Currency futures | | | | | | | (1,366,933 | ) | | | (1.00 | )% |
| Interest rate futures | | | | | | | (5,102,388 | ) | | | (3.75 | )% |
| U.S. bond futures | | | | | | | | | | | | |
| U.S. 10 yr September 2021, $134.00 Call | | | (1 | ) | | | (142,500 | ) | | | (0.10 | )% |
| U.S. 10 yr September 2021, $128.00 - $130.00 Put | | | (3 | ) | | | (621,781 | ) | | | (0.46 | )% |
| U.S. 5 yr September 2021, $122.75 Put | | | (1 | ) | | | (1,552,969 | ) | | | (1.14 | )% |
| U.S. index futures | | | | | | | (2,155,695 | ) | | | (1.58 | )% |
| Total options | | | | | | | (12,595,604 | ) | | | (9.24 | )% |
| Total derivative financial instruments | | | | | | $ | 9,320,870 | | | | 6.85 | % |
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2021:
| Description | | Principal Amount / Number of Contracts | | | Fair Value | | | Percentage of Net Assets of Master Fund | |
| Graham K4D Trading Ltd. | | | | | | | | | |
| Fixed income securities owned (cost $27,500,000) | | | | | | | | | |
| Government bonds (cost $27,500,000) | | | | | | | | | |
| United States (cost $27,500,000) | | | | | | | | | |
| Treasury Bonds (cost $27,500,000) | | | | | | | | | |
| U.S. Treasury bond 0.00% due 07/08/2021 | | $ | 27,500,000 | | | $ | 27,499,806 | | | | 50.78 | % |
| Total United States | | | | | | | 27,499,806 | | | | 50.78 | % |
| Total government bonds | | | | | | | 27,499,806 | | | | 50.78 | % |
| Total fixed income securities owned | | | | | | $ | 27,499,806 | | | | 50.78 | % |
| | | | | | | | | | | | | |
| Exchange memberships (cost $1,924,208) | | | | | | | | | | | | |
| United States (cost $1,924,208) | | | | | | | | | | | | |
| Financial services (cost $1,924,208) | | | | | | $ | 1,578,347 | | | | 2.91 | % |
| Total exchange memberships | | | | | | $ | 1,578,347 | | | | 2.91 | % |
| | | | | | | | | | | | | |
| Derivative financial instruments | | | | | | | | | | | | |
| Long contracts | | | | | | | | | | | | |
| Futures | | | | | | | | | | | | |
| Commodity | | | | | | | | | | | | |
| Copper September 2021 | | | 1 | | | $ | 213 | | | | 0.00 | % |
| LME Copper September 2021 | | | 220 | | | | (3,047,948 | ) | | | (5.63 | )% |
| Other commodity | | | | | | | 4,250,085 | | | | 7.85 | % |
| Currency | | | | | | | (44,028 | ) | | | (0.08 | )% |
| Foreign bond | | | | | | | 48,538 | | | | 0.09 | % |
| Foreign index | | | | | | | (500,347 | ) | | | (0.92 | )% |
| Interest rate | | | | | | | (426,872 | ) | | | (0.79 | )% |
| U.S. bond | | | | | | | (490,763 | ) | | | (0.91 | )% |
| U.S. index | | | | | | | 2,067,009 | | | | 3.82 | % |
| Total futures | | | | | | | 1,855,887 | | | | 3.43 | % |
| | | | | | | | | | | | | |
| Forwards | | | | | | | | | | | | |
| Foreign currency | | | | | | | (4,941,330 | ) | | | (9.12 | )% |
| Total forwards | | | | | | | (4,941,330 | ) | | | (9.12 | )% |
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of June 30, 2021:
| Description | | Number of Contracts / Notional Amounts | | | Fair Value | | | Percentage of Net Assets of Master Fund | |
| Graham K4D Trading Ltd. (continued) | | | | | | | | | |
| Derivative financial instruments (continued) | | | | | | | | | |
| Short contracts | | | | | | | | | |
| Futures | | | | | | | | | |
| Commodity | | | | | | | | | |
| LME Copper September 2021 | | | (160 | ) | | $ | 1,304,320 | | | | 2.41 | % |
| Other commodity | | | | | | | (1,220,840 | ) | | | (2.26 | )% |
| Currency | | | | | | | (14,900 | ) | | | (0.03 | )% |
| Foreign bond | | | | | | | (756,327 | ) | | | (1.40 | )% |
| Foreign index | | | | | | | (50,924 | ) | | | (0.09 | )% |
| Interest rate | | | | | | | (18,679 | ) | | | (0.04 | )% |
| U.S. bond | | | | | | | (1,527,414 | ) | | | (2.82 | )% |
| Total futures | | | | | | | (2,284,764 | ) | | | (4.23 | )% |
| | | | | | | | | | | | | |
| Forwards | | | | | | | | | | | | |
| Foreign currency | | | | | | | 6,909,410 | | | | 12.76 | % |
| Total forwards | | | | | | | 6,909,410 | | | | 12.76 | % |
| Total derivative financial instruments | | | | | | $ | 1,539,203 | | | | 2.84 | % |
3. Investments in Master Funds (continued)
The following table shows the fair value classification of each investment type by Master Fund as of June 30, 2021:
| | | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| Assets | | | | | | |
Level 1: | | | | | | |
| Commodity futures | | $ | 2,931,566 | | | $ | 5,858,258 | |
| Commodity futures options | | | 3,126,301 | | | | – | |
| Currency futures | | | – | | | | 63,288 | |
| Exchange memberships | | | 8,466,752 | | | | 1,578,347 | |
| Foreign bond futures | | | 261,383 | | | | 96,055 | |
| Foreign index futures | | | 111,196 | | | | 44,887 | |
| Interest rate futures | | | 1,344,353 | | | | 50,293 | |
| Interest rate futures options | | | 6,562,881 | | | | – | |
| U.S. bond futures | | | 447,788 | | | | 23,624 | |
| U.S. bond futures options | | | 2,654,304 | | | | – | |
| U.S. index futures | | | 5,216,303 | | | | 2,151,063 | |
| U.S. index futures options | | | 5,282,980 | | | | – | |
Total Level 1 | | | 36,405,807 | | | | 9,865,815 | |
| | | | | | | | | |
Level 2: | | | | | | | | |
| Foreign currency forwards | | | 5,594,247 | | | | 7,396,514 | |
| Foreign currency futures options | | | 9,414,502 | | | | – | |
| Government bonds* | | | – | | | | 27,499,806 | |
Total Level 2 | | | 15,008,749 | | | | 34,896,320 | |
Total investment related assets | | $ | 51,414,556 | | | $ | 44,762,135 | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
Level 1: | | | | | | | | |
| Commodity futures | | $ | (983,470 | ) | | $ | (4,572,428 | ) |
| Commodity futures options | | | (1,653,338 | ) | | | – | |
| Currency futures | | | – | | | | (122,216 | ) |
| Foreign bond futures | | | (1,600,525 | ) | | | (803,844 | ) |
| Foreign index futures | | | (568,473 | ) | | | (596,158 | ) |
| Interest rate futures | | | (518,650 | ) | | | (495,844 | ) |
| Interest rate futures options | | | (5,102,388 | ) | | | – | |
| U.S. bond futures | | | (8,692,101 | ) | | | (2,041,801 | ) |
| U.S. bond futures options | | | (2,317,250 | ) | | | – | |
| U.S. index futures | | | (1,696,948 | ) | | | (84,054 | ) |
| U.S. index futures options | | | (2,155,695 | ) | | | – | |
Total Level 1 | | | (25,288,838 | ) | | | (8,716,345 | ) |
| | | | | | | | | |
Level 2: | | | | | | | | |
| Foreign currency forwards | | | (6,971,163 | ) | | | (5,428,434 | ) |
| Foreign currency futures options | | | (1,366,933 | ) | | | – | |
Total Level 2 | | | (8,338,096 | ) | | | (5,428,434 | ) |
Total investment related liabilities | | $ | (33,626,934 | ) | | $ | (14,144,779 | ) |
* See each Master Fund’s condensed schedule of investments for breakout of industry and geographic region.
3. Investments in Master Funds (continued)
The following table displays the gross volume of derivative activities categorized by primary underlying risk of Graham Commodity Strategies LLC based on its average quarterly notional amounts and number of contracts for the six months ended June 30, 2021. The table also displays the fair value of derivative contracts held by Graham Commodity Strategies LLC at June 30, 2021 categorized by primary underlying risk. The fair value of derivative contracts is included in derivative financial instruments on the statements of financial condition. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and derivative liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade derivative instruments on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT.
| | | Long exposure | | | Short exposure | | | | | | | |
| | | Notional amounts | | | Number of contracts | | | Notional amounts | | | Number of contracts | | | Derivative Assets | | | Derivative Liabilities | |
| Commodity price | | | | | | | | | | | | | | | | | | |
| Futures | | $ | 136,799,221 | | | | 2,083 | | | $ | (22,549,868 | ) | | | (393 | ) | | $ | 2,931,566 | | | $ | (983,470 | ) |
| Options (a) | | | 59,280,796 | | | | 2,033 | | | | (21,014,976 | ) | | | (2,129 | ) | | | 3,126,301 | | | | (1,653,338 | ) |
| | | | 196,080,017 | | | | 4,116 | | | | (43,564,844 | ) | | | (2,522 | ) | | | 6,057,867 | | | | (2,636,808 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity price | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures | | | 326,282,526 | | | | 2,614 | | | | (79,767,132 | ) | | | (1,232 | ) | | | 5,327,499 | | | | (2,265,421 | ) |
| Options (a) | | | 138,545,364 | | | | 2,913 | | | | (52,604,982 | ) | | | (2,891 | ) | | | 5,282,980 | | | | (2,155,695 | ) |
| | | | 464,827,890 | | | | 5,527 | | | | (132,372,114 | ) | | | (4,123 | ) | | | 10,610,479 | | | | (4,421,116 | ) |
| Foreign currency exchange rate | | | | | | | | | | | | | | | | | | | | | |
| Forwards | | | 1,180,755,654 | | | | N/A | | | | (1,083,319,784 | ) | | | N/A | | | | 5,594,247 | | | | (6,971,163 | ) |
| Options (a) | | | 850,261,308 | | | | 39 | | | | (714,257,351 | ) | | | (47 | ) | | | 9,414,502 | | | | (1,366,933 | ) |
| | | | 2,031,016,962 | | | | 39 | | | | (1,797,577,135 | ) | | | (47 | ) | | | 15,008,749 | | | | (8,338,096 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures | | | 1,644,605,021 | | | | 7,237 | | | | (5,413,492,112 | ) | | | (30,083 | ) | | | 2,053,524 | | | | (10,811,276 | ) |
| Options (a) | | | 1,567,631,108 | | | | 31,415 | | | | (1,797,039,738 | ) | | | (33,022 | ) | | | 9,217,185 | | | | (7,419,638 | ) |
| | | | 3,212,236,129 | | | | 38,652 | | | | (7,210,531,850 | ) | | | (63,105 | ) | | | 11,270,709 | | | | (18,230,914 | ) |
Total | | $ | 5,904,160,998 | | | | 48,334 | | | $ | (9,184,045,943 | ) | | | (69,797 | ) | | $ | 42,947,804 | | | $ | (33,626,934 | ) |
| (a) | Notional amounts for options are based on the delta-adjusted positions. |
3. Investments in Master Funds (continued)
The following table displays the gross volume of derivative activities categorized by primary underlying risk of Graham K4D Trading Ltd. based on its average quarterly notional amounts and number of contracts for the six months ended June 30, 2021. The table also displays the fair value of derivative contracts held by Graham K4D Trading Ltd. at June 30, 2021 categorized by primary underlying risk. The fair value of derivative contracts is included in derivative financial instruments on the statements of financial condition. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and derivative liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade derivative instruments on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT.
| | | Long exposure | | | Short exposure | | | | | | | |
| | | Notional amounts | | | Number of contracts | | | Notional amounts | | | Number of contracts | | | Derivative Assets | | | Derivative Liabilities | |
| Commodity price | | | | | | | | | | | | | | | | | | |
| Futures | | $ | 238,095,367 | | | | 3,478 | | | $ | (99,318,379 | ) | | | (990 | ) | | $ | 5,858,258 | | | $ | (4,572,428 | ) |
| | | | 238,095,367 | | | | 3,478 | | | | (99,318,379 | ) | | | (990 | ) | | | 5,858,258 | | | | (4,572,428 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity price | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures | | | 236,663,038 | | | | 1,444 | | | | (12,652,513 | ) | | | (144 | ) | | | 2,195,950 | | | | (680,212 | ) |
| | | | 236,663,038 | | | | 1,444 | | | | (12,652,513 | ) | | | (144 | ) | | | 2,195,950 | | | | (680,212 | ) |
| Foreign currency exchange rate | | | | | | | | | | | | | | | | | | | | | |
| Forwards | | | 238,114,128 | | | | N/A | | | | (447,972,174 | ) | | | N/A | | | | 7,396,514 | | | | (5,428,434 | ) |
| Futures | | | 3,291,669 | | | | 29 | | | | (13,398,498 | ) | | | (145 | ) | | | 63,288 | | | | (122,216 | ) |
| | | | 241,405,797 | | | | 29 | | | | (461,370,672 | ) | | | (145 | ) | | | 7,459,802 | | | | (5,550,650 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures | | | 1,631,705,573 | | | | 7,131 | | | | (506,139,869 | ) | | | (3,377 | ) | | | 169,972 | | | | (3,341,489 | ) |
| | | | 1,631,705,573 | | | | 7,131 | | | | (506,139,869 | ) | | | (3,377 | ) | | | 169,972 | | | | (3,341,489 | ) |
Total | | $ | 2,347,869,775 | | | | 12,082 | | | $ | (1,079,481,433 | ) | | | (4,656 | ) | | $ | 15,683,982 | | | $ | (14,144,779 | ) |
3. Investments in Master Funds (continued)
When multiple derivative contracts are held with the same counterparty, the Master Funds will net the contracts in an asset position with the contracts in a liability position when covered by a master netting agreement or similar arrangements, for presentation in the statements of financial condition. The table below displays the amounts at June 30, 2021 by which the fair values of both derivative assets and derivative liabilities were reduced within the Master Funds’ statements of financial condition as a result of this netting. Gross amounts below correspond to the total derivative asset and derivative liability balances categorized by primary underlying risk and product type in the preceding tables. Collateral pledged (received) for derivative assets and derivative liabilities represent the cash amounts which are included in due from brokers on the statements of financial condition. Actual collateral pledged or received by the Master Funds may exceed these amounts.
| Description | | Gross Amount | | | Gross Amount Offset in the Statements of Financial Condition | | | Net Amount Presented in the Statements of Financial Condition | | | Collateral (Received) / Pledged | | | Net Amount | |
| | | | | | | | | | | | | | | | |
Graham Commodity Strategies LLC1 | | | | | | | | | | | | | |
| Derivative assets | | $ | 42,947,804 | | | $ | (30,593,078 | ) | | $ | 12,354,726 | | | $ | – | | | $ | 12,354,726 | |
| Derivative liabilities | | | (33,626,934 | ) | | | 30,593,078 | | | | (3,033,856 | ) | | | 3,033,856 | | | | – | |
| | | | | | | | | | | | | | | | | | | | | |
Graham K4D Trading Ltd.2 | | | | | | | | | | | | | | | | | | | | |
| Derivative assets | | $ | 15,683,982 | | | $ | (14,144,779 | ) | | $ | 1,539,203 | | | $ | – | | | $ | 1,539,203 | |
| Derivative liabilities | | | (14,144,779 | ) | | | 14,144,779 | | | | – | | | | – | | | | – | |
1 Net derivative asset and liability amounts presented in the statements of financial condition are held with three counterparties. At June 30, 2021, additional collateral pledged in the amount of $115,322,545 was posted in support of derivative positions and is included in due from brokers on the statements of financial condition.
2 Net derivative asset amounts presented in the statements of financial condition are held with two counterparties. At June 30, 2021, additional collateral pledged in the amount of $23,540,984 was posted in support of derivative positions and is included in due from brokers on the statements of financial condition.
3. Investments in Master Funds (continued)
The following table summarizes the results of operations of each Master Fund for the three months ended June 30, 2021:
| | | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| | | | | | | |
Net investment loss | | $ | (23,520 | ) | | $ | (93 | ) |
| | | | | | | | | |
Net realized gain on investments | | | 11,119,651 | | | | 14,394,114 | |
Net decrease in unrealized appreciation on investments | | | (8,703,090 | ) | | | (1,099,277 | ) |
Brokerage commissions and fees | | | (1,353,248 | ) | | | (76,167 | ) |
Net gain on investments | | | 1,063,313 | | | | 13,218,670 | |
Net income | | $ | 1,039,793 | | | $ | 13,218,577 | |
The following table summarizes the results of operations of each Master Fund for the six months ended June 30, 2021:
| | | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| | | | | | | |
Net investment loss | | $ | (25,735 | ) | | $ | (1,987 | ) |
| | | | | | | | | |
Net realized gain on investments | | | 150,012,835 | | | | 32,160,225 | |
Net increase (decrease) in unrealized appreciation on investments | | | 1,103,534 | | | | (16,682,537 | ) |
Brokerage commissions and fees | | | (2,528,183 | ) | | | (145,603 | ) |
Net gain on investments | | | 148,588,186 | | | | 15,332,085 | |
Net income | | $ | 148,562,451 | | | $ | 15,330,098 | |
3. Investments in Master Funds (continued)
The following table shows the gains and losses on all derivative financial instruments held by the Master Funds reported in net realized gain and net decrease in unrealized appreciation on investments in their statements of operations segregated by primary underlying risk and contract type for the three months ended June 30, 2021:
| | | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| | | Net realized gain (loss) on investments | | | Net increase (decrease) in unrealized appreciation on investments | | | Net realized gain (loss) on investments | | | Net increase (decrease) in unrealized appreciation on investments | |
| Commodity price | | | | | | | | | | | | |
| Futures | | $ | 24,544,523 | | | $ | 4,591,827 | | | $ | 15,201,247 | | | $ | 2,919,023 | |
| Options | | | 2,564,635 | | | | 573,766 | | | | – | | | | – | |
| | | | 27,109,158 | | | | 5,165,593 | | | | 15,201,247 | | | | 2,919,023 | |
| Equity price | | | | | | | | | | | | | | | | |
| Futures | | | 16,579,751 | | | | 3,174,872 | | | | 8,639,313 | | | | 623,449 | |
| Options | | | 344,493 | | | | 539,230 | | | | – | | | | – | |
| | | | 16,924,244 | | | | 3,714,102 | | | | 8,639,313 | | | | 623,449 | |
| Foreign currency exchange rate | | | | | | | | | | | | | | | | |
| Forwards | | | 4,677,541 | | | | 3,404,408 | | | | (1,319,772 | ) | | | (2,632,153 | ) |
| Futures | | | – | | | | – | | | | (249,772 | ) | | | 8,936 | |
| Options | | | (10,066,430 | ) | | | (6,034,713 | ) | | | – | | | | – | |
| | | | (5,388,889 | ) | | | (2,630,305 | ) | | | (1,569,544 | ) | | | (2,623,217 | ) |
| Interest rate | | | | | | | | | | | | | | | | |
| Futures | | | (24,630,424 | ) | | | (13,535,102 | ) | | | (7,888,024 | ) | | | (2,110,930 | ) |
| Options | | | (2,894,438 | ) | | | (1,819,078 | ) | | | – | | | | – | |
| | | | (27,524,862 | ) | | | (15,354,180 | ) | | | (7,888,024 | ) | | | (2,110,930 | ) |
Total | | $ | 11,119,651 | | | $ | (9,104,790 | ) | | $ | 14,382,992 | | | $ | (1,191,675 | ) |
3. Investments in Master Funds (continued)
The following table shows the gains and losses on all derivative financial instruments held by the Master Funds reported in net realized gain and net increase (decrease) in unrealized appreciation on investments in their statements of operations segregated by primary underlying risk and contract type for the six months ended June 30, 2021:
| | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| | Net realized gain (loss) on investments | | | Net increase (decrease) in unrealized appreciation on investments | | | Net realized gain (loss) on investments | | | Net increase (decrease) in unrealized appreciation on investments | |
| Commodity price | | | | | | | | | | | | |
| Futures | | $ | 27,047,849 | | | $ | (1,603,679 | ) | | $ | 33,817,504 | | | $ | (10,585,872 | ) |
| Options | | | 1,262,773 | | | | 1,584,082 | | | | – | | | | – | |
| | | | 28,310,622 | | | | (19,597 | ) | | | 33,817,504 | | | | (10,585,872 | ) |
| Equity price | | | | | | | | | | | | | | | | |
| Futures | | | 44,359,815 | | | | 2,219,966 | | | | 22,769,046 | | | | (5,015,644 | ) |
| Options | | | (1,794,848 | ) | | | 2,232,548 | | | | – | | | | – | |
| | | | 42,564,967 | | | | 4,452,514 | | | | 22,769,046 | | | | (5,015,644 | ) |
| Foreign currency exchange rate | | | | | | | | | | | | | | | | |
| Forwards | | | 12,925,684 | | | | 2,022,536 | | | | (5,233,937 | ) | | | 2,873,842 | |
| Futures | | | – | | | | – | | | | (329,180 | ) | | | (162,772 | ) |
| Options | | | (5,502,775 | ) | | | (8,298,226 | ) | | | – | | | | – | |
| | | | 7,422,909 | | | | (6,275,690 | ) | | | (5,563,117 | ) | | | 2,711,070 | |
| Interest rate | | | | | | | | | | | | | | | | |
| Futures | | | 71,741,178 | | | | (5,848,672 | ) | | | (18,906,279 | ) | | | (3,961,811 | ) |
| Options | | | 6,384,997 | | | | 1,133,668 | | | | – | | | | – | |
| | | | 78,126,175 | | | | (4,715,004 | ) | | | (18,906,279 | ) | | | (3,961,811 | ) |
Total | | $ | 156,424,673 | | | $ | (6,557,777 | ) | | $ | 32,117,154 | | | $ | (16,852,257 | ) |
3. Investments in Master Funds (continued)
The following table summarizes the financial position of each Master Fund as of December 31, 2020:
| | | Graham Commodity Strategies LLC (Delaware) | | | Graham K4D Trading Ltd. (BVI) | |
| Assets: | | | | | | |
| Fixed income securities, at fair value (cost $15,290,650) | | $ | – | | | $ | 15,299,973 | |
| Due from brokers | | | 53,351,844 | | | | 13,045,449 | |
| Derivative financial instruments, at fair value | | | 19,688,505 | | | | 19,267,599 | |
| Exchange memberships, at fair value | | | 7,217,279 | | | | 1,376,513 | |
| Dividends receivable | | | 62,120 | | | | 8,846 | |
| Interest receivable | | | 1,123 | | | | 379 | |
Total assets | | | 80,320,871 | | | | 48,998,759 | |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Derivative financial instruments, at fair value | | | – | | | | 901,032 | |
| Interest payable | | | 26,417 | | | | 2,940 | |
Total liabilities | | | 26,417 | | | | 903,972 | |
Members’ Capital / Net Assets | | $ | 80,294,454 | | | $ | 48,094,787 | |
| | | | | | | | | |
Percentage of Master Fund held by GAIT | | | 2.62 | % | | | 9.03 | % |
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2020:
| Description | | Number of Contracts / Notional Amounts | | | Fair Value | | | Percentage of Members’ Capital | |
| Graham Commodity Strategies LLC | | | | | | | | | |
| Exchange memberships (cost $3,649,411) | | | | | | | | | |
| United States (cost $3,649,411) | | | | | | | | | |
Financial services (cost $3,649,411) | | | | | $ | 7,217,279 | | | | 8.99 | % |
| Total exchange memberships | | | | | $ | 7,217,279 | | | | 8.99 | % |
| | | | | | | | | | | | |
| Derivative financial instruments | | | | | | | | | | | |
| Long contracts | | | | | | | | | | | |
| Futures | | | | | | | | | | | |
| Commodity | | | | | $ | 3,605,184 | | | | 4.49 | % |
| Foreign index | | | | | | 86,848 | | | | 0.11 | % |
| Interest rate | | | | | | (1,593,877 | ) | | | (1.99 | )% |
| U.S. index | | | | | | 945,270 | | | | 1.18 | % |
| Total futures | | | | | | 3,043,425 | | | | 3.79 | % |
| | | | | | | | | | | | |
| Forwards | | | | | | | | | | | |
| Euro dollar / U.S. dollar 01/04/2021 - 01/05/2021 | | EUR
| 996,045,395 | | | | (6,213,377 | ) | | | (7.74 | )% |
| Other foreign currency | | | | | | 8,418,948 | | | | 10.49 | % |
| Total forwards | | | | | | 2,205,571 | | | | 2.75 | % |
| | | | | | | | | | | | |
| Options (cost $34,126,355) | | | | | | | | | | | |
| Commodity futures | | | | | | 2,853,904 | | | | 3.55 | % |
| Currency futures | | | | | | | | | | | |
| Euro dollar / U.S. dollar January 2021 - February 2021, $1.13 - $1.21 Put | | | 2 | | | | 201,977 | | | | 0.25 | % |
| Euro dollar / U.S. dollar January 2021 - June 2021, $1.21 - $1.29 Call | | | 22 | | | | 7,930,615 | | | | 9.88 | % |
| Other currency futures | | | | | | | 15,258,361 | | | | 19.01 | % |
| Foreign bond futures | | | | | | | (474,329 | ) | | | (0.59 | )% |
| Interest rate futures | | | | | | | (353,350 | ) | | | (0.44 | )% |
| U.S. bond futures | | | | | | | | | | | | |
| U.S. 10 yr January 2021 - February 2021, $137.00 Put | | | 2 | | | | 613,781 | | | | 0.76 | % |
| U.S. bond February 2021 - March 2021, $168.00 - $173.00 Put | | | 3 | | | | 4,750,609 | | | | 5.92 | % |
| U.S. index futures | | | | | | | 156,243 | | | | 0.19 | % |
| Total options | | | | | | | 30,937,811 | | | | 38.53 | % |
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2020:
| Description | | Number of Contracts | | | Fair Value | | | Percentage of Members’ Capital | |
| Graham Commodity Strategies LLC (continued) | | | | | | | | | |
| Derivative financial instruments (continued) | | | | | | | | | |
| Short contracts | | | | | | | | | |
| Futures | | | | | | | | | |
| Commodity | | | | | $ | (112,721 | ) | | | (0.14 | )% |
| Foreign bond | | | | | | (231,767 | ) | | | (0.29 | )% |
| Foreign index | | | | | | (190,008 | ) | | | (0.24 | )% |
| Interest rate | | | | | | (774,012 | ) | | | (0.96 | )% |
| U.S. bond | | | | | | | | | | | |
| U.S. long bond (CBT) March 2021 | | | (359 | ) | | | (7,469 | ) | | | (0.01 | )% |
| U.S. Ultra bond (CBT) March 2021 | | | (281 | ) | | | (413,531 | ) | | | (0.52 | )% |
| Total futures | | | | | | | (1,729,508 | ) | | | (2.16 | )% |
| | | | | | | | | | | | | |
| Forwards | | | | | | | | | | | | |
| Foreign currency | | | | | | | (4,255,973 | ) | | | (5.30 | )% |
| Total forwards | | | | | | | (4,255,973 | ) | | | (5.30 | )% |
| | | | | | | | | | | | | |
| Options (proceeds $15,848,231) | | | | | | | | | | | | |
| Commodity futures | | | | | | | (1,158,990 | ) | | | (1.44 | )% |
| Currency futures | | | | | | | | | | | | |
| Euro dollar / U.S. dollar January 2021 - February 2021, $1.13 - $1.21 Put | | | (2 | ) | | | (424,428 | ) | | | (0.53 | )% |
| Euro dollar / U.S. dollar January 2021 - February 2021, $1.23 - $1.27 Call | | | (9 | ) | | | (3,657,297 | ) | | | (4.55 | )% |
| Other currency futures | | | | | | | (1,619,819 | ) | | | (2.02 | )% |
| Interest rate futures | | | | | | | 88,338 | | | | 0.11 | % |
| U.S. bond futures | | | | | | | | | | | | |
| U.S. 10 yr January 2021 - February 2021, $137.00 Put | | | (1 | ) | | | (81,844 | ) | | | (0.10 | )% |
| U.S. bond February 2021 - March 2021, $168.00 - $173.00 Put | | | (2 | ) | | | (3,658,781 | ) | | | (4.56 | )% |
| Total options | | | | | | | (10,512,821 | ) | | | (13.09 | )% |
| Total derivative financial instruments | | | | | | $ | 19,688,505 | | | | 24.52 | % |
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2020:
| Description | | Principal Amount / Number of Contracts | | | Fair Value | | | Percentage of Net Assets | |
| Graham K4D Trading Ltd. | | | | | | | | | |
| Fixed income securities owned (cost $15,290,650) | | | | | | | | | |
| Government bonds (cost $15,290,650) | | | | | | | | | |
| United States (cost $15,290,650) | | | | | | | | | |
| Treasury bills (cost $15,290,650) | | | | | | | | | |
| U.S. Treasury bills 0.00% due 01/07/2021 | | $ | 15,300,000 | | | $ | 15,299,973 | | | | 31.81 | % |
| Total Treasury Bills | | | | | | | 15,299,973 | | | | 31.81 | % |
| Total fixed income securities owned | | | | | | $ | 15,299,973 | | | | 31.81 | % |
| | | | | | | | | | | | | |
| Exchange memberships (cost $1,924,208) | | | | | | | | | | | | |
| United States (cost $1,924,208) | | | | | | | | | | | | |
Financial services (cost $1,924,208) | | | | | | $ | 1,376,513 | | | | 2.86 | % |
| Total exchange memberships | | | | | | $ | 1,376,513 | | | | 2.86 | % |
| | | | | | | | | | | | | |
| Derivative financial instruments | | | | | | | | | | | | |
| Long contracts | | | | | | | | | | | | |
| Futures | | | | | | | | | | | | |
| Commodity | | | | | | | | | | | | |
| Copper March 2021 | | | 2 | | | $ | (188 | ) | | | (0.00 | )% |
| LME Copper March 2021 | | | 148 | | | | 3,338,829 | | | | 6.94 | % |
| Soybean March 2021 | | | 244 | | | | 3,274,653 | | | | 6.81 | % |
| Soybean Meal March 2021 | | | 128 | | | | 486,331 | | | | 1.01 | % |
| Soybean Oil March 2021 | | | 104 | | | | 297,162 | | | | 0.62 | % |
| Other commodity | | | | | | | 5,029,748 | | | | 10.46 | % |
| Currency | | | | | | | 17,648 | | | | 0.04 | % |
| Foreign bond | | | | | | | 712,283 | | | | 1.48 | % |
| Foreign index | | | | | | | 3,707,132 | | | | 7.71 | % |
| Interest rate | | | | | | | 218,418 | | | | 0.45 | % |
| U.S. bond | | | | | | | (176,241 | ) | | | (0.37 | )% |
| U.S. index | | | | | | | 2,684,392 | | | | 5.58 | % |
| Total futures | | | | | | | 19,590,167 | | | | 40.73 | % |
| | | | | | | | | | | | | |
| Forwards | | | | | | | | | | | | |
| Foreign currency | | | | | | | 1,990,729 | | | | 4.14 | % |
| Total forwards | | | | | | | 1,990,729 | | | | 4.14 | % |
3. Investments in Master Funds (continued)
The following schedules display the condensed schedules of investments for the Master Funds as of December 31, 2020:
| Description | | Principal Amount / Number of Contracts | | | Fair Value | | | Percentage of Net Assets | |
| Graham K4D Trading Ltd. (continued) | | | | | | | | | |
| Derivative financial instruments (continued) | | | | | | | | | |
| Short contracts | | | | | | | | | |
| Futures | | | | | | | | | |
| Commodity | | | | | | | | | |
| LME Copper March 2021 | | | (28 | ) | | $ | (26,265 | ) | | | (0.05 | )% |
| Other commodity | | | | | | | (567,408 | ) | | | (1.18 | )% |
| Currency | | | | | | | 72,159 | | | | 0.15 | % |
| Foreign bond | | | | | | | 236,444 | | | | 0.49 | % |
| Foreign index | | | | | | | 180,289 | | | | 0.37 | % |
| Interest rate | | | | | | | (44,120 | ) | | | (0.09 | )% |
| U.S. bond | | | | | | | (173,211 | ) | | | (0.36 | )% |
| Total futures | | | | | | | (322,112 | ) | | | (0.67 | )% |
| | | | | | | | | | | | | |
| Forwards | | | | | | | | | | | | |
| Foreign currency | | | | | | | (2,892,217 | ) | | | (6.01 | )% |
| Total forwards | | | | | | | (2,892,217 | ) | | | (6.01 | )% |
| Total derivative financial instruments | | | | | | $ | 18,366,567 | | | | 38.19 | % |
3. Investments in Master Funds (continued)
The following table shows the fair value classification of each investment type by Master Fund as of December 31, 2020:
| | | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| Assets | | | | | | |
Level 1: | | | | | | |
| Commodity futures | | $ | 4,747,408 | | | $ | 12,876,497 | |
| Commodity futures options | | | 2,853,904 | | | | – | |
| Currency futures | | | – | | | | 98,453 | |
| Exchange memberships | | | 7,217,279 | | | | 1,376,513 | |
| Foreign bond futures | | | – | | | | 1,002,520 | |
| Foreign index futures | | | 784,870 | | | | 4,009,649 | |
| Interest rate futures | | | – | | | | 268,741 | |
| Interest rate futures options | | | 88,338 | | | | – | |
| U.S. bond futures | | | – | | | | 179,111 | |
| U.S. bond futures options | | | 5,364,390 | | | | – | |
| U.S. index futures | | | 1,654,860 | | | | 2,684,392 | |
| U.S. index futures options | | | 156,243 | | | | – | |
Total Level 1 | | | 22,867,292 | | | | 22,495,876 | |
| | | | | | | | | |
Level 2: | | | | | | | | |
| Foreign currency forwards | | | 16,048,079 | | | | 2,161,662 | |
| Foreign currency options | | | 23,390,952 | | | | – | |
| Government bonds* | | | – | | | | 15,299,973 | |
Total Level 2 | | | 39,439,031 | | | | 17,461,635 | |
Total investment related assets | | $ | 62,306,323 | | | $ | 39,957,511 | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
Level 1: | | | | | | | | |
| Commodity futures | | $ | (1,254,945 | ) | | $ | (1,043,635 | ) |
| Commodity futures options | | | (1,158,990 | ) | | | – | |
| Currency futures | | | – | | | | (8,646 | ) |
| Foreign bond futures | | | (231,767 | ) | | | (53,793 | ) |
| Foreign bond futures options | | | (474,329 | ) | | | – | |
| Foreign index futures | | | (888,030 | ) | | | (122,228 | ) |
| Interest rate futures | | | (2,367,889 | ) | | | (94,443 | ) |
| Interest rate futures options | | | (353,350 | ) | | | – | |
| U.S. bond futures | | | (421,000 | ) | | | (528,563 | ) |
| U.S. bond futures options | | | (3,740,625 | ) | | | – | |
| U.S. index futures | | | (709,590 | ) | | | – | |
Total Level 1 | | | (11,600,515 | ) | | | (1,851,308 | ) |
| | | | | | | | | |
Level 2: | | | | | | | | |
| Foreign currency forwards | | | (18,098,481 | ) | | | (3,063,150 | ) |
| Foreign currency options | | | (5,701,543 | ) | | | – | |
Total Level 2 | | | (23,800,024 | ) | | | (3,063,150 | ) |
Total investment related liabilities | | $ | (35,400,539 | ) | | $ | (4,914,458 | ) |
* See each Master Fund’s condensed schedule of investments for breakout of industry and geographic region.
3. Investments in Master Funds (continued)
The following table displays the gross volume of derivative activities categorized by primary underlying risk of Graham Commodity Strategies LLC based on its average quarterly notional amounts and number of contracts for the year ended December 31, 2020. The table also displays the fair value of derivative contracts held by Graham Commodity Strategies LLC at December 31, 2020 categorized by primary underlying risk. The fair value of derivative contracts is included in derivative financial instruments on the statements of financial condition. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and derivative liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade derivative instruments on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT.
| | Long exposure | | | Short exposure | | | | | | | |
| | Notional amounts | | | Number of contracts | | | Notional amounts | | | Number of contracts | | | Derivative Assets | | | Derivative Liabilities | |
| Commodity price | | | | | | | | | | | | | | | | | | |
| Futures | | $ | 291,947,987 | | | | 3,666 | | | $ | (22,208,833 | ) | | | (848 | ) | | $ | 4,747,408 | | | $ | (1,254,945 | ) |
| Options (a) | | | 166,938,932 | | | | 9,926 | | | | (71,048,077 | ) | | | (9,418 | ) | | | 2,853,904 | | | | (1,158,990 | ) |
| | | | 458,886,919 | | | | 13,592 | | | | (93,256,910 | ) | | | (10,266 | ) | | | 7,601,312 | | | | (2,413,935 | ) |
| Equity price | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures | | | 228,334,088 | | | | 2,646 | | | | (183,175,537 | ) | | | (2,528 | ) | | | 2,439,730 | | | | (1,597,620 | ) |
| Options (a) | | | 56,160,681 | | | | 4,956 | | | | (41,895,632 | ) | | | (3,627 | ) | | | 156,243 | | | | – | |
| | | | 284,494,769 | | | | 7,602 | | | | (225,071,169 | ) | | | (6,155 | ) | | | 2,595,973 | | | | (1,597,620 | ) |
| Foreign currency exchange rate | | | | | | | | | | | | | | | | | | | | | |
| Forwards | | | 1,740,877,419 | | | | N/A | | | | (1,442,685,488 | ) | | | N/A | | | | 16,048,079 | | | | (18,098,481 | ) |
| Options (a) | | | 1,057,757,240 | | | | 68 | | | | (821,185,710 | ) | | | (55 | ) | | | 23,390,952 | | | | (5,701,543 | ) |
| | | | 2,798,634,659 | | | | 68 | | | | (2,263,871,198 | ) | | | (55 | ) | | | 39,439,031 | | | | (23,800,024 | ) |
| Interest rate | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures | | | 4,702,409,114 | | | | 16,250 | | | | (1,399,855,375 | ) | | | (5,972 | ) | | | – | | | | (3,020,656 | ) |
| Options (a) | | | 1,626,301,542 | | | | 125,103 | | | | (2,314,949,508 | ) | | | (28,892 | ) | | | 5,452,728 | | | | (4,568,304 | ) |
| | | | 6,328,710,656 | | | | 141,353 | | | | (3,714,804,883 | ) | | | (34,864 | ) | | | 5,452,728 | | | | (7,588,960 | ) |
Total | | $ | 9,870,727,003 | | | | 162,615 | | | $ | (6,297,004,160 | ) | | | (51,340 | ) | | $ | 55,089,044 | | | $ | (35,400,539 | ) |
| | (a) | Notional amounts for options are based on the delta-adjusted positions. |
3. Investments in Master Funds (continued)
The following table displays the gross volume of derivative activities categorized by primary underlying risk of Graham K4D Trading Ltd. based on its average quarterly notional amounts and number of contracts for the year ended December 31, 2020. The table also displays the fair value of derivative contracts held by Graham K4D Trading Ltd. at December 31, 2020 categorized by primary underlying risk. The fair value of derivative contracts is included in derivative financial instruments on the statements of financial condition. Derivatives denominated in foreign currencies have been converted to U.S. dollars. Derivative asset and derivative liability balances are presented on a gross basis, prior to the application of counterparty netting. The Master Funds trade derivative instruments on a leveraged basis. Due to the low margin deposits normally required for trading these derivative financial instruments, the gross notional exposure as displayed in the tables below may exceed the net asset value of the Master Funds by a significant amount. As a result, a relatively small price movement in an underlying derivative financial instrument may result in immediate and substantial effect on the net income and net asset value of the Master Funds and GAIT.
| | | Long exposure | | | Short exposure | | | | | | | |
| | | Notional amounts | | | Number of contracts | | | Notional amounts | | | Number of contracts | | | Derivative Assets | | | Derivative Liabilities | |
| Commodity price | | | | | | | | | | | | | | | | | | |
| Futures | | $ | 82,444,396 | | | | 1,103 | | | $ | (63,476,837 | ) | | | (1,616 | ) | | $ | 12,876,497 | | | $ | (1,043,635 | ) |
| | | | 82,444,396 | | | | 1,103 | | | | (63,476,837 | ) | | | (1,616 | ) | | | 12,876,497 | | | | (1,043,635 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity price | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures | | | 153,648,082 | | | | 1,257 | | | | (17,798,393 | ) | | | (212 | ) | | | 6,694,041 | | | | (122,228 | ) |
| | | | 153,648,082 | | | | 1,257 | | | | (17,798,393 | ) | | | (212 | ) | | | 6,694,041 | | | | (122,228 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign currency exchange rate | | | | | | | | | | | | | | | | | | | | | |
| Forwards | | | 227,502,442 | | | | N/A | | | | (185,401,425 | ) | | | N/A | | | | 2,161,662 | | | | (3,063,150 | ) |
| Futures | | | 2,482,513 | | | | 25 | | | | (4,648,985 | ) | | | (52 | ) | | | 98,453 | | | | (8,646 | ) |
| | | | 229,984,955 | | | | 25 | | | | (190,050,410 | ) | | | (52 | ) | | | 2,260,115 | | | | (3,071,796 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures | | | 975,188,403 | | | | 5,167 | | | | (169,048,132 | ) | | | (830 | ) | | | 1,450,372 | | | | (676,799 | ) |
| | | | 975,188,403 | | | | 5,167 | | | | (169,048,132 | ) | | | (830 | ) | | | 1,450,372 | | | | (676,799 | ) |
Total | | $ | 1,441,265,836 | | | | 7,552 | | | $ | (440,373,772 | ) | | | (2,710 | ) | | $ | 23,281,025 | | | $ | (4,914,458 | ) |
3. Investments in Master Funds (continued)
When multiple derivative contracts are held with the same counterparty, the Master Funds will net the contracts in an asset position with the contracts in a liability position when covered by a master netting agreement or similar arrangements, for presentation in the statements of financial condition. The table below displays the amounts at December 31, 2020 by which the fair values of both derivative assets and derivative liabilities were reduced within the Master Funds’ statements of financial condition as a result of this netting. Gross amounts below correspond to the total derivative asset and derivative liability balances categorized by primary underlying risk and product type in the preceding tables. Collateral pledged (received) for derivative assets and derivative liabilities represent the cash amounts which are included in due from brokers on the statements of financial condition. Actual collateral pledged or received by the Master Funds may exceed these amounts.
| Description | | Gross Amount | | | Gross Amount Offset in the Statements of Financial Condition | | | Net Amount Presented in the Statements of Financial Condition | | | Collateral (Received) / Pledged | | | Net Amount | |
| | | | | | | | | | | | | | | | |
Graham Commodity Strategies LLC1 | | | | | | | | | | | | | |
| Derivative assets | | $ | 55,089,044 | | | $ | (35,400,539 | ) | | $ | 19,688,505 | | | $ | – | | | $ | 19,688,505 | |
| Derivative liabilities | | | (35,400,539 | ) | | | 35,400,539 | | | | – | | | | – | | | | – | |
| | | | | | | | | | | | | | | | | | | | | |
Graham K4D Trading Ltd.2 | | | | | | | | | | | | | | | | | | | | |
| Derivative assets | | $ | 23,281,025 | | | $ | (4,013,426 | ) | | $ | 19,267,599 | | | $ | – | | | $ | 19,267,599 | |
| Derivative liabilities | | | (4,914,458 | ) | | | 4,013,426 | | | | (901,032 | ) | | | 901,032 | | | | – | |
1 Net derivative asset amounts presented in the statement of financial condition are held with three counterparties. At December 31, 2020, additional collateral pledged in the amount of $53,268,604 was posted in support of derivative positions and is included in due from brokers on the statement of financial condition.
2 Net derivative asset and liability amounts presented in the statement of financial condition are held with two counterparties. The Fund has pledged collateral to both of those counterparties as of December 31, 2020. At December 31, 2020, additional collateral pledged in the amount of $12,144,417 was posted in support of derivative positions and is included in due from brokers on the statement of financial condition.
3. Investments in Master Funds (continued)
The following table summarizes the results of operations of each Master Fund for the three months ended June 30, 2020:
| | | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| | | | | | | |
Net investment income | | $ | 85,499 | | | $ | 142,431 | |
| | | | | | | | | |
Net realized gain on investments | | | 6,795,935 | | | | 17,622,419 | |
Net decrease in unrealized appreciation on investments | | | (18,768,602 | ) | | | (9,503,719 | ) |
Brokerage commissions and fees | | | (1,858,701 | ) | | | (54,551 | ) |
Net (loss) gain on investments | | | (13,831,368 | ) | | | 8,064,149 | |
Net (loss) income | | $ | (13,745,869 | ) | | $ | 8,206,580 | |
The following table summarizes the results of operations of each Master Fund for the six months ended June 30, 2020:
| | | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| | | | | | | |
Net investment income | | $ | 413,909 | | | $ | 275,613 | |
| | | | | | | | | |
Net realized gain (loss) on investments | | | 237,425,703 | | | | (35,591,157 | ) |
Net (decrease) increase in unrealized appreciation on investments | | | (1,942,818 | ) | | | 7,141,433 | |
Brokerage commissions and fees | | | (5,871,370 | ) | | | (126,616 | ) |
Net gain (loss) on investments | | | 229,611,515 | | | | (28,576,340 | ) |
Net income (loss) | | $ | 230,025,424 | | | $ | (28,300,727 | ) |
3. Investments in Master Funds (continued)
The following table shows the gains and losses on all derivative financial instruments held by the Master Funds reported in net realized gain and net decrease in unrealized appreciation on investments in their statements of operations segregated by primary underlying risk and contract type for the three months ended June 30, 2020:
| | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| | Net realized gain (loss) on investments | | | Net increase (decrease) in unrealized appreciation on investments | | | Net realized gain (loss) on investments | | | Net increase (decrease) in unrealized appreciation on investments | |
| Commodity price | | | | | | | | | | | | |
| Futures | | $ | 19,435,758 | | | $ | 15,878,062 | | | $ | 5,501,252 | | | $ | (5,799,274 | ) |
| Options | | | (3,934,105 | ) | | | 2,667,719 | | | | – | | | | – | |
| | | | 15,501,653 | | | | 18,545,781 | | | | 5,501,252 | | | | (5,799,274 | ) |
| Equity price | | | | | | | | | | | | | | | | |
| Futures | | | (23,815,601 | ) | | | 5,570,264 | | | | 13,955,994 | | | | (450,058 | ) |
| Options | | | (5,489,525 | ) | | | 735,232 | | | | – | | | | – | |
| | | | (29,305,126 | ) | | | 6,305,496 | | | | 13,955,994 | | | | (450,058 | ) |
| Foreign currency exchange rate | | | | | | | | | | | | | | | | |
| Forwards | | | 5,950,015 | | | | (10,812,288 | ) | | | (6,358,072 | ) | | | (97,914 | ) |
| Futures | | | – | | | | – | | | | (263,013 | ) | | | (78,742 | ) |
| Options | | | (14,547,330 | ) | | | 3,120,835 | | | | – | | | | – | |
| | | | (8,597,315 | ) | | | (7,691,453 | ) | | | (6,621,085 | ) | | | (176,656 | ) |
| Interest rate | | | | | | | | | | | | | | | | |
| Futures | | | 33,545,862 | | | | (30,711,693 | ) | | | 4,786,258 | | | | (2,931,487 | ) |
| Options | | | (4,349,139 | ) | | | (4,851,633 | ) | | | – | | | | – | |
| | | | 29,196,723 | | | | (35,563,326 | ) | | | 4,786,258 | | | | (2,931,487 | ) |
Total | | $ | 6,795,935 | | | $ | (18,403,502 | ) | | $ | 17,622,419 | | | $ | (9,357,475 | ) |
3. Investments in Master Funds (continued)
The following table shows the gains and losses on all derivative financial instruments held by the Master Funds reported in net realized gain (loss) and net (decrease) increase in unrealized appreciation on investments in their statements of operations segregated by primary underlying risk and contract type for the six months ended June 30, 2020:
| | Graham Commodity Strategies LLC | | | Graham K4D Trading Ltd. | |
| | Net realized gain (loss) on investments | | | Net increase (decrease) in unrealized appreciation on investments | | | Net realized gain (loss) on investments | | | Net increase (decrease) in unrealized appreciation on investments | |
| Commodity price | | | | | | | | | | | | |
| Futures | | $ | 52,770,472 | | | $ | 1,369,293 | | | $ | 7,294,099 | | | $ | (328,449 | ) |
| Options | | | 4,611,290 | | | | 575,254 | | | | – | | | | – | |
| | | | 57,381,762 | | | | 1,944,547 | | | | 7,294,099 | | | | (328,449 | ) |
| Equity price | | | | | | | | | | | | | | | | |
| Futures | | | 61,805,732 | | | | 5,542,944 | | | | (63,388,273 | ) | | | 342,940 | |
| Options | | | (17,371,070 | ) | | | (1,276,568 | ) | | | – | | | | – | |
| | | | 44,434,662 | | | | 4,266,376 | | | | (63,388,273 | ) | | | 342,940 | |
| Foreign currency exchange rate | | | | | | | | | | | | | | | | |
| Forwards | | | 53,674,248 | | | | (3,705,864 | ) | | | (12,366,990 | ) | | | 2,202,111 | |
| Futures | | | (2,697 | ) | | | (11,107 | ) | | | (181,247 | ) | | | (37,094 | ) |
| Options | | | (21,994,698 | ) | | | (2,455,951 | ) | | | – | | | | – | |
| | | | 31,676,853 | | | | (6,172,922 | ) | | | (12,548,237 | ) | | | 2,165,017 | |
| Interest rate | | | | | | | | | | | | | | | | |
| Futures | | | 92,218,421 | | | | (1,234,999 | ) | | | 32,623,610 | | | | 5,318,903 | |
| Options | | | 11,971,042 | | | | 464,081 | | | | – | | | | – | |
| Swaps | | | (257,037 | ) | | | – | | | | – | | | | – | |
| | | | 103,932,426 | | | | (770,918 | ) | | | 32,623,610 | | | | 5,318,903 | |
Total | | $ | 237,425,703 | | | $ | (732,917 | ) | | $ | (36,018,801 | ) | | $ | 7,498,411 | |
4. Graham Cash Assets LLC
GAIT invests a portion of its excess liquidity in Cash Assets, an entity for which the Manager is also the sole investment advisor. Cash Assets commenced operations on June 22, 2005 and was formed as a Delaware Limited Liability Company for the purpose of consolidating investment activity of multiple funds managed by the Manager. Its objective is to preserve capital while enhancing return on cash balances and providing daily liquidity. It invests in debt obligations guaranteed by the U.S. Federal government which generally range in maturity from one to thirty-four months. Cash Assets also maintains cash and cash equivalents on deposit with major U.S. institutions. Cash Assets values all fixed income securities at amortized cost which approximates fair value. GAIT’s investment in Cash Assets is valued in the accompanying statements of financial condition at fair value in accordance with U.S. GAAP based upon GAIT’s proportionate share of Cash Assets’ reported net asset value. GAIT’s investment in Cash Assets at June 30, 2021 and December 31, 2020 is $53,133,401 and $54,304,841 which represents a percentage of GAIT’s Members’ Capital of 88.51% and 90.90%, respectively.
GAIT records its proportionate share of Cash Assets’ investment income and expenses on a monthly basis. For the three and six months ended June 30, 2021, the total amount recognized by GAIT with respect to its investment in Cash Assets was $10,276 and $32,634, respectively. For the three and six months ended June 30, 2020, the total amount recognized by GAIT with respect to its investment in Cash Assets was $175,321 and $374,155, respectively. These amounts are included in interest income in the statements of operations and incentive allocation. At June 30, 2021 and December 31, 2020, GAIT owned approximately 0.88% and 0.97%, respectively, of Cash Assets. The following table summarizes the financial position of Cash Assets as of June 30, 2021 and December 31, 2020:
| | | June 30, 2021 | | | December 31, 2020 | |
Assets: | | | | | | |
| Cash and cash equivalents | | $ | 498,221,086 | | | $ | 597,659,902 | |
| Investments in fixed income securities (amortized cost $5,531,589,357 and $4,972,093,470, respectively) | | | 5,531,589,357 | | | | 4,972,093,470 | |
| Interest receivable | | | 20,477,813 | | | | 14,546,327 | |
Total assets | | | 6,050,288,256 | | | | 5,584,299,699 | |
| | | | | | | | | |
Members’ capital | | $ | 6,050,288,256 | | | $ | 5,584,299,699 | |
4. Graham Cash Assets LLC (continued)
The following table summarizes the results of operations of Cash Assets for the three and six months ended June 31, 2021 and 2020:
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2021 | | | 2020 | | | 2021 | | | 2020 | |
| Net gain on investment | | | | | | | | | | | | |
| Net realized gain on investments | | $ | - | | | $ | - | | | $ | - | | | $ | 2,283,203 | |
Net gain on investments | | | - | | | | - | | | | - | | | | 2,283,203 | |
| | | | | | | | | | | | | | | | | |
| Investment income | | | | | | | | | | | | | | | | |
| Interest income | | | 1,127,838 | | | | 17,917,443 | | | | 3,574,995 | | | | 41,184,069 | |
Total investment income | | | 1,127,838 | | | | 17,917,443 | | | | 3,574,995 | | | | 41,184,069 | |
| | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | |
| Bank fee expense | | | 50,692 | | | | 67,449 | | | | 103,106 | | | | 133,750 | |
Total expenses | | | 50,692 | | | | 67,449 | | | | 103,106 | | | | 133,750 | |
Net investment income | | | 1,077,146 | | | | 17,849,994 | | | | 3,471,889 | | | | 41,050,319 | |
Net income | | $ | 1,077,146 | | | $ | 17,849,994 | | | $ | 3,471,889 | | | $ | 43,333,522 | |
The following represents the condensed schedule of investments of Cash Assets as of June 30, 2021:
| Description | | Principal Amount | | | Fair Value | | | Percentage of Members’ Capital |
| Investments in Fixed Income Securities (amortized cost $5,531,589,357) | | | | | | | | | |
| United States | | | | | | | | | |
| Government Bonds (amortized cost $5,531,589,357) | | | | | | | | | |
| U.S. Treasury bonds 1.13% due 7/31/2021 | | $ | 350,000,000 | | | $ | 350,309,070 | | | | 5.79 | % |
| U.S. Treasury bonds 1.50% due 8/31/2021 | | | 350,000,000 | | | | 350,838,457 | | | | 5.80 | % |
| U.S. Treasury bonds 1.50% due 9/30/2021 | | | 350,000,000 | | | | 351,247,400 | | | | 5.81 | % |
| U.S. Treasury bonds 1.50% due 11/30/2021 | | | 400,000,000 | | | | 402,405,630 | | | | 6.65 | % |
| U.S. Treasury bonds 2.00% due 12/31/2021 | | | 400,000,000 | | | | 403,871,280 | | | | 6.68 | % |
| U.S. Treasury bonds 2.88% due 10/15/2021 | | | 300,000,000 | | | | 302,437,183 | | | | 5.00 | % |
| U.S. Treasury bonds 0.13% – 2.88% due 7/15/2021 – 4/30/2023 | | | 3,350,000,000 | | | | 3,370,480,337 | | | | 55.70 | % |
| Total Government Bonds | | | | | | | 5,531,589,357 | | | | 91.43 | % |
| Total United States | | | | | | | 5,531,589,357 | | | | 91.43 | % |
Total Investments in Fixed Income Securities | | | | | | $ | 5,531,589,357 | | | | 91.43 | % |
4. Graham Cash Assets LLC (continued)
The following represents the condensed schedule of investments of Cash Assets as of December 31, 2020:
| Description | | Principal Amount | | | Fair Value | | | Percentage of Members’ Capital |
| Investments in Fixed Income Securities (amortized cost $4,972,093,470) | | | | | | | | | |
| United States | | | | | | | | | |
| Government Bonds (amortized cost $3,372,351,436) | | | | | | | | | |
| U.S. Treasury bonds 1.38% due 5/31/2021 | | $ | 300,000,000 | | | $ | 301,566,528 | | | | 5.40 | % |
| U.S. Treasury bonds 1.63% due 6/30/2021 | | | 300,000,000 | | | | 302,271,599 | | | | 5.41 | % |
| U.S. Treasury bonds 2.63% due 5/15/2021 | | | 300,000,000 | | | | 302,807,030 | | | | 5.42 | % |
| U.S. Treasury bonds 2.63% due 6/15/2021 | | | 300,000,000 | | | | 303,467,081 | | | | 5.43 | % |
| U.S. Treasury bonds 1.13% – 2.63% due 1/15/2021 – 10/31/2021 | | | 2,150,000,000 | | | | 2,162,239,198 | | | | 38.73 | % |
| Total Government Bonds | | | | | | | 3,372,351,436 | | | | 60.39 | % |
| | | | | | | | | | | | | |
| Treasury Bills (amortized cost $1,599,742,034) | | | | | | | | | | | | |
| U.S. Treasury bills 0.00% due 1/07/2021 – 4/22/2021 | | | 1,600,000,000 | | | | 1,599,742,034 | | | | 28.65 | % |
| Total Treasury Bills | | | | | | | 1,599,742,034 | | | | 28.65 | % |
| Total United States | | | | | | | 4,972,093,470 | | | | 89.04 | % |
Total Investments in Fixed Income Securities | | | | | | $ | 4,972,093,470 | | | | 89.04 | % |
Cash Assets reports the fair value of its investment related assets and liabilities in accordance with the hierarchy established under U.S. GAAP. The following table shows the fair value classification of each investment type held by Cash Assets as of June 30, 2021 and December 31, 2020:
| | | June 30, 2021 | | | December 31, 2020 | |
| Assets | | | | | | |
Level 2: | | | | | | |
| Fixed income securities | | | | | | |
| Government bonds | | $ | 5,531,589,357 | | | $ | 3,372,351,436 | |
| Treasury bills | | | - | | | | 1,599,742,034 | |
| Total fixed income securities | | | 5,531,589,357 | | | | 4,972,093,470 | |
Total Level 2 | | | 5,531,589,357 | | | | 4,972,093,470 | |
Total assets | | $ | 5,531,589,357 | | | $ | 4,972,093,470 | |
5. Capital Accounts
GAIT offers Class 0 Units and Class 2 Units (collectively, the “Units”). GAIT may issue additional classes in the future subject to different fees, expenses or other terms, or to invest in other investment programs or combinations of investment programs managed by the Manager. GAIT also has Management Units (“Class M units”) which are solely for the investment of the Manager.
A separate capital account is maintained for each member with respect to each Class of Units held by such member. The initial balance of each Members’ Capital account is equal to the initial contribution to GAIT with respect to the Class to which such capital account relates. Each Members’ Capital Account is increased by any additional subscription and decreased by any redemption by such member of Units of such Class to which the capital account relates. All income and expenses of GAIT are allocated among the capital accounts of the members in proportion to the balance that each capital account bears to the balance of all capital accounts as of the beginning of such fiscal period.
Subscriptions
Units may be purchased at a price equal to the Net Asset Value per Unit of the relevant Class as of the immediately preceding Valuation Day, as defined in the LLC Agreement. There is no minimum subscription amount.
Units are available for subscription as of the first business day of each month upon written notice of at least three business days prior to the last business day of the preceding month.
Redemptions
Units are not subject to any minimum holding period. Members may redeem Units at the Net Asset Value thereof as of the last business day of each month upon not less than three business days’ prior written notice to the administrator.
6. Fees and Related Party Transactions
Advisory Fees
Each Class of GAIT other than Class M paid the Manager an advisory fee (the “Advisory Fee”) at an aggregate annual rate of 1.50% of the Members’ Capital of such Class. The Advisory Fee is payable monthly in arrears calculated as of the last business day of each month and any other date the Manager may permit, in its sole and absolute discretion, as of which any subscription or redemption is affected with respect to Units of such Class during the month. The Advisory Fees paid to the Manager for the six months ended June 30, 2021 and 2020 were $448,220 and $407,100, respectively.
Sponsor Fees
Each Class of GAIT other than Class M paid the Manager a sponsor fee (the “Sponsor Fee”) at an annual rate of the Members’ Capital specified in the table below. The Sponsor Fee is payable monthly in arrears calculated as of the last business day of each month in the same manner as the Advisory Fee. The Sponsor Fees paid to the Manager for the six months ended June 30, 2021 and 2020 were $237,224 and $217,414, respectively.
6. Fees and Related Party Transactions (continued)
Incentive Allocation
At the end of each calendar quarter, Graham Capital LLC, an affiliate of the Manager, will receive a special allocation of net profits (the “Incentive Allocation”) in an amount equal to 20% of the New High Net Trading Profits of each Class as defined in the LLC Agreement. The Incentive Allocation is also accrued and allocable on the date of redemption with respect to any Units that are redeemed prior to the end of a calendar quarter. Additionally, any loss carryforward attributable to any class of GAIT shall be proportionately reduced effective as of the date of any redemption of any Units of such class by multiplying the loss carryforward by the ratio that the amount of assets redeemed from such class bears to the net assets of such class immediately prior to such redemption. The loss carryforward of a class must be recouped before any subsequent Incentive Allocation can be made. The Incentive Allocation for the six months ended June 30, 2021 and 2020 was $855,525 and $150,781, respectively.
Any portion of any of the above fees, including the Incentive Allocation, may be paid by the Manager to third parties as compensation for selling activities in connection with GAIT.
Administrator’s Fee
For the six months ended June 30, 2021 and 2020, GAIT paid SEI a monthly administrator’s fee based on GAIT’s Members’ Capital, calculated as of the last business day of each month. In addition, GAIT reimbursed SEI for reasonable out-of-pocket expenses incurred on behalf of GAIT. The total administrator’s fees, including out-of-pocket expenses, incurred by GAIT were $39,028 and $35,989, respectively.
7. Income Taxes
No provision for income taxes has been made in the accompanying financial statements, as members are individually responsible for reporting income or loss based upon their respective share of GAIT’s income and expenses for income tax purposes.
U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. U.S. GAAP requires the evaluation of tax positions taken or expected to be taken in the course of preparing GAIT’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a “more-likely-than-not” threshold would be recorded as a tax expense in the current year. GAIT identifies its major tax jurisdictions as the U.S. for Federal tax purposes and Connecticut for state tax purposes. The Manager has evaluated GAIT’s tax positions and has concluded that there are no significant tax positions requiring recognition, measurement, or disclosure in the financial statements for all open tax years. The Manager is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will change materially in the next twelve months. Tax years which are considered open by the relevant jurisdiction are subject to potential examination. Any assessment for interest or penalties on taxes related to uncertain tax positions, when present, would be included in interest and penalties on tax on the statements of operations and incentive allocation. No such interest and/or penalties were assessed to GAIT for the six months ended June 30, 2021 and 2020.
8. Risk Factors
Certain impacts to public health conditions particular to the coronavirus (COVID-19) outbreak could have a significant impact on GAIT’s performance. The extent of the impact will depend on future developments, including (i) the duration and spread of the outbreak, (ii) any restrictions and advisories, (iii) the effects on the financial markets, and (iv) the effects on the economy overall, all of which are highly uncertain and cannot be predicted. The Manager is monitoring these developments and continually assessing the potential impact on the performance and operations of GAIT, including the terms of brokerage agreements, ISDAs, and other trading agreements with GAIT. The Manager has enacted the appropriate portions of its business continuity plans and adapted its workflow accordingly.
9. Financial Highlights
The following is the per Unit operating performance calculation for the three months ended June 30, 2021 and 2020:
| | | Class 0 | | | Class 2 | |
| Per unit operating performance | | | | | | |
Net asset value per Unit, March 31, 2020 | | $ | 159.32 | | | $ | 113.79 | |
| Net income (loss): | | | | | | | | |
| Net investment loss | | | (0.54 | ) | | | (0.56 | ) |
| Net gain on investments | | | 0.76 | | | | 0.55 | |
| Net income (loss) | | | 0.22 | | | | (0.01 | ) |
Net asset value per Unit, June 30, 2020 | | $ | 159.54 | | | $ | 113.78 | |
Net asset value per Unit, March 31, 2021 | | $ | 181.44 | | | $ | 130.05 | |
| Net income: | | | | | | | | |
| Net investment loss | | | (1.80 | ) | | | (1.54 | ) |
| Net gain on investments | | | 3.80 | | | | 2.77 | |
| Net income | | | 2.00 | | | | 1.23 | |
Net asset value per Unit, June 30, 2021 | | $ | 183.44 | | | $ | 131.28 | |
The following represents ratios to average Members’ Capital, excluding the Managing Member, and total return for the three months ended June 30, 2021 and 2020:
| | | Class 0 | | Class 2 |
| | | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | | | | | | | |
Total return before Incentive Allocation | | | 1.38 | % | | | 0.18 | % | | | 1.22 | % | | | (0.01 | )% |
Incentive Allocation | | | (0.28 | ) | | | (0.04 | ) | | | (0.27 | ) | | | 0.00 | |
Total return after Incentive Allocation | | | 1.10 | % | | | 0.14 | % | | | 0.95 | % | | | (0.01 | )% |
| | | | | | | | | | | | | | | | | |
Net investment loss before Incentive Allocation | | | (0.70 | )% | | | (0.30 | )% | | | (0.90 | )% | | | (0.49 | )% |
Incentive Allocation | | | (0.28 | ) | | | (0.04 | ) | | | (0.27 | ) | | | 0.00 | |
Net investment loss after Incentive Allocation | | | (0.98 | )% | | | (0.34 | )% | | | (1.17 | )% | | | (0.49 | )% |
| | | | | | | | | | | | | | | | | |
Total expenses before Incentive Allocation | | | 0.72 | % | | | 0.64 | % | | | 0.91 | % | | | 0.83 | % |
Incentive Allocation | | | 0.28 | | | | 0.04 | | | | 0.27 | | | | 0.00 | |
Total expenses after Incentive Allocation | | | 1.00 | % | | | 0.68 | % | | | 1.18 | % | | | 0.83 | % |
9. Financial Highlights (continued)
The following is the per Unit operating performance calculation for the six months ended June 30, 2021 and 2020:
| | | Class 0 | | | Class 2 | |
| Per unit operating performance | | | | | | |
Net asset value per Unit, December 31, 2019 | | $ | 152.04 | | | $ | 108.35 | |
| Net income: | | | | | | | | |
| Net investment loss | | | (1.58 | ) | | | (1.03 | ) |
| Net gain on investments | | | 9.08 | | | | 6.46 | |
| Net income | | | 7.50 | | | | 5.43 | |
Net asset value per Unit, June 30, 2020 | | $ | 159.54 | | | $ | 113.78 | |
Net asset value per Unit, December 31, 2020 | | $ | 173.06 | | | $ | 124.23 | |
| Net income: | | | | | | | | |
| Net investment loss | | | (4.90 | ) | | | (3.96 | ) |
| Net gain on investments | | | 15.28 | | | | 11.01 | |
| Net income | | | 10.38 | | | | 7.05 | |
Net asset value per Unit, June 30, 2021 | | $ | 183.44 | | | $ | 131.28 | |
The following represents ratios to average Members’ Capital, excluding the Managing Member, and total return for the six months ended June 30, 2021 and 2020:
| | | Class 0 | | Class 2 |
| | | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | | | | | | | |
Total return before Incentive Allocation | | | 7.55 | % | | | 5.40 | % | | | 7.23 | % | | | 5.01 | % |
Incentive Allocation | | | (1.55 | ) | | | (0.47 | ) | | | (1.56 | ) | | | 0.00 | |
Total return after Incentive Allocation | | | 6.00 | % | | | 4.93 | % | | | 5.67 | % | | | 5.01 | % |
| | | | | | | | | | | | | | | | | |
Net investment loss before Incentive Allocation | | | (1.27 | )% | | | (0.55 | )% | | | (1.65 | )% | | | (0.93 | )% |
Incentive Allocation | | | (1.46 | ) | | | (0.47 | ) | | | (1.43 | ) | | | 0.00 | |
Net investment loss after Incentive Allocation | | | (2.73 | )% | | | (1.02 | )% | | | (3.08 | )% | | | (0.93 | )% |
| | | | | | | | | | | | | | | | | |
Total expenses before Incentive Allocation | | | 1.32 | % | | | 1.28 | % | | | 1.71 | % | | | 1.66 | % |
Incentive Allocation | | | 1.46 | | | | 0.47 | | | | 1.43 | | | | 0.00 | |
Total expenses after Incentive Allocation | | | 2.78 | % | | | 1.75 | % | | | 3.14 | % | | | 1.66 | % |
Total return is calculated for Class 0 and Class 2 units taken as a whole and is not annualized. Total return is calculated as the change in total Members’ Capital, excluding that of the Managing Member, adjusted for subscriptions or redemptions during the period. An individual member’s return may vary from these returns based on the timing of capital transactions and the applicability of Advisory Fees, Sponsor Fees, Administrator’s Fees, and the Incentive Allocation. The net investment loss and total expense ratios (including Incentive Allocation) are calculated for the Class 0 and Class 2 units taken as a whole and include amounts from GAIT and net investment loss and expenses allocated from Master Funds and investment income from Cash Assets. The computation of such ratios is based on the amount of net investment loss, total expenses and Incentive Allocation. Net investment loss and total expense ratios are computed based upon the weighted average of Members’ Capital of GAIT, excluding that of the Managing Member, for the three and six months ended June 30, 2021 and 2020 and are not annualized.
10. Subsequent Events
GAIT had no subscriptions and redemptions of approximately $0.4 million from July 1, 2021 through August 16, 2021, the date through which subsequent events were evaluated by management. These amounts have not been included in the financial statements.
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward-Looking Statements
Certain statements within this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). These statements are being made pursuant to the PSLRA, with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA, and, other than as required by law, we assume no obligation to update or supplement such statements. Forward-looking statements are those that do not relate solely to historical facts. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words such as “may,” “will,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “continue,” “further,” “seek,” “plan,” or “project” and variations of these words or comparable words or phrases of similar meaning. These forward-looking statements reflect our current beliefs and expectations with respect to future events and are based on assumptions and are subject to risks and uncertainties and other factors outside our control that may cause actual results to differ materially from those projected, including the risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2020 and in this Quarterly Report under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We undertake no obligation to update publicly or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
(a) Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of our current financial position and results of operations. This discussion should be read together with our annual financial statements and the notes thereto for the fiscal year ended December 31, 2020 included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 30, 2021. This discussion should also be read in conjunction with “Item 1: Financial Statements.” The information contained therein is essential to, and should be read in conjunction with, the following analysis. For the purposes of this filing beginning with Item 2, the term “Fund” shall include the Blended Strategies Portfolio of GAIF I, GAIT and the Master Funds in which they invest, unless the context implies otherwise. The Fund does not engage in the sale of goods or services. The Fund’s capital consists of capital contributions of the members, as increased or decreased by gains and losses from its investments in the Master Funds, interest, expenses, and redemptions. Its only assets are its investments in the Master Funds. The Master Funds do not engage in the sale of goods or services. Their assets are comprised of fixed income positions, the equity in their accounts with clearing brokers and OTC counterparties, in each case consisting of cash, open trade equity on derivatives and the net option premium paid or received. In the case of Graham Cash Assets LLC (“Cash Assets”), the assets consist of investments in debt obligations guaranteed by the U.S. Federal government, as well as cash and cash equivalents.
For the three months ended June 30, 2021, the Blended Strategies Portfolio’s Members’ Capital decreased by $1,512,790 or -5.0%. The net decrease in the Blended Strategies Portfolio was attributable to redemptions totaling $1,849,508 or -6.1% partially offset by net income of $336,718 or 1.1%, for the period.
For the six months ended June 30, 2021, the Blended Strategies Portfolio’s Members’ Capital decreased by $701,370 or -2.4%. The net decrease in the Blended Strategies Portfolio was attributable to redemptions totaling $2,418,525 or -8.3% partially offset by net income of $1,717,155 or 5.9%, for the period.
For the three months ended June 30, 2020, the Blended Strategies Portfolio’s Members’ Capital decreased by $171,347 or -0.6%. The net decrease in the Blended Strategies Portfolio was attributable to redemptions totaling $193,211 or -0.7% and offset by net income of $21,864 or 0.01%, for the period.
For the six months ended June 30, 2020, the Blended Strategies Portfolio’s Members’ Capital increased by $592,983 or 2.2%. The net increase in the Blended Strategies Portfolio was attributable to net income of $1,305,095 or 4.8% and offset by redemptions totaling $712,112 or -2.6%, for the period.
(i) Results of Operations
The Fund’s success depends primarily upon the Manager’s ability to recognize and capitalize on market trends in the different and varied sectors of the global financial markets in which it trades.
2021 Summary
Three Months Ended June 30, 2021
For the three months ended June 30, 2021, the Blended Strategies Portfolio experienced net trading gains of $676,264. The trading results are attributable to the following sectors:
Agriculture / Softs | | $ | 467,878 | |
Base Metals | | | 197,499 | |
Energy | | | 651,314 | |
Equities | | | 758,761 | |
Foreign Exchange | | | (319,032 | ) |
Long Term / Intermediate Rates | | | (1,165,956 | ) |
Precious Metals | | | 15,608 | |
Short Term Rates | | | 87,859 | |
Weather | | | (17,667 | ) |
| | | $ | 676,264 | |
The Blended Strategies Portfolio recorded a net gain for the second quarter of 2021. The majority of gains came from commodity futures, most notably from positions in energy with further profits in grains and metals. The portfolio also posted gains in equity index futures, primarily from positions in U.S. benchmark indices. The Fund experienced losses in fixed income futures, mostly from positions on the long end of the yield curve in the U.S. Smaller losses came from currencies from positions in the British pound sterling, New Zealand dollar, and Swiss franc versus the U.S. dollar.
Advisory, Sponsor, and Administrator’s Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund. Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value which are discussed in detail herein.
For the three months ended June 30, 2021, Advisory Fees increased by $10,555 or 10.2%, Sponsor Fees increased by $4,871 or 8.7%, and Administrator’s Fees increased by $578 or 6.4% in the Fund over the corresponding period of the preceding year. These increases are attributable to higher net assets of the portfolio resulting from net income and partially offset by redemptions for the period. During the same period, interest income decreased by $87,402 or -95.0%. Interest was earned on free cash at an average annualized yield of 0.07% for the three months ended June 30, 2021 compared to 1.37% for the same period in 2020.
The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended June 30, 2021 and 2020, the Incentive Allocation increased by $78,444 or 1,367.3%. This increase was the result of a larger net gain before incentive allocation for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.
Six Months Ended June 30, 2021
For the six months ended June 30, 2021, the Blended Strategies Portfolio experienced net trading gains of $2,607,334. The trading results are attributable to the following sectors:
Agriculture / Softs | | $ | 580,375 | |
Base Metals | | | 364,732 | |
Energy | | | 671,131 | |
Equities | | | 1,476,560 | |
Foreign Exchange | | | (144,004 | ) |
Long Term / Intermediate Rates | | | (289,391 | ) |
Precious Metals | | | (166,653 | ) |
Short Term Rates | | | 143,514 | |
Weather | | | (28,930 | ) |
| | | $ | 2,607,334 | |
The Blended Strategies Portfolio recorded a net gain for the first half of 2021. The majority of gains came from equity index futures, particularly from positions in U.S. benchmark indices with smaller gains in Asia. The portfolio also recorded profits in commodity futures from positions in energy, grains, and base metals. In currencies, the portfolio experienced modest losses primarily from positions in the New Zealand dollar and British pound sterling versus the U.S. dollar. The portfolio also experienced losses in fixed income futures as losses in Canadian, Australian, Asian, and European bonds more than offset gains from positions across the curve in the U.S.
Advisory, Sponsor, and Administrator’s Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund. Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value which are discussed in detail herein.
For the six months ended June 30, 2021, Advisory Fees increased by $20,734 or 10.2%, Sponsor Fees increased by $9,883 or 9.0%, and Administrator’s Fees increased by $1,445 or 8.3 % in the Fund over the corresponding period of the preceding year. These increases are attributable to higher net assets of the portfolio resulting from net income partially offset by redemptions for the period. During the same period, interest income decreased by $181,295 or -92.1%. Interest was earned on free cash at an average annualized yield of 0.12% for the six months ended June 30, 2021 compared to 1.56% for the same period in 2020.
The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the six months ended June 30, 2021 and 2020, the Incentive Allocation increased by $356,228 or 484.1%. This increase was the result of a larger net gain before incentive allocation for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.
The following table illustrates the sector distribution of the Fund’s investments in Master Funds as of June 30, 2021 based on the fair value of the underlying assets and liabilities in each Master Fund including both long and short positions. Positive percentages represent net assets whereas negative percentages represent a net liability.
Agriculture / Softs | | | 8.7 | % |
Base Metals | | | (1.6 | )% |
Energy | | | 12.3 | % |
Equities | | | 35.2 | % |
Foreign Exchange | | | 38.4 | % |
Long Term / Intermediate Rates | | | (30.5 | )% |
Precious Metals | | | 0.9 | % |
Short Term Rates | | | 36.6 | % |
| | | | 100.0 | % |
2020 Summary
Three Months Ended June 30, 2020
For the three months ended June 30, 2020, the Blended Strategies Portfolio experienced net trading gains of $158,373. The trading results are attributable to the following sectors:
Agriculture / Softs | | $ | (12,192 | ) |
Base Metals | | | 62,190 | |
Energy | | | (138,919 | ) |
Equities | | | 223,901 | |
Foreign Exchange | | | (563,029 | ) |
Long Term / Intermediate Rates | | | (39,340 | ) |
Precious Metals | | | 599,022 | |
Short Term Rates | | | 23,726 | |
Weather | | | 3,014 | |
| | | $ | 158,373 | |
The Blended Strategies Portfolio recorded a modest trading gain for the second quarter of 2020. The portfolio recorded gains in commodities, particularly from positions in metals. The portfolio also recorded gains in equity index futures, most notably in the U.S. with smaller gains in Asia. Losses resulted in currencies from positions in the British pound sterling, Japanese yen, and Korean won versus the U.S. dollar. The portfolio finished the period virtually flat in fixed income futures as gains in short rates were offset by losses further out on the curve in the U.S.
Advisory, Sponsor, and Administrator’s Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund. Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value which are discussed in detail herein.
For the three months ended June 30, 2020, Advisory Fees decreased by $4,401 or -4.1%, Sponsor Fees decreased by $1,994 or -3.5%, and Administrator’s Fees decreased by $349 or -3.7% in the Fund over the corresponding period of the preceding year. These decreases are attributable to lower net assets of the portfolio resulting from redemptions and partially offset by net income for the period. During the same period, interest income decreased by $55,335 or -37.6%. Interest was earned on free cash at an average annualized yield of 1.37% for the three months ended June 30, 2020 compared to 2.11% for the same period in 2019.
The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the three months ended June 30, 2020 and 2019, the Incentive Allocation was $5,737 and $0, respectively.
Six Months Ended June 30, 2020
For the six months ended June 30, 2020, the Blended Strategies Portfolio experienced net trading gains of $1,644,221. The trading results are attributable to the following sectors:
Agriculture / Softs | | $ | 17,535 | |
Base Metals | | | 259,481 | |
Energy | | | (151,791 | ) |
Equities | | | (1,918,437 | ) |
Foreign Exchange | | | (162,475 | ) |
Long Term / Intermediate Rates | | | 1,174,823 | |
Precious Metals | | | 962,327 | |
Short Term Rates | | | 1,460,026 | |
Weather | | | 2,732 | |
| | | $ | 1,644,221 | |
The Blended Strategies Portfolio recorded a gain for the first half of 2020. The portfolio recorded gains in fixed income futures, primarily from positions across the yield curve in the U.S. with smaller gains in Australian and Canadian bonds. The portfolio recorded further gains in commodities, primarily from positions in precious metals with smaller profits in base metals. In equity index futures, the portfolio experienced losses from positions in European and Asian benchmark indices. Smaller losses resulted in currencies, mostly from positions in the British pound sterling, New Zealand dollar, and Korean won versus the U.S. dollar.
Advisory, Sponsor, and Administrator’s Fees are calculated as a percentage of the Fund’s net asset value as of the end of each month and are affected by trading performance, interest income, subscriptions into and redemptions out of the Fund. Accordingly, the fluctuations in these amounts are directly correlated to the changes in net asset value which are discussed in detail herein.
For the six months ended June 30, 2020, Advisory Fees decreased by $16,464 or -7.5%, Sponsor Fees decreased by $8,040 or -6.8%, and Administrator’s Fees decreased by $2,036 or -10.4% in the Fund over the corresponding period of the preceding year. These decreases are attributable to lower net assets of the portfolio resulting from redemptions and partially offset by net income for the period. During the same period, interest income decreased by $97,846 or -33.2%. Interest was earned on free cash at an average annualized yield of 1.56% for the six months ended June 30, 2020 compared to 2.05% for the same period in 2019.
The Incentive Allocation is based on the New High Net Trading Profits of the portfolio. For the six months ended June 30, 2020 and 2019, the Incentive Allocation was $73,579 and $0, respectively.
The following table illustrates the sector distribution of the Fund’s investments in Master Funds as of June 30, 2020 based on the fair value of the underlying assets and liabilities in each Master Fund including both long and short positions. Positive percentages represent net assets whereas negative percentages represent a net liability.
Agriculture / Softs | | | 3.0 | % |
Base Metals | | | 0.2 | % |
Energy | | | (0.8 | )% |
Equities | | | 13.4 | % |
Foreign Exchange | | | 12.5 | % |
Long Term / Intermediate Rates | | | 4.3 | % |
Precious Metals | | | 25.7 | % |
Short Term Rates | | | 41.7 | % |
| | | | 100.0 | % |
Variables Affecting Performance
The Fund’s performance is affected by net profitability resulting from the trading operations of the Master Funds, the fees charged by the Fund, and interest income earned on cash and cash equivalents. The Master Funds acquire and liquidate fixed income positions, long and short positions in futures contracts, forwards contracts, spot currency contracts and associated derivative instruments such as options and swaps. These instruments are carried at fair value, which is heavily influenced by a wide variety of factors including but not limited to, the level and volatility of exchange rates, interest rates, equity prices, and commodity prices as well as global macro political events. These factors generate market movements affecting the fair value of these instruments and in turn the net gains and losses allocated from the Master Funds.
Advisory, Sponsor, and Administrator’s Fees are calculated based on a percentage of the Fund’s net asset value. Changes in the net assets of the Fund resulting from subscriptions, redemptions, interest and trading profits allocated from the Master Funds can therefore have a material impact on the fee expense of the Fund.
A portion of the assets of the Fund is held in cash and cash equivalents. Changes in the net assets of the Fund as well as changes in the interest rates earned on these investments can have a material impact on interest income earned.
(ii) Liquidity
There are no known demands, commitments, events, or uncertainties that will result in or are reasonably likely to result in the Fund’s liquidity increasing or decreasing in any material way.
A portion of the Fund’s assets is generally held as cash or cash equivalents, which are used to margin the Fund’s investments. It is expected that the average margin the Fund will be required to post to support the Fund’s trading may range between 10% and 30% of the Fund’s total assets, which will be segregated or secured by the futures brokers in accordance with the CEA and with CFTC regulations or be maintained on deposit with over-the-counter counterparties. In exceptional market conditions, this amount could increase. The Master Funds are subject to margin calls on a constant daily and intra-day basis, whether in connection with initiating new investment positions or as a result of changes in the value of current investment positions. These margin requirements are met through the posting of additional margin with the applicable futures or FX clearing broker, on an almost daily basis. The Manager generally expresses its margin requirements for the portfolios in terms of the aggregate of the margin requirements for the underlying strategies plus the net option premium costs for the underlying strategies. The following table shows these amounts as of the date indicated:
| | | Blended Strategies Portfolio |
June 30, 2021 | | | 13.26 | % |
December 31, 2020 | | | 10.72 | % |
June 30, 2020 | | | 11.33 | % |
Other than any potential market-imposed limitations on liquidity, the Fund’s assets are highly liquid and are expected to remain so. Market-imposed limitations, when they occur, can be due to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Fund’s futures trading. Through June 30, 2021, the Fund experienced no meaningful periods of illiquidity in any of the markets traded by the Manager on behalf of the Fund.
(iii) Capital Resources
The Fund raises additional capital through the sale of Units and capital is increased through trading profits (if any) and interest income. The Fund may borrow money from brokers or their affiliates and other lenders. Units may be offered for sale as of the beginning, and may be redeemed as of the end, of each month. The amount of capital raised for the Fund should not have a significant impact on its operations, as the Fund has no significant capital expenditure or working capital requirements other than for monies to pay trading losses, brokerage commissions and expenses.
The Fund participates in the speculative trading of commodity futures contracts, substantially all of which are subject to margin requirements. The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges. Further, the Fund’s brokers may require margin in excess of minimum exchange requirements. The Fund bears the risk of financial failure of the brokers through which it clears trades and maintains margin in respect of any such trades and of its counterparties for its foreign exchange and swap trades with whom it also maintains margin.
(iv) Critical Accounting Policies
Presentation – Graham Alternative Investment Fund I LLC is a series Limited Liability Company under Delaware law. The financial statements and corresponding footnotes are presented solely for the Blended Strategies Portfolio, except where otherwise noted.
Use of Estimates – The Fund’s financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all amounts are stated in U.S. dollars except where noted. The preparation of the financial statements requires the Manager to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Fund’s significant accounting policies are described in detail in Note 2 of the financial statements.
Fair Value Measurement – The Fund follows U.S. GAAP for fair value measurements, which defines fair value, establishes a framework for measuring fair value and requires certain disclosures about fair value measurements. U.S. GAAP uses a three-level hierarchy for fair value measurement based on the transparency and independence of inputs used in the valuation of an asset or liability as of the measurement date. The Fund reports the fair value of its investment-related assets and liabilities in accordance with the hierarchy established under U.S. GAAP.
The Fund records its investments in GAIT at fair value in accordance with U.S. GAAP. In determining its net asset value, GAIT records its investments in Master Funds at fair value in accordance with U.S. GAAP. The Fund records its proportionate share of GAIT’s investment income and loss, expenses, fees, and realized and unrealized gains and losses on a monthly basis. Purchases and sales of units in GAIT are recorded on a trade date basis. The accounting policies of GAIT are described in its attached financial statements.
The Master Funds record all their financial instruments at fair value, which is derived in accordance with U.S. GAAP. Unrealized gains and losses from these instruments are recorded based on changes in their fair value. Realized gains and losses are recorded when the positions are closed. All unrealized and realized gains and losses related to financial instruments are included in net gain (loss) on investments in the Master Funds’ statements of operations.
Investment Company – The Fund is an investment company and applies specialized accounting guidance as outlined in Financial Accounting Standards Board Accounting Standards Codification Topic 946 Update 2013-08, Financial Services – Investment Companies, Amendments to the Scope, Measurement, and Disclosure Requirements. The Manager has evaluated this guidance and has determined the Fund meets the criteria to be classified as an investment company.
Cash Assets – GAIT invests a portion of its excess liquidity in Cash Assets, an entity for which the Manager is also the sole investment advisor. The financial information of Cash Assets is included in the notes to the financial statements of GAIT.
Income Taxes – No provision for income taxes has been made in the Fund’s financial statements, as each member is responsible for reporting income or loss based upon the member’s respective share of the Fund’s revenues and expenses for income tax purposes.
U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. U.S. GAAP requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a “more-likely-than-not” threshold would be recorded as a tax expense in the current year and the Fund identifies its major tax jurisdictions as U.S. Federal and Connecticut State. The Manager has evaluated the Fund’s tax positions and has concluded that there are no significant tax positions requiring recognition, measurement, or disclosure in the financial statements for all open tax years. The Manager is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will change materially in the next twelve months. Tax years which are considered open by the relevant jurisdiction are subject to potential examination.
(v) Off-Balance Sheet Arrangements
The Fund does not engage in off-balance sheet arrangements with other entities.
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
No disclosure is required hereunder as the Fund is a “smaller reporting company”, as defined in Item 10(f)(1) of Regulation S-K.
| Item 4. | Controls and Procedures |
Evaluation of Disclosure Control and Procedures
The Fund has established disclosure controls and procedures to ensure that the information required to be disclosed by the Fund in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Manager and the Fund’s management, as appropriate, to allow timely decisions regarding required disclosure.
Based on their evaluation as of June 30, 2021, the Manager, along with the Manager’s principal executive officer and principal financial officer, has concluded that the Fund’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective.
Changes in Internal Control Over Financial Reporting
There were no changes to the Fund’s internal control over financial reporting during the second quarter of 2021 that have materially affected, or are reasonably likely to materially affect, the Fund’s internal control over financial reporting.
PART II. OTHER INFORMATION
None
There have been no material changes to the risk factors disclosed in our 2020 Form 10-K.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
For the three months ended June 30, 2021, the Fund issued no Units with respect to the Blended Strategies Portfolio.
Issuer Purchases of Units
| | Date | (a) Total Number of Units Purchased1 | (b) Average Price Paid per Unit | (c) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number of Approximate Dollar Value of Units that May Yet Be Purchased Under the Plans or Programs |
| | April 1 – April 30, 2021 | 565.268 | | $ 184.56 | N/A | N/A |
| | May 1 – May 31, 2021 | 7,792.277 | | $ 141.72 | N/A | N/A |
| | June 1 – June 30, 2021 | 3,493.670 | | $ 183.44 | N/A | N/A |
| | TOTAL | 11,851.215 | | $ 156.06 | N/A | N/A |
1 Represents number of Units redeemed by Members of the Fund in accordance with the LLC Agreement.
| Item 3. | Defaults Upon Senior Securities – None |
| Item 4. | Mine Safety Disclosures – None |
| Item 5. | Other Information – None |
| Certificate of Formation of Graham Alternative Investment Fund I LLC |
| Amendment to Certificate of Formation of Graham Alternative Investment Fund I LLC |
| Amended and Restated Limited Liability Company Agreement of Graham Alternative Investment Fund I LLC |
| Rule 13a-14(a)/15d-14(a) Certification (Certification of Principal Executive Officer) |
| Rule 13a-14(a)/15d-14(a) Certification (Certification of Principal Financial Officer) |
| Section 1350 Certification (Certification of Principal Executive Officer and Principal Financial Officer) |
*** 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
*** 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
*** 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
*** 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
*** 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
*** 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
*** 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
| | * | Incorporated by reference to the Fund’s Form 10 previously filed on April 30, 2010 |
| | ** | Incorporated by reference to the Fund’s Form 8-K previously filed on April 11, 2013 |
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.
Dated: August 16, 2021 | GRAHAM ALTERNATIVE INVESTMENT FUND I LLC |
| | BLENDED STRATEGIES PORTFOLIO |
| | | |
| | By: | GRAHAM CAPITAL MANAGEMENT, L.P. |
| | | its Manager |
| |
| Brian Douglas, Principal Executive Officer |
| | |
| |
| George Schrade, Principal Financial Officer |
