UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended: September 30, 2021
Or
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 000-54028
MILLBURN MULTI-MARKETS FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware |
| 26-4038497 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
c/o MILLBURN RIDGEFIELD CORPORATION
55 West 46th Street, 31st Floor
New York, NY 10036
(Address of principal executive offices) (Zip Code)
(212) 332-7300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
None | None | None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☒ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Millburn Multi-Markets Fund L.P.
Financial statements
For the three and nine months ended September 30, 2021 and 2020 (unaudited)
| 1 | |
| 2 | |
| 4 | |
| 5 | |
| 9 |
(a) At September 30, 2021 (unaudited) and December 31, 2020
(b) For the nine months ended September 30, 2021 and 2020 (unaudited)
(c) For the three and nine months ended September 30, 2021 and 2020 (unaudited)
Millburn Multi-Markets Fund L.P.
Statements of Financial Condition
| September 30, |
|
| December 31, |
| |||
ASSETS | ||||||||
Investment in Millburn Multi-Markets Trading L.P. (the “Master Fund”) |
| $ | 126,177,269 |
|
| $ | 139,012,777 |
|
Due from the Master Fund |
|
| 505,754 |
|
|
| 2,272,143 |
|
Cash and cash equivalents |
|
| 10,750 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 126,693,773 |
|
| $ | 141,284,920 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’ CAPITAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
Capital withdrawals payable to Limited Partners |
| $ | 516,504 |
|
| $ | 2,272,143 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 516,504 |
|
|
| 2,272,143 |
|
|
|
|
|
|
|
|
|
|
PARTNERS’ CAPITAL: |
|
|
|
|
|
|
|
|
General Partner |
|
| 2,958,462 |
|
|
| 2,803,226 |
|
|
|
|
|
|
|
|
|
|
Limited partners: |
|
|
|
|
|
|
|
|
Series A (93,082.6417 and 99,597.6414 units outstanding) |
|
| 104,028,389 |
|
|
| 108,544,835 |
|
Series B (5,148.5127 and 5,720.6069 units outstanding) |
|
| 6,961,927 |
|
|
| 7,431,183 |
|
Series C (2,436.2995 and 3,029.4662 units outstanding) |
|
| 3,361,262 |
|
|
| 4,015,189 |
|
Series D (6,849.1247 and 12,963.4335 units outstanding) |
|
| 8,867,229 |
|
|
| 16,218,344 |
|
|
|
|
|
|
|
|
|
|
Total limited partners |
|
| 123,218,807 |
|
|
| 136,209,551 |
|
|
|
|
|
|
|
|
|
|
Total partners’ capital |
|
| 126,177,269 |
|
|
| 139,012,777 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
| $ | 126,693,773 |
|
| $ | 141,284,920 |
|
|
|
|
|
|
|
|
|
|
NET ASSET VALUE PER UNIT OUTSTANDING: |
|
|
|
|
|
|
|
|
Series A |
| $ | 1,117.59 |
|
| $ | 1,089.83 |
|
Series B |
| $ | 1,352.22 |
|
| $ | 1,299.02 |
|
Series C |
| $ | 1,379.66 |
|
| $ | 1,325.38 |
|
Series D |
| $ | 1,294.65 |
|
| $ | 1,251.08 |
|
See notes to financial statements (Unaudited)
1
Millburn Multi-Markets Fund L.P.
Statements of Operations
(UNAUDITED)
|
| For the three months ended |
| |||||
|
| September 30, |
|
| September 30, |
| ||
|
|
|
|
|
|
|
|
|
INVESTMENT INCOME: |
|
|
|
|
|
|
|
|
Interest income |
| $ | 3 |
|
| $ | 1 |
|
Interest income (allocated from the Master Fund) (1) |
|
| 3,441 |
|
|
| 224,644 |
|
|
|
|
|
|
|
|
|
|
Total investment income |
|
| 3,444 |
|
|
| 224,645 |
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
Management fees (allocated from the Master Fund) (1) |
|
| 557,532 |
|
|
| 767,867 |
|
Brokerage commissions (allocated from the Master Fund) (1) |
|
| 206,834 |
|
|
| 184,387 |
|
Selling commissions and platform fees (allocated from the Master Fund) (1) |
|
| 551,956 |
|
|
| 654,093 |
|
Administrative and operating expenses (allocated from the Master Fund) (1) |
|
| 132,226 |
|
|
| 117,935 |
|
Custody fees and other expenses (allocated from the Master Fund) (1) |
|
| 5,520 |
|
|
| 7,258 |
|
Total expenses |
|
| 1,454,068 |
|
|
| 1,731,540 |
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT LOSS |
|
| (1,450,624 | ) |
|
| (1,506,895 | ) |
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAINS (LOSSES) |
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed positions: |
|
|
|
|
|
|
|
|
Futures and forward currency contracts |
|
| (9,899,533 | ) |
|
| 5,183,119 |
|
Foreign exchange transactions |
|
| (208,044 | ) |
|
| 444,691 |
|
Net change in unrealized: |
|
|
|
|
|
|
|
|
Futures and forward currency contracts |
|
| 2,176,108 |
|
|
| 1,701,388 |
|
Foreign exchange translation |
|
| (18,948 | ) |
|
| (6,377 | ) |
Net gains (losses) from U.S. Treasury notes: |
|
|
|
|
|
|
|
|
Realized |
|
| (693 | ) |
|
| 4,818 |
|
Net change in unrealized |
|
| (2,317 | ) |
|
| (182,589 | ) |
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains (losses) allocated from the Master Fund |
|
| (7,953,427 | ) |
|
| 7,145,050 |
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
| (9,404,051 | ) |
|
| 5,638,155 |
|
|
|
|
|
|
|
|
|
|
LESS PROFIT SHARE ALLOCATION FROM THE MASTER FUND |
|
| (56,511 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) AFTER PROFIT SHARE |
| $ | (9,347,540 | ) |
| $ | 5,638,155 |
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER UNIT OUTSTANDING: |
|
|
|
|
|
|
|
|
Series A |
| $ | ) |
| $ |
| ||
Series B |
| $ | ) |
| $ |
| ||
Series C |
| $ | ) |
| $ |
| ||
Series D |
| $ | ) |
| $ |
|
(1) | The Partnership’s proportionate share of income and expenses allocated from the Master Fund as of period end. |
See notes to financial statements (Unaudited) | (Continued) |
2
Millburn Multi-Markets Fund L.P.
Statements of Operations (UNAUDITED)
|
| For the nine months ended |
| |||||
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||
|
|
|
|
|
|
|
|
|
INVESTMENT INCOME: |
|
|
|
|
|
|
|
|
Interest income |
| $ | 5 |
|
| $ | 5,930 |
|
Interest income (allocated from the Master Fund) (1) |
|
| 36,771 |
|
|
| 1,392,430 |
|
|
|
|
|
|
|
|
|
|
Total investment income |
|
| 36,776 |
|
|
| 1,398,360 |
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
Management fees (allocated from the Master Fund) (1) |
|
| 1,842,680 |
|
|
| 2,462,296 |
|
Brokerage commissions (allocated from the Master Fund) (1) |
|
| 642,528 |
|
|
| 605,926 |
|
Selling commissions and platform fees (allocated from the Master Fund) (1) |
|
| 1,711,058 |
|
|
| 2,132,257 |
|
Administrative and operating expenses (allocated from the Master Fund) (1) |
|
| 395,103 |
|
|
| 428,301 |
|
Custody fees and other expenses (allocated from the Master Fund) (1) |
|
| 17,212 |
|
|
| 22,051 |
|
Total expenses |
|
| 4,608,581 |
|
|
| 5,650,831 |
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT LOSS |
|
| (4,571,805 | ) |
|
| (4,252,471 | ) |
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAINS (LOSSES) |
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed positions: |
|
|
|
|
|
|
|
|
Futures and forward currency contracts |
|
| 15,448,092 |
|
|
| (29,969,802 | ) |
Foreign exchange transactions |
|
| (156,683 | ) |
|
| 214,124 |
|
Net change in unrealized: |
|
|
|
|
|
|
|
|
Futures and forward currency contracts |
|
| (5,875,439 | ) |
|
| 3,078,876 |
|
Foreign exchange translation |
|
| (284,401 | ) |
|
| (78,656 | ) |
Net gains (losses) from U.S. Treasury notes: |
|
|
|
|
|
|
|
|
Realized |
|
| (5,511 | ) |
|
| 207,165 |
|
Net change in unrealized |
|
| 2,570 |
|
|
| (75,751 | ) |
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains (losses) allocated from the Master Fund |
|
| 9,128,628 |
|
|
| (26,624,044 | ) |
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
| 4,556,823 |
|
|
| (30,876,515 | ) |
|
|
|
|
|
|
|
|
|
LESS PROFIT SHARE ALLOCATION TO THE MASTER FUND |
|
| 42,925 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) AFTER PROFIT SHARE |
| $ | 4,513,898 |
|
| $ | (30,876,515 | ) |
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER UNIT OUTSTANDING: |
|
|
|
|
|
|
|
|
Series A |
| $ |
|
| $ | ) | ||
Series B |
| $ |
|
| $ | ) | ||
Series C |
| $ |
|
| $ | ) | ||
Series D |
| $ |
|
| $ | ) |
(1) | The Partnership’s proportionate share of income and expenses allocated from the Master Fund as of period end. |
See notes to financial statements (Unaudited) | (Concluded) |
3
Millburn Multi-Markets Fund L.P.
Statements of Changes in Partners’ Capital (UNAUDITED)
For the nine months ended September 30, 2021 and 2020
|
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| General | Limited Partners | |||||||||||||||||||||||||||||||||||||
|
| Partner |
|
| Series A |
|
| Series B |
|
| Series C |
|
| Series D |
|
| Total |
| ||||||||||||||||||||||
|
| Amount |
|
| Amount |
|
| Units |
|
| Amount |
|
| Units |
|
| Amount |
|
| Units |
|
| Amount |
|
| Units |
|
| Amount |
| ||||||||||
PARTNERS’ CAPITAL — January 1, 2021 |
| $ | 2,803,226 |
|
| $ | 108,544,835 |
|
|
| 99,597.6414 |
|
| $ | 7,431,183 |
|
|
| 5,720.6069 |
|
| $ | 4,015,189 |
|
|
| 3,029.4662 |
|
| $ | 16,218,344 |
|
|
| 12,963.4335 |
|
| $ | 139,012,777 |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions |
|
| — |
|
|
| 2,419,000 |
|
|
| 2,088.3473 |
|
|
| — |
|
|
| — |
|
|
| 350,000 |
|
|
| 244.6968 |
|
|
| 559,000 |
|
|
| 406.1506 |
|
|
| 3,328,000 |
|
Capital withdrawals |
|
| — |
|
|
| (9,804,033 | ) |
|
| (8,603.3470 | ) |
|
| (772,055 | ) |
|
| (572.0942 | ) |
|
| (1,184,514 | ) |
|
| (837.8635 | ) |
|
| (8,916,804 | ) |
|
| (6,520.4594 | ) |
|
| (20,677,406 | ) |
Net income before profit share |
|
| 155,236 |
|
|
| 2,868,587 |
|
|
| — |
|
|
| 302,799 |
|
|
| — |
|
|
| 180,587 |
|
|
| — |
|
|
| 1,049,614 |
|
|
| — |
|
|
| 4,556,823 |
|
Profit share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (42,925 | ) |
|
| — |
|
|
| (42,925 | ) |
PARTNERS’ CAPITAL — September 30, 2021 |
| $ | 2,958,462 |
|
| $ | 104,028,389 |
|
|
| 93,082.6417 |
|
| $ | 6,961,927 |
|
|
| 5,148.5127 |
|
| $ | 3,361,262 |
|
|
| 2,436.2995 |
|
| $ | 8,867,229 |
|
|
| 6,849.1247 |
|
| $ | 126,177,269 |
|
|
|
|
|
|
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Net Asset Value per Unit at September 30, 2021 |
|
|
|
|
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|
|
|
| $ | 1,117.59 |
|
|
|
|
|
| $ | 1,352.22 |
|
|
|
|
|
| $ | 1,379.66 |
|
|
|
|
|
| $ | 1,294.65 |
|
|
|
|
General | Limited Partners | |||||||||||||||||||||||||||||||||||||||
Partner | Series A | Series B | Series C | Series D | Total | |||||||||||||||||||||||||||||||||||
Amount | Amount | Units | Amount | Units | Amount | Units | Amount | Units | Amount | |||||||||||||||||||||||||||||||
PARTNERS’ CAPITAL — January 1, 2020 | $ | 3,122,595 | $ | 166,972,241 | 132,149.4067 | $ | 10,343,480 | 7,006.4813 | $ | 4,831,807 | 3,207.8856 | $ | 5,919,234 | 4,132.1394 | $ | 191,189,357 | ||||||||||||||||||||||||
Capital contributions | — | 2,257,400 | 1,790.7268 | 150,000 | 120.8101 | 150,000 | 106.9465 | 11,859,000 | 9,052.9189 | 14,416,400 | ||||||||||||||||||||||||||||||
Capital withdrawals | — | (28,285,064 | ) | (26,775.7466 | ) | (968,765 | ) | (784.6188 | ) | (11,039 | ) | (8.9010 | ) | (156,156 | ) | (131.1191 | ) | (29,421,024 | ) | |||||||||||||||||||||
Net (loss) before profit share | (405,180 | ) | (26,590,600 | ) | — | (1,497,600 | ) | — | (701,977 | ) | — | (1,681,158 | ) | — | (30,876,515 | ) | ||||||||||||||||||||||||
Profit share | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
PARTNERS’ CAPITAL — September 30, 2020 | $ | 2,717,415 | $ | 114,353,977 | 107,164.3869 | $ | 8,027,115 | 6,342.6726 | $ | 4,268,791 | 3,305.9311 | $ | 15,940,920 | 13,053.9392 | $ | 145,308,218 | ||||||||||||||||||||||||
Net Asset Value per Unit at September 30, 2020 | $ | 1,067.09 | $ | 1,265.57 | $ | 1,291.25 | $ | 1,221.16 |
See notes to financial statements (Unaudited)
4
Millburn Multi-Markets Fund L.P.
Statement of Financial Highlights (UNAUDITED)
For the three months ended September 30, 2021
The following information presents per unit operating performance data for each series for the three months ended September 30, 2021.
Per Unit Performance | ||||||||||||||||
(For a Unit Outstanding Throughout the Period) | Series A | Series B | Series C | Series D | ||||||||||||
NET ASSET VALUE PER UNIT — Beginning of period | $ | 1,202.10 | $ | 1,447.22 | $ | 1,476.58 | $ | 1,380.31 | ||||||||
INCOME (LOSS) ALLOCATED FROM THE MASTER FUND: | ||||||||||||||||
Net investment loss (1) | (13.91 | ) | (9.79 | ) | (9.97 | ) | (11.93 | ) | ||||||||
Total trading and investing losses (1) | (70.60 | ) | (85.21 | ) | (86.95 | ) | (78.09 | ) | ||||||||
Net loss before profit share allocation from the Master Fund | (84.51 | ) | (95.00 | ) | (96.92 | ) | (90.02 | ) | ||||||||
Less: profit share allocation from the Master Fund (1) (6) | 0.00 | 0.00 | 0.00 | (4.36 | ) | |||||||||||
Net loss from operations after profit share allocation from the Master Fund | (84.51 | ) | (95.00 | ) | (96.92 | ) | (85.66 | ) | ||||||||
NET ASSET VALUE PER UNIT — End of period | $ | 1,117.59 | $ | 1,352.22 | $ | 1,379.66 | $ | 1,294.65 | ||||||||
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) | (7.03 | )% | (6.56 | )% | (6.56 | )% | (6.81 | )% | ||||||||
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6) | 0.00 | 0.00 | 0.00 | (0.60 | ) | |||||||||||
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) | (7.03 | )% | (6.56 | )% | (6.56 | )% | (6.21 | )% | ||||||||
RATIOS TO AVERAGE NET ASSET VALUE: | ||||||||||||||||
Expenses (3) (4) (5) | 4.81 | % | 2.81 | % | 2.81 | % | 3.57 | % | ||||||||
Profit share allocation from the Master Fund (2) (6) | 0.00 | 0.00 | 0.00 | (0.60 | ) | |||||||||||
Total expenses | 4.81 | % | 2.81 | % | 2.81 | % | 2.97 | % | ||||||||
Net investment loss (3) (4) (5) | (4.80 | )% | (2.80 | )% | (2.80 | )% | (3.56 | )% |
(1) | The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. |
(2) | Not Annualized. |
(3) | Annualized. |
(4) | Includes the Partnership’s proportionate share of income (if applicable) and expenses allocated from the Master Fund. |
(5) | Excludes profit share allocation from the Master Fund. |
(6) | Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity. |
See notes to financial statements (Unaudited) | (Continued) |
5
Millburn Multi-Markets Fund L.P.
Statement of Financial Highlights (UNAUDITED)
For the nine months ended September 30, 2021
The following information presents per unit operating performance data for each series for the nine months ended September 30, 2021.
Per Unit Performance |
|
| Series A |
|
|
| Series B |
|
|
| Series C |
|
|
| Series D |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSET VALUE PER UNIT — Beginning of period |
| $ | 1,089.83 |
|
| $ | 1,299.02 |
|
| $ | 1,325.38 |
|
| $ | 1,251.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) ALLOCATED FROM THE MASTER FUND: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss (1) |
|
| (41.71 | ) |
|
| (29.34 | ) |
|
| (29.93 | ) |
|
| (35.60 | ) |
Total trading and investing gains (1) |
|
| 69.47 |
|
|
| 82.54 |
|
|
| 84.21 |
|
|
| 83.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before profit share allocation from the Master Fund |
|
| 27.76 |
|
|
| 53.20 |
|
|
| 54.28 |
|
|
| 47.88 |
|
Less: profit share allocation from the Master Fund (1) (6) |
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
| 4.31 |
|
Net income from operations after profit share allocation from the Master Fund |
|
| 27.76 |
|
|
| 53.20 |
|
|
| 54.28 |
|
|
| 43.57 |
|
NET ASSET VALUE PER UNIT — End of period |
| $ | 1,117.59 |
|
| $ | 1,352.22 |
|
| $ | 1,379.66 |
|
| $ | 1,294.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) |
|
| 2.55 | % |
|
| 4.10 | % |
|
| 4.10 | % |
|
| 3.81 | % |
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6) |
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) |
|
| 2.55 | % |
|
| 4.10 | % |
|
| 4.10 | % |
|
| 3.48 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIOS TO AVERAGE NET ASSET VALUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses (3) (4) (5) |
|
| 4.87 | % |
|
| 2.87 | % |
|
| 2.87 | % |
|
| 3.63 | % |
Profit share allocation from the Master Fund (2) (6) |
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.33 |
|
Total expenses |
|
| 4.87 | % |
|
| 2.87 | % |
|
| 2.87 | % |
|
| 3.96 | % |
Net investment loss (3) (4) (5) |
|
| (4.83 | )% |
|
| (2.83 | )% |
|
| (2.83 | )% |
|
| (3.59 | )% |
(1) | The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing loss is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. |
(2) | Not Annualized. |
(3) | Annualized. |
(4) | Includes the Partnership’s proportionate share of income (if applicable) and expenses allocated from the Master Fund. |
(5) | Excludes profit share allocation from the Master Fund. |
(6) | Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity. |
See notes to financial statements (Unaudited) | (Concluded) |
6
Millburn Multi-Markets Fund L.P.
Statement of Financial Highlights (UNAUDITED)
For the three months ended September 30, 2020
The following information presents per unit operating performance data for each series for the three months ended September 30, 2020.
Per Unit Performance |
| Series A |
|
| Series B |
|
| Series C |
|
| Series D |
| ||||
NET ASSET VALUE PER UNIT — Beginning of period |
| $ | 1,030.05 |
|
| $ | 1,215.56 |
|
| $ | 1,240.23 |
|
| $ | 1,175.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) ALLOCATED FROM THE MASTER FUND: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss (1) |
|
| (11.07 | ) |
|
| (6.87 | ) |
|
| (7.15 | ) |
|
| (9.36 | ) |
Total trading and investing gains (1) |
|
| 48.11 |
|
|
| 56.88 |
|
|
| 58.17 |
|
|
| 55.42 |
|
Net income before profit share allocation from the Master Fund |
|
| 37.04 |
|
|
| 50.01 |
|
|
| 51.02 |
|
|
| 46.06 |
|
Less: profit share allocation from the Master Fund (1) (6) |
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
Net income from operations after profit share allocation from the Master Fund |
|
| 37.04 |
|
|
| 50.01 |
|
|
| 51.02 |
|
|
| 46.06 |
|
NET ASSET VALUE PER UNIT — End of period |
| $ | 1,067.09 |
|
| $ | 1,265.57 |
|
| $ | 1,291.25 |
|
| $ | 1,221.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) |
|
| 3.60 | % |
|
| 4.11 | % |
|
| 4.11 | % |
|
| 3.92 | % |
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6) |
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) |
|
| 3.60 | % |
|
| 4.11 | % |
|
| 4.11 | % |
|
| 3.92 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIOS TO AVERAGE NET ASSET VALUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses (3) (4) (5) |
|
| 4.80 | % |
|
| 2.80 | % |
|
| 2.80 | % |
|
| 3.55 | % |
Profit share allocation from the Master Fund (2) (6) |
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
Total expenses |
|
| 4.80 | % |
|
| 2.80 | % |
|
| 2.80 | % |
|
| 3.55 | % |
Net investment loss (3) (4) (5) |
|
| (4.22 | )% |
|
| (2.22 | )% |
|
| (2.22 | )% |
|
| (2.98 | )% |
(1) | The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. |
(2) | Not Annualized. |
(3) | Annualized. |
(4) | Includes the Partnership’s proportionate share of income (if applicable) and expenses allocated from the Master Fund. |
(5) | Excludes profit share allocation from the Master Fund. |
(6) | Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity. |
See notes to financial statements (Unaudited) | (Continued) |
7
Millburn Multi-Markets Fund L.P.
Statement of Financial Highlights (UNAUDITED)
For the nine months ended September 30, 2020
The following information presents per unit operating performance data for each series for the nine months ended September 30, 2020.
Per Unit Performance |
| Series A |
|
| Series B |
|
| Series C |
|
| Series D |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSET VALUE PER UNIT — Beginning of period |
| $ | 1,263.51 |
|
| $ | 1,476.27 |
|
| $ | 1,506.23 |
|
| $ | 1,432.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) ALLOCATED FROM THE MASTER FUND: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss (1) |
|
| (30.13 | ) |
|
| (16.49 | ) |
|
| (16.99 | ) |
|
| (23.53 | ) |
Total trading and investing losses (1) |
|
| (166.29 | ) |
|
| (194.21 | ) |
|
| (197.99 | ) |
|
| (187.80 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before profit share allocation from the Master Fund |
|
| (196.42 | ) |
|
| (210.70 | ) |
|
| (214.98 | ) |
|
| (211.33 | ) |
Less: profit share allocation from the Master Fund (1) (6) |
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
Net loss from operations after profit share allocation from the Master Fund |
|
| (196.42 | ) |
|
| (210.70 | ) |
|
| (214.98 | ) |
|
| (211.33 | ) |
NET ASSET VALUE PER UNIT — End of period |
| $ | 1,067.09 |
|
| $ | 1,265.57 |
|
| $ | 1,291.25 |
|
| $ | 1,221.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) |
|
| (15.55 | )% |
|
| (14.27 | )% |
|
| (14.27 | )% |
|
| (14.75 | )% |
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6) |
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) |
|
| (15.55 | )% |
|
| (14.27 | )% |
|
| (14.27 | )% |
|
| (14.75 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIOS TO AVERAGE NET ASSET VALUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses (3) (4) (5) |
|
| 4.85 | % |
|
| 2.85 | % |
|
| 2.85 | % |
|
| 3.59 | % |
Profit share allocation from the Master Fund (2) (6) |
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
|
| 0.00 |
|
Total expenses |
|
| 4.85 | % |
|
| 2.85 | % |
|
| 2.85 | % |
|
| 3.59 | % |
Net investment loss (3) (4) (5) |
|
| (3.72 | )% |
|
| (1.73 | )% |
|
| (1.73 | )% |
|
| (2.60 | )% |
(1) | The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. |
(2) | Not Annualized. |
(3) | Annualized. |
(4) | Includes the Partnership’s proportionate share of income (if applicable) and expenses allocated from the Master Fund. |
(5) | Excludes profit share allocation from the Master Fund. |
(6) | Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity. |
See notes to financial statements (Unaudited) | (Concluded) |
8
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Millburn Multi-Markets Fund L.P.’s (the “Partnership”) financial condition at September 30, 2021 (unaudited) and December 31, 2020 and the results of its operations for the three and nine months ended September 30, 2021 and 2020 (unaudited).
These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Partnership’s 2020 annual report included in Form 10-K filed with the Securities and Exchange Commission. The December 31, 2020 information has been derived from the audited financial statements as of December 31, 2020.
The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”), as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”), requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.
The Partnership enters into contracts with various financial institutions that contain a variety of indemnification provisions. The Partnership’s maximum exposure under these arrangements is unknown. However, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
The Income Taxes (Topic 740) of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2017 to 2020, Millburn Ridgefield Corporation (the “General Partner”) has determined that no reserves for uncertain tax positions were required.
There have been no material changes with respect to the Partnership’s critical accounting policies, off-balance sheet arrangements or disclosure of contractual obligations as reported in the Partnership’s Annual Report on Form 10-K for fiscal year 2020.
2. INVESTMENT IN MILLBURN MULTI-MARKETS TRADING L.P.
The Partnership invests substantially all of its assets in Millburn Multi-Markets Trading L.P. (the “Master Fund”). The Partnership’s ownership percentage of the Master Fund at September 30, 2021 and December 31, 2020 was 29.38% and 25.08%, respectively, of total partners’ capital of the Master Fund. See the attached financial statements of the Master Fund.
3. RELATED PARTY TRANSACTIONS
The Partnership bears its own expenses, including, but not limited to, periodic legal, accounting and filing fees. Administrative and operating expenses related to investors in the Partnership (including their pro-rata share of Master Fund expenses) are not expected to exceed 1/2 of 1% per annum of the Partnership’s average month-end partners’ capital.
Series A Limited Partners that redeem Units at or prior to the end of the first eleven months after such Units are sold shall be assessed redemption charges calculated based on their redeemed Units’ net asset value as of the date of redemption. All redemption charges will be paid to the General Partner. At September 30, 2021 and December 31, 2020, there were no redemption charges owed to the General Partner.
4. FINANCIAL HIGHLIGHTS
Per unit operating performance for Series A, Series B, Series C and Series D Units is calculated based on Limited Partners’ Partnership capital for each series taken as a whole utilizing the beginning and ending net asset value per unit and weighted average number of units during the period. Weighted average number of units of each series is detailed below.
Schedule of weighted number of units Schedule of weighted number of units | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
|
|
| 2021 |
|
|
| 2020 |
|
|
| 2021 |
|
|
| 2020 |
|
Series A |
|
| 92,344.719 |
|
|
| 118,034.723 |
|
|
| 94,871.221 |
|
|
| 127,159.028 |
|
Series B |
|
| 5,148.518 |
|
|
| 6,537.753 |
|
|
| 5,310.402 |
|
|
| 6,850.092 |
|
Series C |
|
| 2,511.196 |
|
|
| 3,305.893 |
|
|
| 2,724.337 |
|
|
| 3,288.386 |
|
Series D |
|
| 7,015.673 |
|
|
| 13,018.240 |
|
|
| 9,968.982 |
|
|
| 10,959.560 |
|
9
5. SUBSEQUENT EVENTS
The General Partner has performed its evaluation of subsequent events through November 12, 2021, the date the Form 10-Q was filed. Based on such evaluation, no events were discovered that required disclosure or adjustment to the financial statement.
10
Millburn Multi-Markets Trading L.P. |
|
|
Financial statements |
|
|
For the three and nine months ended September 30, 2021 and 2020 (unaudited) |
|
|
|
|
|
| 11 | |
| 12 | |
| 16 | |
| 18 | |
| 19 | |
| 21 |
(a) At September 30, 2021 (unaudited) and December 31, 2020
(b) For the nine months ended September 30, 2021 and 2020 (unaudited)
(c) For the three and nine months ended September 30, 2021 and 2020 (unaudited)
Millburn Multi-Markets Trading L.P.
Statements of Financial Condition
|
|
|
|
|
|
|
|
|
|
| September 30, |
|
| December 31, |
| ||
(unaudited) | ||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY IN TRADING ACCOUNTS: |
|
|
|
|
|
|
|
|
Investments in U.S. Treasury notes — at fair value (amortized cost $96,283,669 and $91,546,413) |
| $ | 96,277,823 |
|
| $ | 91,539,195 |
|
Net unrealized appreciation on open futures and forward currency contracts |
|
| 3,955,234 |
|
|
| 20,183,485 |
|
Due from brokers, net |
|
| 23,100,583 |
|
|
| 22,876,161 |
|
Cash denominated in foreign currencies (cost $19,127,491 and $21,945,775) |
|
| 18,796,748 |
|
|
| 22,644,281 |
|
|
|
|
|
|
|
|
|
|
Total equity in trading accounts |
|
| 142,130,388 |
|
|
| 157,243,122 |
|
|
|
|
|
|
|
|
|
|
INVESTMENTS IN U.S. TREASURY NOTES — at fair value (amortized cost $297,207,360 and $408,518,267) |
|
| 297,188,543 |
|
|
| 408,476,105 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS |
|
| 29,738,141 |
|
|
| 42,498,650 |
|
|
|
|
|
|
|
|
|
|
ACCRUED INTEREST RECEIVABLE |
|
| 2,290,409 |
|
|
| 3,523,202 |
|
|
|
|
|
|
|
|
|
|
DUE FROM MILLBURN MULTI-MARKETS LTD. |
|
| — |
|
|
| 100 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
| $ | 471,347,481 |
|
| $ | 611,741,179 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’ CAPITAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
Net unrealized depreciation on open futures and forward currency contracts |
| $ | 7,404,922 |
|
| $ | 125,252 |
|
Capital withdrawals payable to Limited Partners |
|
| 24,349,962 |
|
|
| 53,597,364 |
|
Capital withdrawal payable to General Partner |
|
| — |
|
|
| 622,309 |
|
Management fee payable |
|
| 439,273 |
|
|
| 648,347 |
|
Selling commissions payable |
|
| 179,300 |
|
|
| 196,027 |
|
Accrued expenses |
|
| 282,755 |
|
|
| 286,761 |
|
Due to brokers, net |
|
| 8,781,400 |
|
|
| 1,909,153 |
|
Commissions and other trading fees on open futures contracts |
|
| 26,225 |
|
|
| 108,048 |
|
Accrued profit share |
|
| 393,293 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 41,857,130 |
|
|
| 57,493,261 |
|
|
|
|
|
|
|
|
|
|
PARTNERS’ CAPITAL |
|
| 429,490,351 |
|
|
| 554,247,918 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
| $ | 471,347,481 |
|
| $ | 611,741,179 |
|
See notes to financial statements (Unaudited)
11
Millburn Multi-Markets Trading L.P.
Condensed Schedule of Investments (UNAUDITED)
September 30, 2021
FUTURES AND FORWARD CURRENCY CONTRACTS |
|
| Net Unrealized |
|
|
| Net Unrealized |
|
|
|
|
|
|
|
|
|
|
FUTURES CONTRACTS |
|
|
|
|
|
|
|
|
Long futures contracts: |
|
|
|
|
|
|
|
|
Energies |
|
| 1.16 | % |
| $ | 4,964,172 |
|
Grains |
|
| (0.00 | ) |
|
| (9,210 | ) |
Interest rates |
|
| (0.34 | ) |
|
| (1,448,596 | ) |
Livestock |
|
| 0.01 |
|
|
| 34,390 |
|
Metals |
|
| (0.74 | ) |
|
| (3,161,963 | ) |
Softs |
|
| 0.05 |
|
|
| 201,441 |
|
Stock indices |
|
| (0.47 | ) |
|
| (2,018,610 | ) |
|
|
|
|
|
|
|
|
|
Total long futures contracts |
|
| (0.33 | ) |
|
| (1,438,376 | ) |
|
|
|
|
|
|
|
|
|
Short futures contracts: |
|
|
|
|
|
|
|
|
Energies |
|
| (0.05 | ) |
|
| (210,760 | ) |
Grains |
|
| 0.23 |
|
|
| 992,480 |
|
Interest rates: |
|
|
|
|
|
|
|
|
2 Year U.S. Treasury Note (408 contracts, settlement date December 2021) |
|
| 0.01 |
|
|
| 57,953 |
|
5 Year U.S. Treasury Note (991 contracts, settlement date December 2021) |
|
| 0.05 |
|
|
| 202,226 |
|
10 Year U.S. Treasury Note (421 contracts, settlement date December 2021) |
|
| 0.01 |
|
|
| 39,500 |
|
Other interest rates |
|
| 0.15 |
|
|
| 656,245 |
|
|
|
|
|
|
|
|
|
|
Total interest rates |
|
| 0.22 |
|
|
| 955,924 |
|
|
|
|
|
|
|
|
|
|
Livestock |
|
| 0.00 |
|
|
| 10,430 |
|
Metals |
|
| 0.44 |
|
|
| 1,856,189 |
|
Softs |
|
| (0.01 | ) |
|
| (54,432 | ) |
Stock indices |
|
| (0.01 | ) |
|
| (33,971 | ) |
|
|
|
|
|
|
|
|
|
Total short futures contracts |
|
| 0.82 |
|
|
| 3,515,860 |
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net |
|
| 0.49 |
|
|
| 2,077,484 |
|
|
|
|
|
|
|
|
|
|
FORWARD CURRENCY CONTRACTS |
|
|
|
|
|
|
|
|
Total long forward currency contracts |
|
| (4.46 | ) |
|
| (19,139,123 | ) |
Total short forward currency contracts |
|
| 3.17 |
|
|
| 13,611,951 |
|
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net |
|
| (1.29 | ) |
|
| (5,527,172 | ) |
|
|
|
|
|
|
|
|
|
TOTAL |
|
| (0.80 | )% |
| $ | (3,449,688 | ) |
(Continued)
12
Millburn Multi-Markets Trading L.P.
Condensed Schedule of Investments (UNAUDITED)
September 30, 2021
U.S. TREASURY NOTES
Face Amount |
| Description |
|
|
| Fair Value as a % of Partners’ Capital |
|
|
| Fair Value |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ | 134,580,000 |
| U.S. Treasury notes, 2.000%, 11/15/2021 |
|
|
| 31.41 | % |
| $ | 134,900,679 |
|
| 122,400,000 |
| U.S. Treasury notes, 2.500%, 02/15/2022 |
|
|
| 28.76 |
|
|
| 123,518,813 |
|
| 133,640,000 |
| U.S. Treasury notes, 1.750%, 05/15/2022 |
|
|
| 31.44 |
|
|
| 135,046,874 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Total investments in U.S. Treasury notes (amortized cost $393,491,029) |
|
|
| 91.61 | % |
| $ | 393,466,366 |
|
See notes to financial statements (Unaudited) | (Concluded) |
13
Millburn Multi-Markets Trading L.P.
Condensed Schedule of Investments
December 31, 2020
|
|
|
|
|
|
|
|
|
FUTURES AND FORWARD CURRENCY CONTRACTS |
|
| Net Unrealized |
|
|
| Net Unrealized |
|
|
|
|
|
|
|
|
|
|
FUTURES CONTRACTS |
|
|
|
|
|
|
|
|
Long futures contracts: |
|
|
|
|
|
|
|
|
Energies |
|
| 0.15 | % |
| $ | 819,755 |
|
Grains |
|
| 0.60 |
|
|
| 3,317,996 |
|
Interest rates: |
|
|
|
|
|
|
|
|
2 Year U.S. Treasury Note (400 contracts, settlement date March 2021) |
|
| 0.00 |
|
|
| 12,742 |
|
5 Year U.S. Treasury Note (2,390 contracts, settlement date March 2021) |
|
| 0.04 |
|
|
| 227,326 |
|
10 Year U.S. Treasury Note (1,971 contracts, settlement date March 2021) |
|
| 0.04 |
|
|
| 201,234 |
|
30 Year U.S. Treasury Bond (556 contracts, settlement date March 2021) |
|
| 0.02 |
|
|
| 85,906 |
|
Other interest rates |
|
| 0.28 |
|
|
| 1,560,583 |
|
|
|
|
|
|
|
|
|
|
Total interest rates |
|
| 0.38 |
|
|
| 2,087,791 |
|
|
|
|
|
|
|
|
|
|
Metals |
|
| 1.13 |
|
|
| 6,253,013 |
|
Softs |
|
| 0.06 |
|
|
| 345,995 |
|
Stock indices |
|
| 0.82 |
|
|
| 4,567,677 |
|
|
|
|
|
|
|
|
|
|
Total long futures contracts |
|
| 3.14 |
|
|
| 17,392,227 |
|
|
|
|
|
|
|
| �� |
|
Short futures contracts: |
|
|
|
|
|
|
|
|
Energies |
|
| 0.11 |
|
|
| 591,490 |
|
Grains |
|
| (0.06 | ) |
|
| (347,625 | ) |
Interest rates |
|
| 0.00 |
|
|
| (25,918 | ) |
Livestock |
|
| 0.00 |
|
|
| (12,760 | ) |
Metals |
|
| (0.22 | ) |
|
| (1,137,354 | ) |
Softs |
|
| (0.02 | ) |
|
| (115,670 | ) |
Stock indices |
|
| 0.14 |
|
|
| 773,085 |
|
|
|
|
|
|
|
|
|
|
Total short futures contracts |
|
| (0.05 | ) |
|
| (274,752 | ) |
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net |
|
| 3.09 |
|
|
| 17,117,475 |
|
|
|
|
|
|
|
|
|
|
FORWARD CURRENCY CONTRACTS |
|
|
|
|
|
|
|
|
Total long forward currency contracts |
|
| 2.02 |
|
|
| 11,186,702 |
|
Total short forward currency contracts |
|
| (1.49 | ) |
|
| (8,245,944 | ) |
|
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net |
|
| 0.53 |
|
|
| 2,940,758 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
| 3.62 | % |
| $ | 20,058,233 |
|
(Continued)
14
Millburn Multi-Markets Trading L.P.
Condensed Schedule of Investments
December 31, 2020
U.S. TREASURY NOTES
Face Amount |
| Description |
|
| Fair Value as a % of Partners’ Capital |
|
| Fair Value |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
$ | 189,080,000 |
| U.S. Treasury notes, 2.250%, 02/15/2021 |
|
| 34.21 | % |
| $ | 189,560,086 |
|
| 152,900,000 |
| U.S. Treasury notes, 2.625%, 05/15/2021 |
|
| 27.84 |
|
|
| 154,306,561 |
|
| 153,640,000 |
| U.S. Treasury notes, 2.750%, 08/15/2021 |
|
| 28.17 |
|
|
| 156,148,653 |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Total investments in U.S. Treasury notes (amortized cost $500,064,680) |
|
| 90.22 | % |
| $ | 500,015,300 |
|
See notes to financial statements (Unaudited) | (Concluded) |
15
Millburn Multi-Markets Trading L.P.
Statements of Operations (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended |
| ||||
|
|
| September 30, 2021 |
|
|
| September 30, 2020 |
|
INVESTMENT INCOME — Interest income |
| $ | 12,335 |
|
| $ | 953,944 |
|
EXPENSES: |
|
|
|
|
|
|
|
|
Brokerage commissions |
|
| 745,481 |
|
|
| 786,171 |
|
Management fees |
|
| 1,361,413 |
|
|
| 2,199,572 |
|
Selling commissions and platform fees |
|
| 552,346 |
|
|
| 660,975 |
|
Administrative and operating expenses |
|
| 282,067 |
|
|
| 293,017 |
|
Custody fees and other expenses |
|
| 19,972 |
|
|
| 31,152 |
|
Total expenses |
|
| 2,961,279 |
|
|
| 3,970,887 |
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT LOSS |
|
| (2,948,944 | ) |
|
| (3,016,943 | ) |
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAINS (LOSSES): |
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed positions: |
|
|
|
|
|
|
|
|
Futures and forward currency contracts |
|
| (37,111,149 | ) |
|
| 26,629,664 |
|
Foreign exchange transactions |
|
| (738,406 | ) |
|
| 1,834,663 |
|
Net change in unrealized: |
|
|
|
|
|
|
|
|
Futures and forward currency contracts |
|
| 8,267,530 |
|
|
| 5,221,855 |
|
Foreign exchange translation |
|
| (78,761 | ) |
|
| 23,731 |
|
Net gains (losses) from U.S. Treasury notes: |
|
|
|
|
|
|
|
|
Realized |
|
| (2,502 | ) |
|
| 20,841 |
|
Net change in unrealized |
|
| (8,359 | ) |
|
| (776,203 | ) |
Total net realized and unrealized gains (losses) |
|
| (29,671,647 | ) |
|
| 32,954,551 |
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
| (32,620,591 | ) |
|
| 29,937,608 |
|
LESS PROFIT SHARE TO GENERAL PARTNER |
|
| (914,181 | ) |
|
| 72,899 |
|
NET INCOME (LOSS) AFTER PROFIT SHARE TO GENERAL PARTNER |
| $ | (31,706,410 | ) |
| $ | 29,864,709 |
|
See notes to financial statements (Unaudited) | (Continued) |
16
Millburn Multi-Markets Trading L.P.
Statements of Operations (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
| |||||
|
| September 30, |
|
| September 30, |
| ||
INVESTMENT INCOME — Interest income |
| $ | 129,346 |
|
| $ | 5,780,865 |
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
Brokerage commissions |
|
| 2,308,560 |
|
|
| 2,512,532 |
|
Management fees |
|
| 4,443,144 |
|
|
| 6,977,202 |
|
Selling commissions and platform fees |
|
| 1,721,577 |
|
|
| 2,149,586 |
|
Administrative and operating expenses |
|
| 851,185 |
|
|
| 937,709 |
|
Custody fees and other expenses |
|
| 63,634 |
|
|
| 94,547 |
|
Total expenses |
|
| 9,388,100 |
|
|
| 12,671,576 |
|
|
|
|
|
|
|
|
|
|
NET INVESTMENT LOSS |
|
| (9,258,754 | ) |
|
| (6,890,711 | ) |
|
|
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAINS (LOSSES): |
|
|
|
|
|
|
|
|
Net realized gains (losses) on closed positions: |
|
|
|
|
|
|
|
|
Futures and forward currency contracts |
|
| 58,210,855 |
|
|
| (122,763,161 | ) |
Foreign exchange transactions |
|
| (561,788 | ) |
|
| 926,261 |
|
Net change in unrealized: |
|
|
|
|
|
|
|
|
Futures and forward currency contracts |
|
| (23,507,921 | ) |
|
| 9,086,227 |
|
Foreign exchange translation |
|
| (1,029,249 | ) |
|
| (315,956 | ) |
Net gains (losses) from U.S. Treasury notes: |
|
|
|
|
|
|
|
|
Realized |
|
| (20,386 | ) |
|
| 875,124 |
|
Net change in unrealized |
|
| 24,717 |
|
|
| (255,616 | ) |
Total net realized and unrealized gains (losses) |
|
| 33,116,228 |
|
|
| (112,447,121 | ) |
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
| 23,857,474 |
|
|
| (119,337,832 | ) |
LESS PROFIT SHARE TO GENERAL PARTNER |
|
| 602,156 |
|
|
| 105,482 |
|
NET INCOME (LOSS) AFTER PROFIT SHARE TO GENERAL PARTNER |
| $ | 23,255,318 |
|
| $ | (119,443,314 | ) |
See notes to financial statements (Unaudited) | (Concluded) |
17
Millburn Multi-Markets Trading L.P.
Statements of Changes in Partners’ Capital (UNAUDITED)
For the nine months ended September 30, 2021
Limited Partners | New Profit Memo Account | General Partner | Total | |||||||||||||
PARTNERS’ CAPITAL - January 1, 2021 | $ | 553,303,603 | $ | — | $ | 944,315 | $ | 554,247,918 | ||||||||
Contributions | 25,953,000 | 208,863 | — | 26,161,863 | ||||||||||||
Withdrawals | (174,174,748 | ) | — | — | (174,174,748 | ) | ||||||||||
Net income (loss) before profit share | 23,815,842 | (12,587 | ) | 54,219 | 23,857,474 | |||||||||||
General Partner’s allocation - profit share | (602,156 | ) | — | — | (602,156 | ) | ||||||||||
PARTNERS’ CAPITAL - September 30, 2021 | $ | 428,295,541 | $ | 196,276 | $ | 998,534 | $ | 429,490,351 |
For the nine months ended September 30, 2020
Limited Partners | New Profit Memo Account | General Partner | Total | |||||||||||||
PARTNERS’ CAPITAL - January 1, 2020 | $ | 629,952,934 | $ | — | $ | 1,049,391 | $ | 631,002,325 | ||||||||
Contributions | 268,999,600 | — | — | 268,999,600 | ||||||||||||
Withdrawals | (139,372,170 | ) | — | — | (139,372,170 | ) | ||||||||||
Net (loss) before profit share | (119,203,276 | ) | — | (134,556 | ) | (119,337,832 | ) | |||||||||
General Partner’s allocation - profit share | (105,482 | ) | — | — | (105,482 | ) | ||||||||||
PARTNERS’ CAPITAL - September 30, 2020 | $ | 640,271,606 | $ | — | $ | 914,835 | $ | 641,186,441 |
See notes to financial statements (Unaudited)
18
Millburn Multi-Markets Trading L.P.
Statements of Financial Highlights (UNAUDITED)
The following information presents financial highlights of a Limited Partner that is charged a monthly management fee of 1/12 of 1.75% (1.75% per annum) and an annual profit share of 20% of Trading Profits (as defined in the Limited Partnership Agreement).
For the three months ended | For the nine months ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Total return before General Partner profit share allocation (3) | (6.50 | )% | 4.17 | % | 4.30 | % | (14.12 | )% | ||||||||
Less: General Partner profit share allocation (3) (5) | — | 0.00 | — | 0.00 | ||||||||||||
Total return after General Partner profit share allocation (3) | (6.50 | )% | 4.17 | % | 4.30 | % | (14.12 | )% | ||||||||
Ratios to average net asset value: | ||||||||||||||||
Expenses (1) (4) | 2.52 | % | 2.64 | % | 2.61 | % | 2.61 | % | ||||||||
General Partner profit share allocation (3) (5) | — | 0.00 | — | 0.00 | ||||||||||||
Total expenses (1) | 2.52 | % | 2.64 | % | 2.61 | % | 2.61 | % | ||||||||
Net investment loss (1) (2) (4) | (2.52 | )% | (2.08 | )% | (2.58 | )% | (1.50 | )% |
Total returns and the ratios to average net asset value are calculated for a Limited Partner.
(1) | Includes the Limited Partner’s proportionate share of expenses allocated from the Master Fund’s operations for the three and nine months ended September 30, 2021 and 2020. |
(2) | Excludes General Partner profit share allocation and includes interest income. |
(3) | Not Annualized. |
(4) | Annualized. |
(5) | In instances of 0.00, value is less than 0.01 when rounded to two decimal places. |
See notes to financial statements (Unaudited)
19
Millburn Multi-Markets Trading L.P.
Statements of Financial Highlights (UNAUDITED)
The following information presents financial highlights for Limited Partners as a whole.
For the three months ended | For the nine months ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Total return before General Partner profit share allocation (3) | (6.71 | )% | 4.65 | % | 4.11 | % | (13.75 | )% | ||||||||
Less: General Partner profit share allocation (3) | (0.19 | ) | 0.01 | 0.12 | 0.02 | |||||||||||
Total return after General Partner profit share allocation (3) | (6.52 | )% | 4.64 | % | 3.99 | % | (13.77 | )% | ||||||||
Ratios to average net asset value: | ||||||||||||||||
Expenses (1) (4) | 2.48 | % | 2.40 | % | 2.56 | % | 2.45 | % | ||||||||
General Partner profit share allocation (3) | (0.19 | ) | 0.01 | 0.12 | 0.02 | |||||||||||
Total expenses (1) | 2.29 | % | 2.41 | % | 2.68 | % | 2.47 | % | ||||||||
Net investment loss (1) (2) (4) | (2.48 | )% | (1.84 | )% | (2.53 | )% | (1.33 | )% |
Total returns and the ratios to average net asset value are calculated for a Limited Partner. An individual Limited Partner’s total returns and ratios may vary from the above total returns and ratios based on different management fee and General Partner profit share allocation agreements and the timing of contributions and withdrawals.
(1) | Includes the Limited Partners’ proportionate share of expenses allocated from the Master Fund’s operations for the three and nine months ended September 30, 2021 and 2020. |
(2) | Excludes General Partner profit share allocation and includes interest income. |
(3) | Not Annualized. |
(4) | Annualized. |
See notes to financial statements (Unaudited)
20
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Master Fund engages in the speculative trading of futures and forward currency contracts, as well as hedging using forward currency contracts and also acts as a master fund for the Partnership and Millburn Multi-Markets Ltd., a Cayman Islands exempted company (the “Cayman Feeder”).
The accompanying financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Master Fund’s financial condition at September 30, 2021 (unaudited) and December 31, 2020 (audited) and the results of its operations for the three and nine months ended September 30, 2021 and 2020 (unaudited).
These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Master Fund’s annual report for the year ended December 31, 2020 included in the Partnership’s annual report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2020 information has been derived from the audited financial statements as of December 31, 2020.
The preparation of financial statements in conformity with U.S. GAAP in the U.S, as detailed in the FASB Codification, requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.
The Master Fund enters into contracts with various financial institutions that contain a variety of indemnification provisions. The Master Fund’s maximum exposure under these arrangements is unknown. However, the Master Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
The Income Taxes (Topic 740) of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2017 to 2020, the General Partner has determined that no reserves for uncertain tax positions were required.
Investment Company Status: The Partnership is for U.S. GAAP purposes an investment company in accordance with FASB Codification 946 Financial Services – Investment Companies.
2. INVESTORS IN MILLBURN MULTI-MARKETS TRADING L.P.
The Partnership and the Cayman Feeder invest substantially all of their assets in the Master Fund. At September 30, 2021 and December 31, 2020, the respective ownership percentages of the Master Fund are detailed below. The remaining interests are held by direct investors in the Master Fund.
Schedule of interests are held by direct investors in the Master Fund | ||||||||
September 30, | December 31, | |||||||
2021 | 2020 | |||||||
Partnership | 29.38 | % | 25.08 | % | ||||
Cayman Feeder | 58.58 | % | 65.81 | % | ||||
Total | 87.96 | % | 90.89 | % |
The capital withdrawals payable at September 30, 2021 and December 31, 2020 were $24,349,962 and $54,219,673, respectively, as detailed below.
Schedule of capital withdrawals payable |
September 30, | December 31, | |||||||
2021 | 2020 | |||||||
Direct investors (1) | $ | 0 | $ | 990,861 | ||||
Partnership | 505,754 | 2,272,143 | ||||||
Cayman Feeder | 23,844,208 | 50,956,669 | ||||||
Total | $ | 24,349,962 | $ | 54,219,673 |
(1) | Includes General Partner’s profit share of $622,309 at December 31, 2020. |
21
The Master Fund bears expenses, including, but not limited to, periodic legal, accounting and filing fees, up to an amount equal to 1/4 of 1% per annum of average net assets of the Master Fund (the “Expense Cap”). Amounts subject to the Expense Cap include expenses incurred at the Master Fund and Cayman Feeder level. The General Partner bears any excess over such amounts.
3. FAIR VALUE
The Fair Value Measurement (Topic 820) of the Codification defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The three levels of the fair value hierarchy are described below:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and
Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
In determining fair value, the Master Fund separates its investments into two categories: cash instruments and derivative contracts.
Cash Instruments. The Master Fund’s cash instruments are generally classified within Level 1 of the fair value hierarchy because they are typically valued using quoted market prices. The types of instruments valued based on quoted market prices in active markets include U.S. government obligations. The General Partner does not adjust the quoted price for such instruments, even in situations where the Master Fund holds a large position and a sale could reasonably impact the quoted price.
Derivative Contracts. Derivative contracts can be exchange-traded or over-the-counter (“OTC”). Exchange-traded futures contracts are valued based on quoted closing settlement prices and typically fall within Level 1 of the fair value hierarchy.
Spot currency contracts are valued based on current market prices (“Spot Price”). Forward currency contracts are valued based on pricing models that consider the Spot Price plus the financing cost or benefit (“Forward Point”). Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Master Fund may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of months from the date the forward currency contract is being valued to its maturity date (“Months to Maturity”), then identifying the forward currency contracts for the two forward months that are closest to the Months to Maturity (“Forward Month Contracts”). Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.
During the three and nine months ended September 30, 2021 and 2020, there were no transfers of assets or liabilities between Level 1 and Level 2. The following tables represent the Master Fund’s investments by hierarchical level as of September 30, 2021 and December 31, 2020 in valuing the Master Fund’s investments at fair value. During the nine and twelve months ended September 30, 2021 and December 31, 2020, the Master Fund held no assets or liabilities in Level 3. At September 30, 2021 and December 31, 2020, the Master Fund had no assets or liabilities in Level 3.
22
Financial assets and liabilities at fair value as of September 30, 2021
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | ||||||||||||
Level 1 | Level 2 | Total | ||||||||||
U.S. Treasury notes (1) | $ | 393,466,366 | $ | 0 | $ | 393,466,366 | ||||||
Short-Term Money Market Fund* | 29,488,041 | 0 | 29,488,041 | |||||||||
Exchange-traded futures contracts | ||||||||||||
Energies | 4,753,412 | 0 | 4,753,412 | |||||||||
Grains | 983,270 | 0 | 983,270 | |||||||||
Interest rates | (492,672 | ) | 0 | (492,672 | ) | |||||||
Livestock | 44,820 | 0 | 44,820 | |||||||||
Metals | (1,305,774 | ) | 0 | (1,305,774 | ) | |||||||
Softs | 147,009 | 0 | 147,009 | |||||||||
Stock indices | (2,052,581 | ) | 0 | (2,052,581 | ) | |||||||
Total exchange-traded futures contracts | 2,077,484 | 0 | 2,077,484 | |||||||||
Over-the-counter forward currency contracts | — | (5,527,172 | ) | (5,527,172 | ) | |||||||
Total futures and forward currency contracts (2) | 2,077,484 | (5,527,172 | ) | (3,449,688 | ) | |||||||
Total financial assets and liabilities at fair value | $ | 425,031,891 | $ | (5,527,172 | ) | $ | 419,504,719 | |||||
Per line item in the Statements of Financial Condition | ||||||||||||
(1) | ||||||||||||
Investments in U.S. Treasury notes held in equity trading accounts as collateral | $ | 96,277,823 | ||||||||||
Investments in U.S. Treasury notes held in custody | 297,188,543 | |||||||||||
Total investments in U.S. Treasury notes | $ | 393,466,366 | ||||||||||
(2) | ||||||||||||
Net unrealized appreciation on open futures and forward currency contracts | $ | 3,955,234 | ||||||||||
Net unrealized depreciation on open futures and forward currency contracts | (7,404,922 | ) | ||||||||||
Total net unrealized depreciation on open futures and forward currency contracts | $ | (3,449,688 | ) |
* | The short-term money market fund is included in Cash and Cash Equivalents in the Statements of Financial Condition. |
23
Financial assets and liabilities at fair value as of December 31, 2020
Level 1 | Level 2 | Total | ||||||||||
U.S. Treasury notes (1) | $ | 500,015,300 | $ | 0 | $ | 500,015,300 | ||||||
Short-Term Money Market Fund* | 42,248,650 | 0 | 42,248,650 | |||||||||
Exchange-traded futures contracts | ||||||||||||
Energies | 1,411,245 | 0 | 1,411,245 | |||||||||
Grains | 2,970,371 | 0 | 2,970,371 | |||||||||
Interest rates | 2,061,873 | 0 | 2,061,873 | |||||||||
Livestock | (12,760 | ) | 0 | (12,760 | ) | |||||||
Metals | 5,115,659 | 0 | 5,115,659 | |||||||||
Softs | 230,325 | 0 | 230,325 | |||||||||
Stock indices | 5,340,762 | 0 | 5,340,762 | |||||||||
Total exchange-traded futures contracts | 17,117,475 | 0 | 17,117,475 | |||||||||
Over-the-counter forward currency contracts | 0 | 2,940,758 | 2,940,758 | |||||||||
Total futures and forward currency contracts (2) | 17,117,475 | 2,940,758 | 20,058,233 | |||||||||
Total financial assets and liabilities at fair value | $ | 559,381,425 | $ | 2,940,758 | $ | 562,322,183 | ||||||
Per line item in the Statements of Financial Condition | ||||||||||||
(1) | ||||||||||||
Investments in U.S. Treasury notes held in equity trading accounts as collateral | $ | 91,539,195 | ||||||||||
Investments in U.S. Treasury notes | 408,476,105 | |||||||||||
Total investments in U.S. Treasury notes | $ | 500,015,300 | ||||||||||
(2) | ||||||||||||
Net unrealized appreciation on open futures and forward currency contracts | $ | 20,183,485 | ||||||||||
Net unrealized depreciation on open futures and forward currency contracts | (125,252 | ) | ||||||||||
Total net unrealized appreciation on open futures and forward currency contracts | $ | 20,058,233 |
* | The short-term money market fund is included in Cash and Cash Equivalents in the Statements of Financial Condition. |
4. DERIVATIVE INSTRUMENTS
The Derivatives and Hedging (Topic 815) of the Codification requires qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.
The Master Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Master Fund’s open positions and the liquidity of the markets in which it trades.
The Master Fund engages in the speculative trading of futures and forward contracts on interest rates, grains, softs, currencies, metals, energies, livestock and stock indices. The following were the primary trading risk exposures of the Master Fund at September 30, 2021 by market sector:
Agricultural (grains, livestock and softs) – The Master Fund’s primary exposure is to agricultural price movements, which are often directly affected by severe or unexpected weather conditions, as well as supply and demand factors.
Currencies – Exchange rate risk is a principal market exposure of the Master Fund. The Master Fund’s currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. The fluctuations are influenced by interest rate changes, as well as political and general economic conditions. The Master Fund trades in a large number of currencies, including cross-rates—e.g., positions between two currencies other than the U.S. dollar.
24
Energies – The Master Fund’s primary energy market exposure is to gas and oil price movements often resulting from political developments in the oil producing countries and economic conditions worldwide. Energy prices are volatile and substantial profits and losses have been and are expected to continue to be experienced in this sector.
Interest rates – Interest rate movements directly affect the price of the sovereign bond futures positions held by the Master Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country, as well as relative interest rate movements between countries may materially impact the Master Fund’s profitability. The Master Fund’s primary interest rate exposure is to interest rate fluctuations in countries or regions including Australia, Canada, Japan, Switzerland, the United Kingdom, the U.S. and the Eurozone. However, the Master Fund also may take positions in futures contracts on the government debt of other nations. The General Partner anticipates that interest rates in these industrialized countries or areas, both long-term and short-term, will remain the primary interest rate market exposure of the Master Fund for the foreseeable future.
Metals – The Master Fund’s metals market exposure is to fluctuations in the price of aluminum, copper, gold, lead, nickel, platinum, silver, tin and zinc.
Stock indices – The Master Fund’s equity exposure, through stock index futures, is to equity price risk in the major industrialized countries, as well as other countries.
The Derivatives and Hedging (Topic 815) of the Codification requires entities to recognize in the Statements of Financial Condition all derivative contracts as assets or liabilities. Fair values of futures and forward currency contracts in an asset position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized appreciation on open futures and forward currency contracts.” Fair values of futures and forward currency contracts in a liability position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized depreciation on open futures and forward currency contracts.” The Master Fund’s policy regarding fair value measurement is discussed in the Fair Value note, contained herein.
Since the derivatives held or sold by the Master Fund are for speculative trading purposes, the derivative instruments are not designated as hedging instruments under the provisions of the Derivatives and Hedging guidance. Accordingly, all realized gains and losses, as well as any change in net unrealized gains or losses on open positions from the preceding period, are recognized as part of the Master Fund’s trading gains and losses in the Statements of Operations.
The following tables present the fair value of open futures and forward currency contracts, held long or sold short, at September 30, 2021 and December 31, 2020. Fair value is presented on a gross basis even though the contracts are subject to master netting agreements and qualify for net presentation in the Master Fund’s Statements of Financial Condition.
25
Fair value of futures and forward currency contracts at September 30, 2021
Schedule of fair value of futures and forward currency contracts | ||||||||||||||||||||
Net Unrealized | ||||||||||||||||||||
Gain (Loss) | ||||||||||||||||||||
Fair Value - Long Positions | Fair Value - Short Positions | on Open | ||||||||||||||||||
Sector | Gains | Losses | Gains | Losses | Positions | |||||||||||||||
Futures contracts: | ||||||||||||||||||||
Energies | $ | 5,053,042 | $ | (88,870 | ) | $ | 25,470 | $ | (236,230 | ) | $ | 4,753,412 | ||||||||
Grains | — | (9,210 | ) | 1,417,455 | (424,975 | ) | 983,270 | |||||||||||||
Interest rates | 14,243 | (1,462,839 | ) | 1,029,046 | (73,122 | ) | (492,672 | ) | ||||||||||||
Livestock | 35,900 | (1,510 | ) | 10,430 | — | 44,820 | ||||||||||||||
Metals | 862,709 | (4,024,672 | ) | 3,226,284 | (1,370,095 | ) | (1,305,774 | ) | ||||||||||||
Softs | 214,210 | (12,769 | ) | — | (54,432 | ) | 147,009 | |||||||||||||
Stock indices | 106,862 | (2,125,472 | ) | 404,611 | (438,582 | ) | (2,052,581 | ) | ||||||||||||
Total futures contracts | 6,286,966 | (7,725,342 | ) | 6,113,296 | (2,597,436 | ) | 2,077,484 | |||||||||||||
Forward currency contracts | 2,125,460 | (21,264,583 | ) | 16,265,085 | (2,653,134 | ) | (5,527,172 | ) | ||||||||||||
Total futures and forward currency contracts | $ | 8,412,426 | $ | (28,989,925 | ) | $ | 22,378,381 | $ | (5,250,570 | ) | $ | (3,449,688 | ) |
Fair value of futures and forward currency contracts at December 31, 2020
Net Unrealized | ||||||||||||||||||||
Gain (Loss) | ||||||||||||||||||||
Fair Value - Long Positions | Fair Value - Short Positions | on Open | ||||||||||||||||||
Sector | Gains | Losses | Gains | Losses | Positions | |||||||||||||||
Futures contracts: | ||||||||||||||||||||
Energies | $ | 951,320 | $ | (131,565 | ) | $ | 854,540 | $ | (263,050 | ) | $ | 1,411,245 | ||||||||
Grains | 3,318,296 | (300 | ) | — | (347,625 | ) | 2,970,371 | |||||||||||||
Interest rates | 2,550,872 | (463,081 | ) | — | (25,918 | ) | 2,061,873 | |||||||||||||
Livestock | — | — | 1,910 | (14,670 | ) | (12,760 | ) | |||||||||||||
Metals | 7,202,141 | (949,128 | ) | 737,287 | (1,874,641 | ) | 5,115,659 | |||||||||||||
Softs | 346,947 | (952 | ) | 2,090 | (117,760 | ) | 230,325 | |||||||||||||
Stock indices | 5,173,445 | (605,768 | ) | 795,375 | (22,290 | ) | 5,340,762 | |||||||||||||
Total futures contracts | 19,543,021 | (2,150,794 | ) | 2,391,202 | (2,665,954 | ) | 17,117,475 | |||||||||||||
Forward currency contracts | 14,163,798 | (2,977,096 | ) | 3,203,228 | (11,449,172 | ) | 2,940,758 | |||||||||||||
Total futures and forward currency contracts | $ | 33,706,819 | $ | (5,127,890 | ) | $ | 5,594,430 | $ | (14,115,126 | ) | $ | 20,058,233 |
The effect of trading futures and forward currency contracts is represented on the Master Fund’s Statements of Operations for the three and nine months ended September 30, 2021 and 2020 as “Net realized gains (losses) on closed positions: Futures and forward currency contracts” and “Net change in unrealized: Futures and forward currency contracts.” These trading gains and losses are detailed below.
26
Trading gains (losses) of futures and forward currency contracts for the three and nine months ended September 30, 2021 and 2020
Schedule of trading gains (losses) of futures and forward currency contracts | ||||||||||||||||
Three months | Three months | Nine months | Nine months | |||||||||||||
ended: | ended: | ended: | ended: | |||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
Sector | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Futures contracts: | ||||||||||||||||
Energies | $ | 3,152,244 | $ | 3,755,596 | $ | 23,708,484 | $ | 38,622,323 | ||||||||
Grains | 858,209 | (2,756,806 | ) | 2,665,340 | (2,222,408 | ) | ||||||||||
Interest rates | (8,169,527 | ) | (11,243,708 | ) | (10,590,727 | ) | (11,545,189 | ) | ||||||||
Livestock | (55,930 | ) | 349,200 | (585,010 | ) | 1,101,830 | ||||||||||
Metals | (2,670,251 | ) | 3,466,841 | 2,350,604 | (5,805,613 | ) | ||||||||||
Softs | 50,062 | 23,463 | (1,945,195 | ) | 1,041,892 | |||||||||||
Stock indices | (10,246,001 | ) | 23,781,674 | 40,585,651 | (158,123,044 | ) | ||||||||||
Total futures contracts | (17,081,194 | ) | 17,376,260 | 56,189,147 | (136,930,209 | ) | ||||||||||
Forward currency contracts | (11,762,425 | ) | 14,475,259 | (21,486,213 | ) | 23,253,275 | ||||||||||
Total futures and forward currency contracts | $ | (28,843,619 | ) | $ | 31,851,519 | $ | 34,702,934 | $ | (113,676,934 | ) |
For the three months ended September 30, 2021 and 2020, the monthly average number of future contracts bought and sold and the monthly average notional value of forward currency contracts traded are detailed below:
]Schedule of monthly average future and forward currency contracts | |||||||||
2021 | 2020 | ||||||||
Average bought | 79,295 | 104,534 | |||||||
Average sold | 84,064 | 103,187 | |||||||
Average notional | $ | 10,024,000,000 | $ | 8,746,000,000 |
The customer agreements between the Master Fund, the futures clearing brokers including, Deutsche Bank Securities Inc. (a wholly owned subsidiary of Deutsche Bank AG), BofA Securities, Inc. (formerly Merrill Lynch Pierce, Fenner & Smith Inc.) and Goldman Sachs & Co. LLC, as well as the FX prime brokers, Deutsche Bank AG (“DB”) and Bank of America, N.A. (“BA”), give the Master Fund the legal right to net unrealized gains and losses on open futures and forward currency contracts. The Master Fund ceased clearing futures trades through SG Americas Securities, LLC. during November 2020.The Master Fund netted, for financial reporting purposes, the unrealized gains and losses on open futures and forward currency contracts on the Statements of Financial Condition as the criteria under FASB Accounting Standards Codification Topic 210, “Balance Sheet,” were met.
The following tables represent gross amounts of assets or liabilities which qualify for offset as presented in the Statements of Financial Condition as of September 30, 2021 and December 31, 2020.
27
Offsetting of derivative assets and liabilities at September 30, 2021
Schedule of offsetting Derivative Assets And Liabilities | ||||||||||||
Gross amounts of | Gross amounts offset in the Statements of | Net amounts of assets presented in the Statements of | ||||||||||
recognized | Financial | Financial | ||||||||||
Assets | assets | Condition | Condition | |||||||||
Futures contracts | ||||||||||||
Counterparty J | $ | 2,634,111 | $ | (696,580 | ) | $ | 1,937,531 | |||||
Counterparty L | 9,180,388 | (7,162,685 | ) | 2,017,703 | ||||||||
Total assets | $ | 11,814,499 | $ | (7,859,265 | ) | $ | 3,955,234 |
Gross | Net amounts of liabilities | |||||||||||
amounts offset in the | presented in the | |||||||||||
Gross amounts of | Statements of | Statements of | ||||||||||
Liabilities | recognized liabilities | Financial Condition | Financial Condition | |||||||||
Futures contracts | ||||||||||||
Counterparty C | $ | 2,463,513 | $ | (585,763 | ) | $ | 1,877,750 | |||||
Forward currency contracts | ||||||||||||
Counterparty G | 8,022,529 | (5,005,040 | ) | 3,017,489 | ||||||||
Counterparty K | 15,895,188 | (13,385,505 | ) | 2,509,683 | ||||||||
Total forward currency contracts | 23,917,717 | (18,390,545 | ) | 5,527,172 | ||||||||
Total liabilities | $ | 26,381,230 | $ | (18,976,308 | ) | $ | 7,404,922 |
Amounts Not Offset in the Statements of Financial Condition | ||||||||||||||||
Net amounts of | ||||||||||||||||
Assets | ||||||||||||||||
presented in the | ||||||||||||||||
Statements of Financial | Financial | Collateral | Net | |||||||||||||
Counterparty | Condition | Instruments | Received(1)(2) | Amount(3) | ||||||||||||
Counterparty J | $ | 1,937,531 | $ | — | $ | (1,937,531 | ) | $ | — | |||||||
Counterparty L | 2,017,703 | — | (2,017,703 | ) | — | |||||||||||
Total | $ | 3,955,234 | $ | — | $ | (3,955,234 | ) | $ | — |
Amounts Not Offset in the Statements of Financial Condition | ||||||||||||||||
Net amounts of | ||||||||||||||||
Liabilities | ||||||||||||||||
presented in the | ||||||||||||||||
Statements of Financial | Financial | Collateral | Net | |||||||||||||
Counterparty | Condition | Instruments | Pledged(1)(2) | Amount(4) | ||||||||||||
Counterparty C | $ | 1,877,750 | $ | — | $ | 1,877,750 | $ | — | ||||||||
Counterparty G | 3,017,489 | $ | — | 3,017,489 | $ | — | ||||||||||
Counterparty K | 2,509,683 | — | 2,509,683 | — | ||||||||||||
Total | $ | 7,404,922 | $ | — | $ | 7,404,922 | $ | — |
(1) | Collateral received includes trades made on exchanges. These trades are subject to central counterparty clearing where settlement is guaranteed by the exchange. Collateral pledged includes both cash and U.S. Treasury notes held at each respective counterparty. |
(2) | Collateral disclosed is limited to an amount not to exceed 100% of the net amount of liabilities presented in the Statements of Financial Condition, for each respective counterparty. |
(3) | Net amount represents the amount that is subject to loss in the event of a counterparty failure as of September 30, 2021. |
(4) | Net amount represents the amounts owed by the Master Fund to each counterparty as of September 30, 2021. |
28
Offsetting of derivative assets and liabilities at December 31, 2020
Net amounts of | ||||||||||||
Gross | Gross amounts offset in the | assets presented in the | ||||||||||
amounts of | Statements of | Statements of | ||||||||||
Assets | recognized assets | Financial Condition | Financial Condition | |||||||||
Futures contracts | ||||||||||||
Counterparty C | $ | 7,424,604 | $ | (845,191 | ) | $ | 6,579,413 | |||||
Counterparty J | 2,079,575 | (195,917 | ) | 1,883,658 | ||||||||
Counterparty L | 12,430,044 | (3,775,640 | ) | 8,654,404 | ||||||||
Total futures contracts | 21,934,223 | (4,816,748 | ) | 17,117,475 | ||||||||
Forward currency contracts | ||||||||||||
Counterparty G | 8,394,326 | (5,328,316 | ) | 3,066,010 | ||||||||
Total assets | $ | 30,328,549 | $ | (10,145,064 | ) | $ | 20,183,485 |
Net | ||||||||||||
Gross amounts offset in the | amounts of liabilities presented in the | |||||||||||
Gross amounts of | Statement of | Statement of | ||||||||||
Liabilities | recognized liabilities | Financial Condition | Financial Condition | |||||||||
Forward currency contracts | ||||||||||||
Counterparty K | $ | 9,097,952 | $ | (8,972,700) | $ | 125,252 | ||||||
Total liabilities | $ | 9,097,952 | $ | (8,972,700) | $ | 125,252 |
Amounts Not Offset in the Statements of Financial Condition | ||||||||||||||||
Net amounts of | ||||||||||||||||
Assets | ||||||||||||||||
presented in the | ||||||||||||||||
Statements of Financial | Financial | Collateral | Net | |||||||||||||
Counterparty | Condition | Instruments | Received(1)(2) | Amount(3) | ||||||||||||
Counterparty C | $ | 6,579,413 | $ | — | $ | (6,579,413 | ) | $ | — | |||||||
Counterparty J | 1,883,658 | — | (1,883,658 | ) | — | |||||||||||
Counterparty L | 8,654,404 | — | (8,654,404 | ) | — | |||||||||||
Counterparty G | 3,066,010 | — | — | 3,066,010 | ||||||||||||
Total | $ | 20,183,485 | $ | — | $ | (17,117,475 | ) | $ | 3,066,010 |
Amounts Not Offset in the Statement of Financial Condition | ||||||||||||||||
Net amounts of | ||||||||||||||||
Liabilities | ||||||||||||||||
presented in the | ||||||||||||||||
Statement of Financial | Financial | Collateral | Net | |||||||||||||
Counterparty | Condition | Instruments | Pledged(1)(2) | Amount(4) | ||||||||||||
Counterparty K | $ | 125,252 | — | $ | (125,252 | ) | — | |||||||||
Total | $ | 125,252 | $ | — | $ | (125,252 | ) | $ | — |
(1) | Collateral received includes trades made on exchanges. These trades are subject to central counterparty clearing where settlement is guaranteed by the exchange. Collateral pledged includes both cash and U.S. Treasury notes held at each respective counterparty. |
(2) | Collateral disclosed is limited to an amount not to exceed 100% of the net amount of liabilities presented in the Statement of Financial Condition, for each respective counterparty. |
(3) | Net amount represents the amount that is subject to loss in the event of a counterparty failure as of December 31, 2020. |
(4) | Net amount represents the amounts owed by the Master Fund to each counterparty as of December 31, 2020. |
29
CONCENTRATION OF CREDIT RISK
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. Credit risk is normally reduced to the extent that an exchange or clearing organization acts as a counterparty to futures transactions since typically the collective credit of the members of the exchange is pledged to support the financial integrity of the exchange.
The General Partner seeks to minimize credit risk primarily by depositing and maintaining the Master Fund’s assets at financial institutions and trading counterparties which the General Partner believes to be creditworthy. In addition, for OTC forward currency contracts, the Master Fund enters into master netting agreements with its counterparties. Collateral posted at the various counterparties for trading of futures and forward currency contracts includes cash and U.S. Treasury notes.
The Master Fund’s forward currency trading activities are cleared by DB and BA. The Master Fund’s concentration of credit risk associated with DB, or BA nonperformance includes unrealized gains inherent in such contracts, which are recognized in the Statements of Financial Condition plus the value of margin or collateral held by DB, and BA. The amount of such credit risk was $55,869,829 and $47,021,416 at September 30, 2021 and December 31, 2020, respectively.
The following table indicates the total profit share earned and accrued during the three and nine months ended September 30, 2021 and 2020. Profit share earned (from Limited Partners’ redemptions) is credited to the New Profit Memo Account as defined in the Master Fund’s Agreement of Limited Partnership.
Schedule of profit share | |||||||||
Three months ended: | Three months ended: | ||||||||
September 30, 2021 | September 30, 2020 | ||||||||
Profit share earned | $ | 11,307 | $ | 0 | |||||
Reversal of profit share (1) | (1,318,781 | ) | (32,583 | ) | |||||
Profit share accrued | 393,293 | 105,482 | |||||||
Total profit share | $ | (914,181 | ) | $ | 72,899 |
Nine months ended: | Nine months ended: | ||||||||
September 30, 2021 | September 30, 2020 | ||||||||
Profit share earned | $ | 208,863 | $ | 0 | |||||
Profit share accrued | 393,293 | 105,482 | |||||||
Total profit share | $ | 602,156 | $ | 105,482 |
(1) | Reversal of profit share occurs on July 1st |
6. FINANCIAL HIGHLIGHTS
Ratios to average capital are calculated based on 1) a Limited Partner that is charged a monthly management fee of 1/12 of 1.75% (1.75% per annum) and 20% of Trading Profits and 2) Limited Partners’ capital taken as a whole. The computation of such ratios based on the amount of expenses and profit share allocation assessed to an individual partner’s capital account may vary from these ratios based on the timing of capital transactions and differences in individual partners’ management fee, selling commission, platform fee and profit share allocation arrangements. Returns are calculated based on 1) a Limited Partner that is charged a monthly management fee of 1/12 of 1.75% (1.75% per annum) and 20% of Trading Profits and 2) Limited Partners’ capital taken as a whole. An individual partner’s returns may vary from these returns based on the timing of capital transactions and differences in individual partners’ management fee, selling commission, platform fee and profit share allocation arrangements.
7. SUBSEQUENT EVENTS
The General Partner has performed its evaluation of subsequent events through November 12, 2021, the date this form 10-Q was filed. Based on such evaluation, no further were discovered that required disclosure or adjustment to the 10-Q.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to Item 1, “Financial Statements.” The information contained therein is essential to, and should be read in connection with, the following analysis.
OPERATIONAL OVERVIEW
The Partnership invests substantially all of its assets in the Master Fund. Due to the nature of the Master Fund’s business, its results of operations depend on the General Partner’s ability to recognize and capitalize on trends and other profit opportunities in different sectors of the global capital and commodity markets. The General Partner’s investment and trading methods are confidential so that substantially the only information that can be furnished regarding the Master Fund’s results of operations is contained in the performance record of its trading. Unlike operating businesses, general economic or seasonal conditions do not directly affect the profit potential of the Master Fund, and its past performance is not necessarily indicative of future results. The General Partner believes, however, that there are certain market conditions, for example, markets with strong price trends, in which the Master Fund has a better likelihood of being profitable than in others.
LIQUIDITY AND CAPITAL RESOURCES
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 Partnership should not have a significant impact on its operations, as the Partnership and the Master Fund have no significant capital expenditure or working capital requirements other than for monies to pay trading losses, brokerage commissions and charges. Within broad ranges of capitalization, the General Partner’s trading positions should increase or decrease in approximate proportion to the size of the Master Fund (in which the Partnership participates).
The Partnership raises additional capital only through the sale of Units and capital is increased through trading profits (if any). Neither the Partnership nor the Master Fund engages in borrowing.
The Master Fund trades futures, forwards, and spot contracts on interest rate instruments, agricultural commodities, currencies, metals, energy and stock indices, and forward contracts on currencies, and may trade options on the foregoing and swaps thereon. Risk arises from changes in the value of these contracts (market risk) and the potential inability of counterparties or brokers to perform under the terms of their contracts (credit risk). Market risk is generally measured by the face amount of the futures positions acquired and the volatility of the markets traded. The credit risk from counterparty non-performance associated with these instruments is the net unrealized gain, if any, on these positions plus the value of the margin or collateral held by the counterparty. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with OTC transactions because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. In most OTC transactions, on the other hand, traders must rely (typically but not universally) solely on the credit of their respective individual counterparties. Margins which may be subject to loss in the event of a default are generally required in exchange trading and counterparties may require margin or collateral in the OTC markets.
The General Partner has procedures in place to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. These procedures primarily focus on (1) real time monitoring of open positions; (2) diversifying positions among various markets; (3) limiting the assets committed as margin or collateral, generally within a range of 5% to 35% of an account’s net assets, though the amount may at any time be substantially higher; and (4) prohibiting pyramiding (that is, using unrealized profits in a particular market as margin for additional positions in the same market). The General Partner attempts to control credit risk by causing the Partnership and the Master Fund to deal exclusively with large, well-capitalized financial institutions as brokers and counterparties.
The financial instruments traded by the Master Fund contain varying degrees of off-balance sheet risk whereby changes in the market values of the futures, forward, and spot contracts or the Master Fund’s satisfaction of the obligations may exceed the amount recognized in the Statements of Financial Condition of the Master Fund.
Due to the nature of the Master Fund’s business, substantially all its assets are represented by cash, cash equivalents, and U.S. government obligations, while the Master Fund maintains its market exposure through open futures, forward, and spot contract positions.
The Master Fund’s futures contracts are settled by offset and are cleared by the exchange clearinghouse function. Open futures positions are marked-to-market each trading day and the Master Fund’s trading accounts are debited or credited accordingly. Options on futures contracts are settled either by offset or by exercise. If an option on a future is exercised, the Master Fund is assigned a position in the underlying future which is then settled by offset. The Master Fund’s spot and forward currency transactions conducted in the interbank market are settled by netting offsetting positions or payment obligations and by cash payments.
The value of the Master Fund’s cash and financial instruments is not materially affected by inflation. Changes in interest rates, which are often associated with inflation, could cause the value of certain of the Master Fund’s debt securities to decline, but only to a limited extent. More importantly, changes in interest rates could cause periods of strong up or down market price trends, during which the Master Fund’s profit potential generally increases. However, inflation can also give rise to markets which have numerous short price trends followed by rapid reversals, markets in which the Master Fund is likely to suffer losses.
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The Master Fund’s assets are generally held as cash or cash equivalents, including U.S. government securities or securities issued by federal agencies, other Commodity Futures Trading Commission-authorized investments or bank held or certain other money market instruments (e.g., bankers acceptances and Eurodollar or other time deposits), which are used to margin the Master Fund’s futures, forwards, and spot currency positions and withdrawn, as necessary, to pay redemptions and expenses. Other than potential market-imposed limitations on liquidity, due, for example, to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Master Fund’s futures, forward and spot trading, the Master Fund’s assets are highly liquid and are expected to remain so. During its operations through September 30, 2021, the Partnership, through its investment in the Master Fund, experienced no meaningful periods of illiquidity in any of the numerous markets traded by the General Partner.
CRITICAL ACCOUNTING ESTIMATES
The Master Fund records its transactions in futures, forward and spot contracts, including related income and expenses, on a trade date basis. Open futures contracts traded on an exchange are valued at fair value, which is based on the closing settlement price on the exchange where the futures contract is traded by the Master Fund on the day with respect to which net assets are being determined. Spot currency contracts are valued based on current market prices (“Spot Price”). Forward currency contracts are valued based on pricing models that consider the Spot Price plus the financing cost or benefit (“Forward Point”). Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Master Fund may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of months from the date the forward currency contract is being valued to its maturity date (“Months to Maturity”), then identifying the forward currency contracts for the two forward months that are closest to the Months to Maturity (“Forward Month Contracts”). Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, such as accrual of expenses, that affect the amounts and disclosures reported in the financial statements. Based on the nature of the business and operations of the Partnership, the General Partner believes that the estimates utilized in preparing the Partnership’s financial statements are appropriate and reasonable, however actual results could differ from these estimates. The estimates used do not provide a range of possible results that would require the exercise of subjective judgment. The General Partner further believes that, based on the nature of the business and operations of the Partnership, no other reasonable assumptions relating to the application of the Partnership’s critical accounting estimates other than those currently used would likely result in materially different amounts from those reported.
RESULTS OF OPERATIONS
Due to the nature of the Partnership’s trading, through its investment in the Master Fund, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.
Periods ended September 30, 2021
Total | |||||
Partners’ | |||||
Capital of the | |||||
Month Ended: | Partnership | ||||
September 30, 2021 | $ | 126,177,269 | |||
June 30, 2021 | 134,322,512 | ||||
December 31, 2020 | 139,012,777 |
Three Months | Nine Months | |||||||
Change in Partners’ Capital | $ | (8,145,243 | ) | $ | (12,835,508 | ) | ||
Percent Change | (6.06 | )% | (9.23 | )% |
32
THREE MONTHS ENDED SEPTEMBER 30, 2021
The decrease in the Partnership’s net assets of $8,145,243 was attributable to net loss after profit share through its investment in the Master Fund of $9,347,540 and withdrawals of $1,751,703 which were partially offset by contributions of $2,954,000.
Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2021 decreased $210,335 relative to the corresponding period in 2020. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2021, relative to the corresponding period in 2020.
The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2021 increased $22,447 relative to the corresponding period in 2020. The increase was due to an increase in the trading volume during the three months ended September 30, 2021, relative to the corresponding period in 2020.
Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the three months ended September 30, 2021 decreased $102,137 relative to the corresponding period in 2020. The decrease was due predominantly to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2021, relative to the corresponding period in 2020.
The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2021 increased $14,291 relative to the corresponding period in 2020. The increase was due to an increase in sales and marketing expense during the three months ended September 30, 2021, relative to the corresponding period in 2020.
Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2021 decreased $221,203 relative to the corresponding period in 2020. The decrease was due predominantly to a decrease in short-term U.S. Treasury yields during the three months ended September 30, 2021 as well as a decrease in Treasury note holdings, relative to the corresponding period in 2020.
For the three months ended September 30, 2021, the Partnership, through its investment in the Master Fund, experienced net realized and unrealized losses of $9,404,051 from trading operations (including foreign exchange transactions and translations). Management fees of $557,532, brokerage commissions of $206,834, selling commissions and platform fees of $551,956, administrative and operating expenses of $132,226, custody fees and other expenses of $5,520, and profit share reversal of $56,511. Interest income of $3,444 partially offset the Master Fund expenses allocated to the Partnership resulting in net loss after profit share of $9,347,540.
An analysis of the Master Fund’s trading gain (loss) by sector is as follows:
% Gain | ||||
Sector | (Loss) | |||
Currencies | (2.40 | )% | ||
Energies | 0.69 | % | ||
Grains | 0.20 | % | ||
Interest rates | (1.89 | )% | ||
Livestock | 0.02 | % | ||
Metals | (0.53 | )% | ||
Softs | 0.05 | % | ||
Stock indices | (2.11 | )% | ||
Trading loss* | (5.97 | )% |
* | Percentage of the Partnership Capital |
NINE MONTHS ENDED SEPTEMBER 30, 2021
The decrease in the Partnership’s net assets of $12,835,508 was attributable to withdrawals of $20,677,406 which were partially offset by net income after profit share through its investment in the Master Fund of $4,513,898 and contributions of $3,328,000.
Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2021 decreased $619,616 relative to the corresponding period in 2020. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2021, relative to the corresponding period in 2020.
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The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2021 increased $36,602 relative to the corresponding period in 2020. The increase was due to an increase in the trading volume during the nine months ended September 30, 2021, relative to the corresponding period in 2020.
Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the nine months ended September 30, 2021 decreased $421,199 relative to the corresponding period in 2020. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2021, relative to the corresponding period in 2020.
The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2021 decreased $33,198 relative to the corresponding period in 2020. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2021, relative to the corresponding period in 2020.
Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2021 decreased $1,355,659 relative to the corresponding period in 2020. This decrease was due predominantly to a decrease in short-term U.S. Treasury yields as well as a decrease in Treasury note holdings.
For the nine months ended September 30, 2021, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized gains of $9,128,628 from trading operations (including foreign exchange transactions and translations). Management fees of $1,842,680, brokerage commissions of $642,528, selling commissions and platform fees of $1,711,058, administrative and operating expenses of $395,103, custody fees and other expenses of $17,212, and profit share of $42,925 were paid or accrued. Interest income of $36,776 partially offset the Master Fund expenses allocated to the Partnership resulting in net income after profit share of $4,513,898.
An analysis of the Master Fund’s trading gain (loss) by sector is as follows:
% Gain | ||||
Sector | (Loss) | |||
Currencies | (4.46 | )% | ||
Energies | 4.81 | % | ||
Grains | 0.44 | % | ||
Interest rates | (2.19 | )% | ||
Livestock | (0.17 | )% | ||
Metals | 0.39 | % | ||
Softs | (0.46 | )% | ||
Stock indices | 8.10 | % | ||
Trading gain* | 6.46 | % |
* | Percentage of the Partnership Capital |
MANAGEMENT DISCUSSION – 2021
Three months ended September 30, 2021
The Partnership was unprofitable for the quarter as losses from trading equity, interest rate and metal futures, and currency forwards far outpaced gains from trading energy and grain futures. Trading of soft and livestock futures was flat.
Markets were roiled because the near-term global growth outlook, particularly for Asia, was negatively affected as the COVID-19 Delta variant spread and China experienced a multi-pronged regulatory crackdown in support of its Common Prosperity, national security, financial stability and environmental goals. The growth outlook was also impacted by continuing supply chain difficulties, including labor market shortages and mismatches, and rising prices—including soaring energy prices-- that have affected consumer demand. Furthermore, a reduction of fiscal stimulus globally, including from the U.S., and signs that central banks were beginning the process of scaling back on ultra-accommodative policies and returning to “more normal” stances likely worried market participants.
For most of the quarter interest rates were restrained by the growth slowdown. However, in late September, Federal Reserve (the “Fed”) Chairman Powell stressed that a Quantitative easing tapering was likely to begin by the end of 2021 and was expected to reach completion by mid-2022. Furthermore, there were indications that the first Fed official rate hike might occur in late 2022. These moves reflected the fact that the U.S. economy had made ’substantial further progress’ on its inflation and unemployment goals and that economic growth was expected to rebound after the third quarter slowdown. At the same time, similar outlooks were posited by other central banks including the Bank of England, European Central Bank and Norges Bank, which became the first G-20 central bank to increase official rates since the onset of the global COVID-19 pandemic when it raised its policy rate from zero to 0.25%. Several other Central European and Latin America central banks have also raised rates recently to control inflation. Overall long positions in German, French, British, Australian and Japanese long-term bond futures registered losses, especially late in the quarter. Conversely, early in the period, long positions in German, U.S., Canadian and Italian 3-year to 10-year note futures posted partially offsetting gains.
34
During the quarter, equities were supported by strong earnings, liquidity and anticipated U.S. infrastructure spending. Still, creeping concerns about the durability of the global economic recovery and China’s regulatory crackdown contributed to turbulence in global equity markets that were near all-time highs amid thin summer trading. The Fed actions triggered an upsurge in interest rates, following which equity markets experienced a broad-based selloff. Overall, losses were sustained on long positions in U.S., Canadian, EAFE, and EURO STOXX 50 indices; from trading Asia ex-Japan indices; and from short VIX and VSTOXX volatility index positions. Partially offsetting profits were accrued on short Brazilian, emerging market, and Chinese H-share index positions; long positions in Japanese index futures; and trading Indian, Dutch and French stock index futures.
The U.S. dollar was volatile in a 2% band for most of the quarter before surging higher in late September after U.S. interest rates jumped higher. Indeed, by the end of the quarter, the U.S. dollar had reached its highest level of 2021, climbing about 4% in total from its May low. On balance, currency trading was unprofitable. Trading the Canadian dollar versus the U.S. dollar was unprofitable amid oil price swings, global growth worries, monetary policy pronouncements in both countries, and political uncertainties in Canada. Trading the UK sterling/U.S. dollar exchange rate was volatile and unprofitable amid concerns over the pace of global growth, the worldwide spike in COVID-19 infections and uncertainties about the future direction of monetary policy in each country. In Brazil, tension and noise in the domestic political-institutional environment and the deterioration in the country’s fiscal prospects continue to threaten the economic outlook. However, the Brazilian real saw a 2% increase in official interest rates during the quarter as the central bank sought to contain rising inflation, and a short real/long U.S. dollar trade was unprofitable. Trading the U.S.dollar/Australian dollar exchange rate was volatile and unprofitable due in part to several factors including: the collapse in the iron ore price; surging gas and oil prices; China uncertainties; the Sydney COVID-19 lockdown, U.S. dollar strength and changing interest rate differentials. In addition, short U.S. dollar positions against the New Zealand dollar, Swiss franc, and several other currencies were particularly unprofitable in September. A long U.S. dollar/short Japanese yen trade did produce a fractional gain.
Amid the changing growth and inflation outlooks, interest rate and U.S. dollar volatility, and supply chain disruptions, metal prices displayed wide swings. Trading of copper, zinc and platinum produced a fractional loss, while a long aluminum position and a short silver trade registered slightly offsetting gains.
Energy prices were volatile during the quarter. Growth worries related to the COVID-19 Delta variant and the continuing expansion of production by The Organization of the Petroleum Exporting Countries helped prompt a selloff during the first half of the period as evidenced by Brent crude oil which fell from about $76/barrel at the start of July to about $65/barrel on August 20, producing losses on long positions. Subsequently however, prices rebounded to close the quarter near $80/barrel as the Gulf of Mexico experienced crude oil production cuts following hurricanes Henri and Ida. There were also stronger than expected demand increases for oil and natural gas as market participants came to expect the 3Q growth slowdown to be temporary, and as businesses and consumers increased their usage of everything from gasoline to jet fuel as governments lifted COVID-19 social and travel restrictions. In addition, a surge in natural gas prices that will likely lead to “gas to oil” switching in the power business, especially in Europe, and persistent tightness in crude oil and natural gas inventories impacted energy prices. Consequently, long positions in Brent crude, heating oil, London gas oil and U.S. natural gas were highly profitable during late August and in September, and for the quarter overall.
Lastly, grain trading was slightly profitable as gains from short corn, soybean and soybean meal positions fractionally outdistanced losses from short wheat positions.
Three months ended June 30, 2021
The Partnership was profitable in the quarter as gains from long positions in stock index, interest rate, energy and metals futures outpaced losses from trading currency forwards and grain and soft commodity futures.
For much of the quarter, reflation and reopening dynamics underpinned by expanding COVID-19 vaccinations and accommodative monetary and fiscal policies globally contributed to rising equity prices, commodity prices and interest rates. In May, market participants faced headwinds that at times impacted market sentiment including: declines in Bitcoin and SPAC prices; the Colonial pipeline cyberattack; and geopolitical tensions and/or negotiations between the U.S. and China, the U.S. and Iran, Israel and Hamas and Russia/Belarus and the West. Importantly, evidence that inflation was increasing raised concerns that global monetary policies might become less accommodative. Central banks in Brazil, Russia, Turkey, Mexico, Hungary and the Czech Republic have raised official rates recently and monetary authorities in Canada, New Zealand and Norway have suggested it may be time to rein in crisis policies soon. The Federal Reserve (the “Fed”) continues to emphasize the “transitory” nature of recent inflation increases but financial markets were impacted following the Fed’s June meeting and indications that a number of Fed policy makers are considering Quantitative easing (“QE”) tapering and interest rates increases earlier than had been previously anticipated.
35
After peaking late in March, interest rates were volatile but drifted lower during most of the quarter. Following the June Fed meeting, rates fell to their lowest levels since late February and yield curves flattened, inflation expectations eased, real yields rose, gold declined and the U.S. dollar rebounded. Consequently, long positions in long-term U.S., U.K., Japanese, Canadian and Australian government bonds were profitable. On the other hand, trading of the U.S. 5-year note and European long-term interest rate futures produced partially offsetting losses.
Against this background of reflation and reopening, long positions in U.S., Canadian and EAFE equity index futures, and trading of European, Chinese and Taiwanese stock index futures were highly profitable. Elsewhere, short positions in Japanese and Brazilian equity futures posted partially offsetting losses.
During the quarter, Brent crude oil hit its highest price level since October 2018 and an increasingly bullish picture contributed to speculation that the price may eventually return to $100 a barrel. Prices drew support from expectations that the Organization of the Petroleum Exporting Countries’ (“OPEC”)+ alliance -- which meets on July 1 -- won’t revive production quickly enough to prevent markets from tightening, and from continued production discipline from non-OPEC shale producers who have exerted strong control on additional investments while focusing on returns to investors. Consequently, stockpiles are draining as fuel consumption rebounds in key regions including the U.S. and Europe. At the same time, the prospect of an imminent surge of Iranian oil is diminishing as talks to revive a nuclear deal continue. In this environment, long positions in Brent crude, WTI crude, RBOB gasoline, London gas oil and heating oil were profitable. On the other hand, a short U.S. natural gas position posted a partially offsetting loss. Natural gas prices have risen sharply amid low global natural gas inventories after a long, cold winter; rebounding global demand along with the reopening global economy; and hot summer temperatures.
Reflation and reopening demand contributed to metals’ prices despite some intra-quarter volatility prompted by Chinese efforts to rein in “excessive” speculation and worries about possible changes in monetary policy. Long copper, gold, silver and aluminum positions were profitable, especially in April and May.
The U.S. dollar strengthened during the first quarter amid the U.S.’s vaccine distribution efforts (particularly relative to the rest of the world), fiscal policy support, economic reopening and rising interest rates. Subsequently, as those distinctions eroded, the U.S. dollar declined for much of the second quarter. However, the U.S. currency rebounded sharply in June, particularly after Federal Reserve officials suggested that they were starting to think about QE tapering and interest rate increases. Currency trading was mixed and unprofitable for the quarter. Short U.S. dollar trades against the currencies of Australia and New Zealand were unprofitable especially in the second half of the quarter. Long U.S. dollar trades against the Japanese yen and Norwegian krone posted losses, particularly in April. Trading the U.S.dollar against the euro, Polish zloty, Swedish krona, Brazilian real and Chilean peso added to the losses. On the other hand, during April and May, short U.S. dollar trades versus the British pound, Indian rupee, Israeli shekel, Russian ruble and Swiss franc produced partially offsetting profits.
Grains prices were volatile during the quarter, spiking and plunging along with a variety of events including drought concerns and robust demand from China, the U.S. and elsewhere as the global economy reopened; the multi-year highs reached in May while rains in the U.S. Midwest and Canada eased severe drought concerns; and the release of the USDA grain stocks June 30th report showing sharp inventory declines from a year ago. On balance, trading of wheat, corn and soybean meal registered losses, while a long soybean oil trade posted a partially offsetting gain.
A short coffee position was unprofitable when coffee prices increased as the 2020 drought reduced recent supplies from Brazil, Colombia and Nicaragua, and because logistics and customs issues constrained Brazilian exports. Trading of sugar was slightly unprofitable too.
Three months ended March 31, 2021
The Partnership was profitable in the quarter as gains from trading equity, energy and grain futures outpaced losses from trading interest rate futures, metal futures and currency forwards. Trading of livestock and soft commodity futures was marginally negative.
The global reflation trade gathered momentum throughout the quarter amid fiscal stimulus expansion from the Biden Administration; Federal Reserve (the “Fed”) Chairman Powell reiterating in testimony before Congress that the Fed will maintain low interest rates and continue asset purchases until “substantial further progress has been made” toward its employment and inflation goals; the global vaccine rollout; and the resurgence of global trade. Periodically, however, the growth outlook and investor enthusiasm were tamped down and markets experienced increased volatility while concerns about the slow pace of vaccine distribution in Europe, Asia and emerging markets relative to the U.S. and U.K. lingered; evidence of moderating monetary and fiscal policy support came out of China; and the geopolitical conflict between China and the U.S expanded.
Trading of equity futures was highly profitable. Positive impulses from massive fiscal and monetary policy support globally outweighed the negative impact of higher global interest rates and less synchronous global growth. The Reddit-driven short frenzy in January, Archegos events in March, and the week-long Suez Canal closure in March did not seem to have long-term effects on equity markets. Long positions in U.S., Canadian, European, British, Chinese and EAFE equity index futures were profitable. A short VIX position and trading of the EEM emerging market index future were also profitable. On the other hand, trading of South African and Australian futures registered small offsetting losses.
36
Energy markets were volatile during the quarter. After exceeding 2-year highs early in March amid strong reflation trade and Organization of the Petroleum Exporting Countries’ production restraint, crude prices dropped sharply as reopening demand expectations receded along with the global growth outlook. For example, Brent crude, climbed from just over $50/barrel at the start of the year to nearly $71/barrel on March 7, but plunged to nearly $60/barrel on March 23. Even though the closure of the Suez Canal provided some support to crude prices, Brent closed the month at less than $63/barrel. Overall, long positions in Brent crude, RBOB gasoline, London gas oil and heating oil were profitable. On the other hand, a short natural gas trade was unprofitable, especially as prices rose in January in response to unusually cold weather across Europe and China and in February in the wake of weather-induced energy market turmoil in Texas. Trading of WTI crude oil was slightly unprofitable as well.
Chinese demand for U.S. exports, a weaker than expected U.S. harvest of row crops and dry weather in South America contributed to profits on long corn, soybean and soybean oil trades. Then, on March 31 the USDA reported that farmers are likely to plant lower-than-expected corn and soybean acreage in 2021, and corn and soybean prices traded limit-up on the day, reinforcing results from earlier in the quarter. Trading of soybean meal was marginally unprofitable.
Interest rates were volatile during the quarter, trading across a broad range in January, spiking higher in February, and then dropping back sharply in March before entering volatile range-trading to close out the period. Amid growth, inflation and government borrowing concerns, global note and bond yields pushed sharply higher during the January-February period as evidenced by the German 10-year Bund yield which rose from about -0.60% at the start of January to as high as -0.23% on February 25. Then, as growth optimism faded somewhat in March, the Bund yield fell to -0.39% on March 21 before closing the quarter at -0.32%. Long positions in U.S., Canadian and Australian long bond futures were unprofitable, especially in February. Trading of German, French, Italian and Japanese bond futures were also unprofitable, particularly in January and March. Trading of U.S., British, Australian, German and Italian short-term interest rate futures registered small losses as well. On the other hand, short positions in the U.S. 5-year note future and in the German ultra-long bond future posted partially offsetting gains in February.
Currency markets too were impacted by the fluid growth, inflation and interest rate developments, and trading of currency forwards was mixed and unprofitable. The euro, which traded toward five-year highs during January and February, declined sharply in March and a long euro position against the U.S. dollar was unprofitable. Long Swiss franc and Swedish krona positions were also unprofitable. Trading the U.S. dollar against the currencies of Brazil and Singapore posted losses, as did a long U.S. dollar/short Canadian dollar position as commodity currencies outperformed. On the other hand, long U.S. dollar positions versus the Japanese yen and Israeli shekel, short dollar trades versus the Norwegian krone and South African rand, and trading the U.S. dollar against the British pound sterling produced partially offsetting gains.
The improving economic outlook and COVID-19 prognosis together with higher interest rates and a stronger U.S. dollar weighed on precious metal prices and long gold and silver positions posted losses. Meanwhile, long positions in copper and aluminum produced partially offsetting profits, especially in February as prices rose and reflation optimism was high.
Periods ended September 30, 2020
Total | |||||
Partners’ | |||||
Capital of the | |||||
Month Ended: | Partnership | ||||
September 30, 2020 | $ | 145,308,218 | |||
June 30, 2020 | 155,420,631 | ||||
December 31, 2019 | 191,189,357 |
Three Months | Nine Months | |||||||
Change in Partners’ Capital | $ | (10,112,413 | ) | $ | (45,881,139 | ) | ||
Percent Change | (6.51 | )% | (24.00 | )% |
THREE MONTHS ENDED SEPTEMBER 30, 2020
The decrease in the Partnership’s net assets of $10,112,413 was attributable to withdrawals of $16,026,568 which were partially offset by net income after profit share through its investment in the Master Fund of $5,638,155 and contributions of $276,000.
Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2020 decreased $93,832 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2020, relative to the corresponding period in 2019.
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The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2020 decreased $66,908 relative to the corresponding period in 2019. The decrease was due to a decrease in the trading volume during the three months ended September 30, 2020, relative to the corresponding period in 2019.
Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the three months ended September 30, 2020 decreased $120,034 relative to the corresponding period in 2019. The decrease was due predominantly to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2020, relative to the corresponding period in 2019.
The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2020 decreased $30,785 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2020, relative to the corresponding period in 2019.
Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2020 decreased $751,396 relative to the corresponding period in 2019. The decrease was due predominantly to a decrease in short-term U.S. Treasury yields during the three months ended September 30, 2020, relative to the corresponding period in 2019.
For the three months ended September 30, 2020, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized gains of $7,145,050 from trading operations (including foreign exchange transactions and translations). Management fees of $767,867, brokerage commissions of $184,387, selling commissions and platform fees of $654,093, administrative and operating expenses of $117,935, custody fees and other expenses of $7,258. Interest income of $224,645 partially offset the Master Fund expenses allocated to the Partnership resulting in net income after profit share of $5,638,155.
An analysis of the Master Fund’s trading gain (loss) by sector is as follows:
% Gain | ||||
Sector | (Loss) | |||
Currencies | 1.95 | % | ||
Energies | 0.58 | % | ||
Grains | (0.41 | )% | ||
Interest rates | (1.67 | )% | ||
Livestock | 0.05 | % | ||
Metals | 0.52 | % | ||
Softs | 0.01 | % | ||
Stock indices | 3.67 | % | ||
Trading gain* | 4.70 | % |
* | Percentage of the Partnership Capital |
NINE MONTHS ENDED SEPTEMBER 30, 2020
The decrease in the Partnership’s net assets of $45,881,139 was attributable to net loss after profit share through its investment in the Master Fund of $30,876,515 and withdrawals of $29,421,024 which were partially offset by contributions of $14,416,400.
Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2020 decreased $15,585 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2020, relative to the corresponding period in 2019.
The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2020 decreased $35,703 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2020, relative to the corresponding period in 2019.
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Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the nine months ended September 30, 2020 decreased $111,986 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2020, relative to the corresponding period in 2019.
The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2020 decreased $15,975 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2020, relative to the corresponding period in 2019.
Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2020 decreased $1,474,302 relative to the corresponding period in 2019. This decrease was due predominantly to a decrease in short-term U.S. Treasury yields and partially offset by an increase in average net asset value of the Partnership during the nine months ended September 30, 2020 relative to the corresponding period in 2019.
For the nine months ended September 30, 2020, the Partnership, through its investment in the Master Fund, experienced net realized and unrealized losses of $26,624,044 from trading operations (including foreign exchange transactions and translations). Management fees of $2,462,296, brokerage commissions of $605,926, selling commissions and platform fees of $2,132,257, administrative and operating expenses of $428,301, custody fees and other expenses of $22,051. Interest income of $1,398,360 partially offset the Master Fund expenses allocated to the Partnership resulting in net loss after profit share of $30,876,515.
An analysis of the Master Fund’s trading gain (loss) by sector is as follows:
% Gain | ||||
Sector | (Loss) | |||
Currencies | 3.25 | % | ||
Energies | 4.72 | % | ||
Grains | (0.33 | )% | ||
Interest rates | (1.42 | )% | ||
Livestock | 0.12 | % | ||
Metals | (0.79 | )% | ||
Softs | 0.13 | % | ||
Stock indices | (18.82 | )% | ||
Trading loss* | (13.14 | )% |
* | Percentage of the Partnership Capital |
MANAGEMENT DISCUSSION – 2020
Three months ended September 30, 2020
The Partnership was profitable in the third quarter as gains from trading equity, energy and metal futures and currency forwards outpaced losses from trading interest rate and grain futures. Trading of soft commodity and livestock futures was nearly flat.
With global fiscal and monetary policy stances remaining accommodative, the economic rebound that commenced during the second half of the second quarter continued during July and August. By September, however, rising COVID-19 cases in many countries and ensuing restrictions, a tapering of fiscal support programs, uncertainty surrounding the upcoming U.S. presidential election, continued tensions between Beijing and Washington, and contentious Brexit talks led to a deceleration in economic momentum and increased turbulence in markets.
This economic environment, together with the fact that leading tech companies reported strong profits, was quite supportive of stock markets. Still, there were times when equities faced headwinds because of investors’ concerns about rising or elevated levels of coronavirus infections, the uneven pace of economic recovery and political risks.
During the quarter, Millburn’s models successfully shifted between long and short positions. For example, both long and short positions in U.S. equity futures, especially for the NASDAQ, were profitable. Trading of the EAFE and emerging markets index futures was also profitable both long and short. Long positions in Chinese, Canadian, French, German and Swedish index futures added to the gains, as did short VIX and Spanish futures trades. On the other hand, short Japanese stock index futures positions, a long British futures position and trading of the Australian index future registered partially offsetting losses.
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Throughout the quarter, crude oil prices traded in a $6 band around $40/barrel. Production control efforts from both The Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC producers and signs of economic reopening undergirded prices while the demand destruction from the COVID-19 pandemic restrained any upward impulse. Short positions in WTI crude oil, heating oil and London gasoil and trading of Brent crude oil were each fractionally profitable. A long RBOB gasoline position was also profitable in September. On the other hand, a short natural gas position posted a partially offsetting loss. Natural gas prices, after plumbing 10-year lows in the wake of the pandemic and a stubborn supply overhang, were boosted in August by strong cooling demand due to an extraordinarily hot summer in the U.S.; rising industrial demand as economies gradually emerged from lockdown; and from short covering as Hurricane Laura produced a surprise hit on critical natural gas export infrastructure.
For most of the quarter, a weaker U.S. dollar, low interest rates and safe haven demand affected the precious metals markets. Long gold and silver positions were profitable. Silver also benefitted from increased industrial demand. Short copper and aluminum positions registered partially offsetting losses in July and August, and in September, a modest U.S. dollar rebound and weakening economic activity weighed on metal prices. The Partnership experienced small losses on long silver, zinc and gold positions, further reducing the sector’s quarterly gain.
From late March into mid-September the U.S. dollar fell about 10% in volatile trading. The interest rate differential that had previously favored the U.S. dollar collapsed as the Federal Reserve (“Fed”) cut policy rates to near zero. Numerous other Fed programs, including expanded swap lines, reduced an emerging U.S. dollar shortage. The potential of the passage of a joint European fiscal program led to euro strength versus the U.S. dollar. Rising uncertainty concerning the upcoming U.S. presidential election and the strength of U.S. growth relative to that abroad also affected enthusiasm for the U.S. dollar. In September, however, the U.S. dollar did recover somewhat during the risk-off environment that characterized most of the month. Overall, short U.S. dollar positions versus euro, yen, Indian rupee, South African rand, Singapore dollar and New Zealand dollar were profitable in July and August. A short Mexican peso trade was profitable in September. A long sterling trade was profitable in July and a short sterling trade was profitable in September. Elsewhere, trading the U.S. dollar against the Russian and Polish currencies produced partially offsetting losses, especially during September.
Interest rates were volatile during the quarter. Accommodative monetary policy, declining inflation and shrinking economies globally kept downward pressure on interest rates for most of the period, although interest rates did poke higher intermittently. In August, concern about the ability of governments to fund burgeoning fiscal deficits and debt, and about the potential for future increases in inflation, underscored by the announcement of the Fed’s new long-run policy framework, pushed up global interest rates and led to a steeper yield curve in the U.S. Then, after drifting lower again, rates spiked higher in late September in the wake of the unsettling U.S. presidential debate and after Bank of England officials declined to embrace negative interest rates. Overall, trading of German, British, Australian, Canadian and U.S. interest rate futures were unprofitable. Long positions in Italian interest rate futures registered a partially offsetting profit.
Grain trading was fractionally unprofitable during the quarter. The possibility that severely hot weather in the U.S. Midwest could reduce crop yields together with Chinese buying of soybeans and a declining U.S. dollar pushed up grain prices. Short corn, wheat, soybean meal and soybean oil positions posted losses, especially during August and September. Meanwhile, a long soybean trade posted a partially offsetting profit in September.
Three months ended June 30, 2020
The Partnership was profitable in the second quarter as gains from long equity and interest rate futures positions and from trading currency forwards and grain futures outdistanced losses from trading energy, metal and soft commodity futures.
The sentiment of equity market participants improved continuously throughout the quarter in response to a steady stream of aggressive monetary and fiscal policy actions from global authorities—especially in the U.S.; surprising improvements in economic activity as economies cautiously reopened; and sporadic encouraging news concerning COVID-19 therapies and vaccines. But this overall attitude improvement was muted periodically-- and especially during the second half of June—by: evidence of new COVID-19 hotspots such as Beijing, Germany, Australia, EM and several U.S. states; the statistical reports on growth and unemployment; and the expanding tensions between the U.S. (and other many western countries) and China. Long positions in U.S. equity futures were particularly profitable, although long positions in German, French, Dutch, Chinese, Taiwanese and Korean stock futures added to the gains. A short U.K. FTSE position and trading of the Canadian equity future were also profitable, as was a short VIX trade in May. On the other hand, short positions in Japanese, Australian, Italian and Spanish equity futures and trading of the EAFE and emerging market index futures posted partially offsetting losses.
Long interest rate futures positions were profitable during the quarter. Strongly accommodative monetary policies, a plunge in global growth, and disinflationary impulses worldwide restrained interest rates across yield curves. Safe haven buying of government securities also placed downward pressure on rates. Not even the extraordinary fiscal policy efforts leading to unprecedentedly large deficits and debt/GDP levels across the globe were able to boost borrowing cost more than temporarily. Long positions in U.S., Canadian, German, French, Italian and British interest rate futures were profitable, while a long Japanese government bond future position was unprofitable.
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The U.S. dollar traded in a narrow range from the start of April until mid-May, fell about 5% into early June and edged up a bit into the end of the quarter and long euro and Swiss franc positions versus the U.S. dollar were profitable. Long positions in high yielding Polish and South African currencies relative to the U.S. dollar also produced gains. A long New Zealand dollar trade was profitable against a supportive domestic backdrop that has seen the New Zealand government announce a complete end to COVID-19 restrictions due to the virtual eradication of the virus in the country. Trading the U.S. currency against the Brazilian real, Singapore dollar and Turkish lira was also profitable during the quarter. On the other hand, the Aussie dollar, which had fallen sharply during the first quarter of 2020, rebounded in April and a short position was unprofitable. Long U.S. dollar trades versus the currencies of Norway, Chile and Colombia were also unprofitable.
Ample grain supplies globally continue to weigh on prices and short wheat positions and trading of corn were profitable in June. A reduction in demand for corn to make ethanol pushed stockpiles higher. Meanwhile, trading of the soybean complex was slightly unprofitable.
Energy markets were buffeted by conflicting forces during the second quarter. On the one hand, the massive COVID-19 demand shock saw a collapse of WTI prices from near $61/barrel at the start of 2020 to only $12/barrel near the end of April—having actually fallen briefly below zero in mid-April. On the other hand, supply reductions from the Organization of the Petroleum Exporting Countries (“OPEC”) via agreements and from non-OPEC producers in response to plunging market prices helped prices to recover sharply in May and June to around $40/barrel, as market participants were encouraged by signs of economic reopening. Overall, losses from trading WTI crude, Brent crude, RBOB gasoline and heating oil outpaced a small profit from a short natural gas trade.
Copper prices, which had fallen sharply earlier this year, rebounded during the quarter among a weaker dollar and encouraging signs of economic reopening, particularly from Asia, and the Partnership’s short copper positions were unprofitable. Short positions in other industrial metals—aluminum, nickel, zinc, and platinum—also registered losses and were reduced or reversed. The Partnership saw a gain on a long gold position in April. Trading of silver was also fractionally profitable.
Finally, trading of sugar and cotton futures were each slightly unprofitable.
Three months ended March 31, 2020
The Partnership posted a sizable loss in the first quarter as the COVID-19 pandemic and its economic impacts spread across the globe, roiling financial and commodity markets. The onset of the oil price war between Saudi Arabia and Russia in early March added significantly to the market turmoil. Losses from long equity futures positions and, to a much lesser extent, from trading interest rate and metal futures far outpaced the profits from trading energy futures, currency forwards and soft and agricultural commodity futures.
Equity futures, which had been underpinned early in January by the U.S.-China trade deal, accommodative global monetary policy and the conservative election victory in Great Britain, collapsed as COVID-19 spread from China to the Middle East to Europe to the U.S.A. and became a global pandemic. As the potential scope and duration of the damage to global demand became evident, the selling of equities and other financial investments cascaded violently. In response, strong, coordinated and unprecedented monetary and fiscal measures were implemented by countries across the globe. For example in the U.S., the Federal Reserve (the “Fed”), at two emergency meetings, cut interest rates by 1.5% to near zero; the Fed also expanded the magnitude and scope of its quantitative easing (“QE”), swap lines and other lending facilities well beyond that seen during the Global Financial Crisis; and a fiscal stimulus package measured at about 10% of GDP was assembled in about a week and was added to two smaller packages announced early in March. While these policy efforts did give a fillip to financial markets and help to stabilize them, the damage to equity prices and markets remained large. Broad-based losses were sustained on a short vix trade and on long positions in U.S., Canadian, European, British, Japanese, non-Japan Asian and emerging markets equity index futures, especially in the second half of the quarter.
Interest rates on government debt were buffeted by a variety of cross currents during the quarter including: the actual and anticipated negative impact of the pandemic on global growth; a flight to safety that boosted demand for government debt; a rush for liquidity and U.S. dollars that at times led to a forced liquidation of government debt; 27 central banks cutting official rates 68 times during March, according to centralbankrates.com; and central banks creating numerous massive liquidity provision and QE programs in order to stabilize struggling financial markets globally. Overall, short positions in U.S., German and Canadian note and bond futures posted losses and were reversed to long positions. Trading of British Gilts, long positions in French and Australian bond futures and a long position in the short-term euribor future were also unprofitable, particularly in mid-March, when market participants sought liquidity. Long positions in short-term eurodollar, British, Italian and Australian interest rate futures and in Japanese government bond futures produced partially offsetting profits. A long position in the 5-year U.S. note in January was also profitable.
Trading of metal futures was fractionally unprofitable. Industrial metal prices were pummeled in response to the actual and expected growth-reducing impacts of COVID-19. The price of silver, which had been supported for a time as a safe haven precious metal, succumbed to profit-taking and to a dramatic weakening in industrial demand and a long position was unprofitable. A long platinum position was also unprofitable. On the other hand, short copper, aluminum, nickel and zinc positions were profitable and a long gold trade benefitted from safe haven demand and also posted a gain.
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Oil prices fell to their lowest levels in 17 years as demand collapsed due to shelter-in-place orders, travel bans and other efforts to mitigate the pandemic, and as supply surged due to the unrelenting price war between Saudi Arabia and Russia. The price of WTI crude oil, which had eased down from $61/barrel at the end of 2019 to about $54/barrel on February 20, plunged precipitously thereafter, falling to under $20/barrel on March 30. Short positions in Brent crude, WTI crude, RBOB gasoline, London gas oil, heating oil and natural gas were highly profitable, particularly in March.
Foreign exchange rates were buffeted by a variety of cross currents from interest rate, liquidity, safe haven and energy price influences during the quarter. Performance in these instruments was mixed but slightly profitable. Long U.S. dollar trades against the Brazilian real, Russian ruble, Aussie dollar and a few other emerging market currencies were profitable. A long euro/short Norway trade was also profitable in the wake of the oil price collapse. On the other hand, long U.S. dollar trades versus the euro, yen, Singapore dollar, and Swedish krona were unprofitable, as was trading versus the British, Canadian, Indian, South African, Norwegian, Polish and New Zealand currencies.
Trading of soft and agricultural commodity futures was fractionally profitable.
OFF-BALANCE SHEET ARRANGEMENTS
Neither the Partnership nor the Master Fund engages in off-balance sheet arrangements with other entities.
CONTRACTUAL OBLIGATIONS
Neither the Partnership nor the Master Fund enters into any contractual obligations or commercial commitments to make future payments of a type that would be typical for an operating company or that would affect its liquidity or capital resources. The Partnership’s sole business, through its investment in the Master Fund, is trading futures, forward currency, spot and swap contracts, both long (contracts to buy) and short (contacts to sell). All such contracts are settled by offset, not delivery. Substantially all such contracts are for settlement within four months of the trade date and substantially all such contracts are held by the Master Fund for less than four months before being offset or rolled over into new contracts with similar maturities. The financial statements of the Master Fund present a condensed schedule of investments setting forth open futures, forward and other contracts at September 30, 2021 and December 31, 2020.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 4. CONTROLS AND PROCEDURES
The General Partner, with the participation of the principal executive officers and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the period covered by this quarterly report, and, based on its evaluation, has concluded that these disclosure controls and procedures are effective. There were no changes in the General Partner’s internal controls over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the General Partner’s internal controls over financial reporting with respect to the Partnership.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 1A. Risk Factors
Not required.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Pursuant to the Partnership’s Third Amended and Restated Limited Partnership Agreement (the “Partnership Agreement”), the Partnership may sell Units at the beginning of each calendar month. On July 1, 2021, August 1, 2021 and September 1, 2021 the Partnership sold Units to new and existing limited partners of $295,000, $297,000 and $2,362,000 respectively. There were no underwriting discounts or commissions in connection with the sales of the Units described above.
Each of the foregoing Interests were offered and sold only to “accredited investors” as defined in Rule 501(a) under the Securities Act of 1933 as amended (the “1933 Act”), in reliance on the exemption from registration provided by Rule 506(b) under the 1933 Act.
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(b) Pursuant to the Partnership’s Partnership Agreement, investors may redeem their Units at the end of each calendar month at the then current month-end net asset value. The redemption of Units has no impact on the value of Units that remain outstanding, and Units are not reissued once redeemed.
The following table summarizes the redemptions by Series A, Series C, and Series D limited partners during the three months ended September 30, 2021. There were no Series B redemptions.
Series A | Series C | Series D | |||||||||||||||||||||||
Units | NAV | Units | NAV | Units | NAV | ||||||||||||||||||||
Date of Withdrawal | Redeemed | per Unit | Redeemed | per Unit | Redeemed | per Unit | |||||||||||||||||||
July 31, 2021 | (329.4490 | ) | $ | 1,194.44 | (125.8901 | ) | $ | 1,469.62 | - | $ | 1,374.38 | ||||||||||||||
August 31, 2021 | (153.6717 | ) | 1,160.58 | - | 1,430.34 | (364.1588 | ) | 1,343.05 | |||||||||||||||||
September 30, 2021 | (208.8358 | ) | 1,117.59 | (197.4120 | ) | 1,379.66 | - | 1,294.65 | |||||||||||||||||
Total | (691.9565 | ) | (323.3021 | ) | (364.1588 | ) |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are included herewith:
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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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.
By: | Millburn Ridgefield Corporation, | |
General Partner |
Date: November 12, 2021 | |
/s/ Michael W. Carter | |
Michael W. Carter | |
Vice-President | |
(Principal Accounting Officer) |
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