The Campbell Global Trend Fund L.P. (the “Registrant” or “the Fund”) was formed as a Delaware series limited partnership on December 1, 2009. The Registrant operates as a commodity investment pool, whose purpose is to trade speculatively in the U.S. and international futures and forward markets. Specifically, the Fund trades in a diverse array of global assets, including global interest rates, stock indices, currencies and commodities.
The general partner and trading advisor of the Registrant is Campbell & Company, Inc. (“Campbell & Company”). In addition to making all trading decisions in its capacity as trading advisor, Campbell & Company conducts and manages all aspects of the business and administration of the Registrant in its role as general partner. Campbell & Company uses a systematic trading approach combined with quantitative portfolio management analysis and seeks to identify and profit from price movements in futures and forward markets. Multiple trading models are utilized across most markets traded. Each model analyzes market movements and internal market and price configurations in order to generate signals to be executed through a variety of execution platforms.
As a registrant with the Securities and Exchange Commission, the Fund is subject to the regulatory requirements under the Securities Act of 1934. As a commodity investment pool, the Fund is subject to the provisions of the Commodity Exchange Act, regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of the various commodity exchanges where the Fund executes transactions. Additionally, the Fund is subject to the requirements of futures commission merchants (brokers) and interbank market makers through which the Fund trades.
The general partner has formed the Fund as a series limited partnership pursuant to and in accordance with the provisions of the Delaware Revised Uniform Limited Partnership Act (6 Del. C. § 17-101 et seq., as amended from time to time, the “Act”). The Act provides for the limitation of liability of each Series to the debts, liabilities, obligations and expenses of such Series and not those of any other Series or the Fund in general. The Fund will trade pursuant to the Campbell Trend Following Portfolio. The Trend Following Portfolio applies traditional and alternative trend following methods to systematically exploit future market moves through the use of price information. Some trend following strategies trade all markets while others are specific to certain sectors or factors.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Fund’s significant accounting policies are described in Note 1 of the Financial Statements.
The Fund will record all investments at fair value in its financial statements, with changes in fair value reported as a component of change in unrealized trading gains (losses) in the Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, estimates are involved in determining fair value in the absence of an active market closing price (e.g. forward contracts which are traded in the inter-bank market).
The selling agents will offer the Fund Units during the initial offering period, and thereafter through the sale of Units offered pursuant to the continuing offering. The Fund does not intend to raise any capital through borrowing. Due to the nature of the Fund’s business, it will make no capital expenditures and will have no capital assets, which are not operating capital or assets.
Most United States commodity exchanges limit fluctuations in futures contracts prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Fund from promptly liquidating unfavorable positions and subject the Fund to substantial losses which could exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the Fund may not be able to execute futures trades at favorable prices if little trading in such contracts is taking place. Other than these limitations on liquidity, which are inherent in the Fund’s futures trading operations, the Fund’s assets are expected to be highly liquid.
The Fund’s assets will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested in or loaned to Campbell & Company or any affiliated entities.
The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Fund will trade in futures and forward contracts and therefore will be a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Fund, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Fund at the same time, and if the Fund’s trading advisor was unable to offset futures interests positions of the Fund, the Fund could lose all of its assets and the Limited Partners would realize a 100% loss. Campbell & Company, as general partner of the Fund (who also acts as trading advisor) minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30%.
In addition to market risk, in entering into futures and forward contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Fund. The counterparty for futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.
Disclosures About Certain Trading Activities that Include Non-Exchange Traded Contracts Accounted for at Fair Value
The Fund invests in futures and forward currency contracts. The fair value of futures (exchange-traded) contracts is determined by the various futures exchanges, and reflects the settlement price for each contract as of the close of the last business day of the reporting period. The fair value of forward (non-exchange traded) contracts is extrapolated on a forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) of the last business day of the reporting period.
Results of Operations
The returns for the nine months ending September 30, 2012 for Class A, Class B, Class C and Class D were 0.67%, 0.83%, 1.75% and 2.33%, respectively. The returns for the nine months ending September 30, 2011 for Class A and Class C were (1.22)% and 0.19%, respectively. The returns for Class B and Class D for the period May 1, 2011 (inception of trading) through September 30, 2011 were (5.03)% and (3.79)%, respectively. During the nine months ended September 30, 2012 and 2011, the Fund accrued advisory and general partner fees in the amount of $343,417 and $393,112 respectively, and paid advisory and general partner fees in the amount of $354,716 and $392,039, respectively. Performance fees were accrued in the amount of $37,865 and $2,941, respectively, and paid performance fees in the amount of $37,865 and $0, respectively.
2012 (For the Nine Months Ending September 30)
Of the 2012 year-to-date increase of 0.67% for Class A, approximately 5.10% was due to trading gains (before commissions) and approximately 0.08% due to investment income, offset by approximately 4.51% due to brokerage fees, advisory fees, general partner fees, selling agent fees, performance fees, offering costs and operating expenses borne by Class A.
Of the 2012 year-to-date increase of 0.83% for Class B, approximately 5.10% was due to trading gains (before commissions) and approximately 0.10% due to investment income, offset by approximately 4.37% due to brokerage fees, advisory fees, general partner fees, selling agent fees, offering costs and operating expenses borne by Class B.
Of the 2012 year-to-date increase of 1.75% for Class C, approximately 5.10% was due to trading gains (before commissions) and approximately 0.08% due to investment income, offset by approximately 3.43% due to brokerage fees, advisory fees, general partner fees, performance fees, selling agent fees, offering costs and operating expenses borne by Class C.
Of the 2012 year-to-date increase of 2.33% for Class D, approximately 5.10% was due to trading gains (before commissions) and approximately 0.09% due to investment income, offset by approximately 2.86% due to brokerage fees, advisory fees, general partner fees, performance fees, offering costs and operating expenses borne by Class D.
An analysis of the 5.10% year-to-date trading gain by sector is as follows:
| Sector | | % Gain (Loss) | |
| Commodities | | | 0.35 | % |
| Currencies | | | (4.20 | ) |
| Interest Rates | | | 6.78 | |
| Stock Indices | | | 2.17 | |
| | | | 5.10 | % |
2012 began on a positive note, providing much needed relief to market participants across most sectors. Improving global economic data, progress with the European sovereign debt crisis, and continued central bank support drove prices higher in many markets, with the notable exception of the U.S. Dollar. The Fund's models were well positioned for these moves, recording gains in all four sectors with fixed income and stock index futures leading the way. Rising global bond prices in the U.S., Europe and Japan drove returns; the interest rates sector gained over 1% for the Fund as yields continued to drop on further monetary easing. Long positions in U.S. and European equity indices were the major source of return in the stock index sector, adding approximately 1% to the Fund, as prices moved higher on positive global manufacturing data, improving sentiment in Europe, and the Fed’s pledge to keep interest rates low until 2014. The commodity sector traded flat recording gains on the Fund’s short position in natural gas offset by losses in industrial metals. The foreign exchange sector was profitable, driven by long positions in the commodity linked currencies of Australia and New Zealand.
February continued to exhibit a sense of global optimism that began 2012. Positive data in global economies and Central Bank support in China, Europe and Japan pushed equity prices and many commodities higher. Fixed income prices and the U.S. Dollar against the G10 currencies, with the notable exception of the Japanese Yen, fell as investors moved towards risk assets. The Fund profited in three of the four major sectors traded, experiencing losses in fixed income, with commodities, equity indices and foreign exchange driving gains. Rising petroleum prices were a major contributor to the Fund’s performance as tensions with Iran, stronger U.S. economic data, and a tightening global supply environment led to the rally in prices, adding almost 2% to the portfolio. Additional gains were recorded in equity indices from a net long position in stock index futures as the upward trend continued. Equity market gains were driven by continued improvement in manufacturing, employment and housing data, as well as friendly Central Bank policies and the approval of the second Greek bailout package. Other gains stemmed from currency trading, where the Japanese Yen was the major contributor. The Fund’s models quickly reacted to a changing trend in the Yen, a result of Japan’s trade balance ending 2011 in deficit territory for the first time in 30 years, and profited on the 6.5% loss in the currency’s value against the Dollar. A portion of these gains were offset by losses experienced in the fixed income sector as investors rotated out of the safety of government debt.
March ended an overall profitable first quarter of 2012 with a pullback in performance. The majority of losses stemmed from a mid-month reversal of the longstanding upward trend in fixed income prices. Additional losses in foreign exchange trading were more than offset by gains in the commodities and equity indices sectors. The diversity of markets held in the Fund helped to mitigate losses as the Fixed Income sector experienced particularly high volatility. Better-than-expected economic data and the U.S. FOMC raising their assessment of the U.S. economy reduced the market’s expectation of additional Fed support and caused a move away from safe haven assets. Fixed income prices tumbled across the curve and the Fund’s long position in the sector suffered. Concerns over demand for commodities also caused losses for the Fund as signs of a slowing economy in China caused the depreciation of the commodity-linked currencies of Australia and New Zealand. Gains in equity indices and energies offset some losses as the Fed reaffirmed its easy-money policy, sending stocks higher, and the existing upward trend in oil and downward trend in natural gas extended.
A profitable April began the second quarter of 2012 with gains coming from the Fixed Income sector. The other three sectors, commodities, foreign exchange, and stock indices, detracted from the Fund’s performance. Markets continue to exhibit high volatility and a high sensitivity to headlines in the news, creating both challenges and opportunities for participants. Softer economic data, increased expectations of action from central banks, and continued uncertainty in Europe pushed fixed income markets higher in April, leading gains in the Fund’s portfolio. A portion of these gains were offset by losses experienced in the equity markets from long positions in global stock index futures. Additional losses were recorded in the commodity markets from the Fund’s long positions in the energy markets as petroleum prices consolidated through the month of April with gasoline underperforming the complex. The price action in energies revealed a pause in the geopolitical fears that have gripped the markets for much of the year as well as a pause in the excitement over the better than expected economic performance in the United States through Q1. Losses were also experienced in the foreign exchange markets from the Fund’s short positions in the Japanese Yen. The value of the Yen strengthened by almost 3% as the Bank of Japan, which was under pressure to deliver more easing at the end of the month, and broadly disappointed the markets.
The Fund’s strategies recorded gains in three of four sectors traded in May. Continued problems in Europe and signs of a slowing global economy helped push safe haven asset prices higher and caused risk assets to fall. The fixed income, foreign exchange, and commodity sectors were profitable for the Fund while the equity indices sector detracted from performance. The primary source of returns in May came from the fixed income sector. Weaker economic numbers and persisting uncertainty across the euro zone drove many fixed income yields to record lows, negative in some cases, and benefited the Fund’s long position in global government bond futures. Increased safe haven demand produced additional gains in the foreign exchange sector from the Fund’s long positions in the U.S. Dollar, particularly vs. the Euro currency. The U.S. Dollar reached its highest level since September 2010 with the Dollar Index (DXY) up over 5% on the month. Ongoing efforts by the Bank of Japan and the Swiss National Bank to limit their currency’s strength helped bolster the appeal of the Dollar. Smaller gains were recorded in the commodity markets from the Fund’s short positions in cotton as the soft commodity sold-off all month and ended the month down 21.5% on increasing global supply and falling demand in China. Additional gains in the commodity markets came from short positions in base and precious metals. A portion of these gains was offset by losses in the equity markets from positions in U.S. and global stock index futures as the markets sold off aggressively on the back of concerns about a possible Greek exit from the European Union, Spain’s struggle to recapitalize its’ banks, and softer global economic data.
The Fund experienced losses in all sectors during the month of June, ending the quarter relatively flat on a gross basis. Global market moves caused by unexpected policy responses from the E.U. summit on the final day of the month reversed gains in profitable sectors and exacerbated losses in unprofitable sectors. Foreign exchange markets led losses in June from a long position in the U.S. Dollar, particularly against the Euro. The Euro rallied into month-end on market optimism from the E.U. summit after European leaders agreed to recapitalize banks directly from the bailout fund and to remove ESM seniority for Spain. These developments, combined with the formation of a government in Greece, caused a decline in safe haven asset prices and recorded losses in the Fund’s long global government bond and short European stock index positions. In the commodity markets, natural gas prices increased on warmer-than-normal weather, low storage injection numbers from the EIA, and a tropical storm in the Gulf, leading to losses from the Fund’s short position. The rally in coffee prices on supply concerns out of Brazil also led to losses from the Fund’s short position in the soft commodity.
During the month of July, the Fund’s trend following strategies recorded gains in the fixed income markets from a long position in global government bond futures. Weaker than expected global economic data and heightened expectations for central bank action pushed prices higher. Markets were pricing in central bank accommodation from the U.S. Fed, the European Central Bank (ECB), and the People's Bank of China (PBOC) at month end. Additional gains were recorded in the commodity markets from long positions in corn, wheat and soybeans as hot, dry weather in the U.S. Mid-West sent the gain markets soaring to all-time highs. The Fund was long the complex coming into the month and was able to take advantage of the surging prices brought on by the severe drought conditions. In foreign exchange markets, the Fund's long position in the U.S. Dollar vs. the Swiss Franc and the Euro Currency was profitable in July. The Euro made a 25 month low at 1.2043 after the ECB cut both the refinancing and the deposit rate in response to the ongoing crisis. The Swiss Franc also weakened as the Swiss National Bank continued to defend the 1.2000 EUR/CHF floor.
During the month of August, the Fund’s strategies experienced losses in the foreign exchange, fixed income, and commodity sectors, partially offset by gains in equity indices. Increased central bank activity in Europe and the U.S. along with better-than-expected economic data in the U.S. caused significant moves in several global markets, driving losses in the Fund’s trend following strategies. The Fund’s non-trend following strategies helped to mitigate losses, particularly in fixed income and equity indices. In the foreign exchange markets, the Fund’s short positions in the Swiss Franc and the Euro currency vs. the U.S. Dollar suffered as rising expectations of ECB action threatened to remove some of the tail risks around the sovereign debt crisis. The Swiss Franc emerged as one of the strongest G10 currencies for the month (+2.9%) as the Swiss National Bank reserves made new highs in an effort to defend the 1.2000 floor in EUR/CHF. Additional losses were recorded in the commodity markets from our short positions in base metals and short position in cotton. Prices increased across the base metals on a general covering of short positions in risk assets due to the anticipation of further central bank action. Deteriorating U.S. crop conditions, Indian production worries, and speculation of Chinese purchases caused an increase in cotton prices and subsequent losses in the Fund’s short position in the soft commodity. Smaller losses came from fixed income markets, resulting in part from Mario Draghi’s “whatever it takes” speech, with partially offsetting gains recorded from long equity indices positions in the sector. Moves in the fixed income and equity indices sectors resulted generally from anticipation of ECB action and improving U.S. economic data.
The majority of September gains in the Fund came from the equity indices sector in both trend and non-trend following strategies. The Fund’s long positions in global stock index futures benefited from rising equity index prices on the back of several central bank announcements of new quantitative easing measures, China’s proposal for new fiscal stimulus, and the German high court’s ruling to uphold the constitutionality of the Euro-zone’s permanent bailout mechanism. Additional gains were recorded in foreign exchange trading, driven mainly by non-trend strategies, from the Fund's short positions in the U.S. Dollar vs. a basket of currencies. The DXY index lost 2% in September as unlimited balance sheet expansion in the U.S. led investors to shift into other currencies like the New Zealand Dollar. A portion of these gains were offset by losses experienced by trend following strategies in the fixed income markets from the Fund's long position in global government bond futures. During a volatile month for bond prices, the U.S. 30 year contract finished the month almost 2 full points lower, as the market began to worry about the prospects of inflation. Additional losses were recorded by the Fund's trend following models in the commodity markets from short positions in base metals as prices rallied sharply following the ECB’s commitment to buy unlimited bonds.
2011 (For the Nine Months Ending September 30)
Of the 2011 year-to-date decrease of (1.22)% for Class A, approximately (4.83)% was due to brokerage fees, advisory fees, general partner fees, selling agent fees, offering costs and operating expenses borne by Class A, offset by approximately 3.56% due to trading gains (before commissions) and approximately 0.05% due to investment income.
Of the period from May 1, 2011 (commencement of trading) through September 30, 2011 decrease of (5.03)% for Class B, approximately (1.30)% was due to trading losses (before commissions) and approximately (3.75)% was due to brokerage fees, advisory fees, general partner fees, selling agent fees, offering costs and operating expenses borne by Class B, offset by approximately 0.02% due to investment income.
Of the 2011 year-to-date increase of 0.19% for Class C, approximately 3.56% was due to trading gains (before commissions) and approximately 0.05% was due to investment income, offset by approximately (3.42)% due to brokerage fees, advisory fees, general partner fees, selling agent fees, offering costs and operating expenses borne by Class C.
Of the period from May 1, 2011 (commencement of trading) through September 30, 2011 decrease of (3.79)% for Class D, approximately (1.30)% was due to trading losses (before commissions) and approximately (2.51)% was due to brokerage fees, advisory fees, general partner fees, offering costs and operating expenses borne by Class D, offset by approximately 0.02% due to investment income.
An analysis of the 3.56% year-to-date trading loss by sector is as follows:
| Sector | | % Gain (Loss) | |
| Commodities | | | (6.05 | )% |
| Currencies | | | (0.81 | ) |
| Interest Rates | | | 17.80 | |
| Stock Indices | | | (7.38 | ) |
| | | | 3.56 | % |
2011 started with global equities trending higher, fueled by improving U.S. labor market conditions, a “pro-business” move toward the center by President Obama, stronger corporate earnings and a general rotation from fixed income into stocks. The Fund’s long equity positions made the sector the best performer for the month of January, in the face of such a rising global equity environment. Commodity trading also produced gains for the month of January from the Fund’s long positions in agricultural and energy contracts. A number of energy contracts reached 24 month highs on strong global demand due to a number of factors, including, cold weather in the U.S. / U.K. and civil unrest in the Middle East. Cotton started 2011 up over 16% for the month of January on surging demand from the world’s biggest consumer, China. Currency trading on the month proved difficult as the Fund’s short position in the U.S. Dollar generated losses as emerging market risk aversion may have been prompted by the Egyptian anti-government protests. Additional losses were recorded in the fixed income markets from the Fund’s long position in short-term European rates. The bond market was choppy during the first part of January until concerns were raised about Euro-zone inflation, contributing to a sell-off in short-term rates as market participants began pricing in future rate hikes.
In February, geopolitical concerns, centering on the growing Middle East/North African ("MENA") populist uprising, may have negatively affected the commodity markets. This regional tension may have generated significant price movements in the energy sector fueling gains for the Fund. Precious Metals, including gold and silver, were also strong contributors, along with soft commodities such as cotton (+17% during February) and coffee as they continued their upward trends. Additional gains were recorded in equity trading due partially to improving macroeconomic data supporting the global recovery theme. While some of the major currencies rallied during the month, others like the New Zealand Dollar fell significantly on the devastation of a massive earthquake in the Christchurch region. In the aggregate, currency trading was marginally positive on the month for the Fund. Fixed Income trading finished slightly negative as price action was choppy across the globe, mainly from better economic data in the early part of the month followed by risk aversion in the second half of the month.
The “V–shaped” behavior in most sectors during March may have been caused by global stock market volatility compounded by the devastating earthquake and resulting tsunami in Japan, followed by upside surprises to manufacturing data and other economic activity as the month came to a close. Global stock markets experienced significant volatility as the MENA unrest and Europe’s sovereign debt crisis both worsened prior to the crisis in Japan that concluded with threats of a nuclear reactor emergency. While the Nikkei finished down approximately 8% for March, the U.S. stock market was relatively unchanged despite large mid-month swings. The Fund’s models adjusted to the abrupt price swings by reducing long equity exposure over 50% (region specific) by mid-month across the U.S., Europe and Asia. Stock indices trading was the worst performing sector for March. Commodities were negatively impacted by base metal prices. Gains from long positions in energies and precious metals were not enough to overcome losses in nickel, copper and corn. Currency trading also proved challenging as Central Banks intervened in response to excess volatility and disorderly movements in exchange rates that may have been perceived as having adverse implications for economic and financial stability. In particular, the Fund’s short position in the Japanese Yen suffered as a result of the repatriation of Yen back to Japan. While risk exposures were light in fixed income trading, small losses were incurred in both short-term and long-term rates due to choppy market price action.
While March’s tumultuous markets were highlighted by the tragic events in Japan, April’s theme revolved around a persistently weaker U.S. Dollar coupled with a strong “risk on” appetite in global stock markets. Irrespective of the continued unrest in the Middle East/North Africa, Goldman Sachs’ warning that the commodities boom may be running out of steam and oil at multi-year highs, the bulls prevailed on strong M&A activity, a strong start to the earnings season, and the U.S. Federal Reserve’s continued pledge to keep interest rates low for an “extended period.” The U.S. Dollar Index experienced its largest monthly decline since September of last year as Bernanke maintained an accommodative stance in the U.S., while the European Central Bank raised rates to fight inflation. Additional downward pressure came in the form of an S&P downgrade, mid-month, to the U.S. long-term credit outlook. The Fund recorded solid gains in the currency sector, particularly against the Swiss Franc and commodity-linked currencies such as the Australian Dollar and the New Zealand Dollar. Commodity trading also produced substantial gains as geopolitics contributed to a strong rally in the petroleum complex. Precious metals were also solid performers as Silver came close to its all-time high when the infamous Hunt brothers attempted to corner the market in 1980. In stock indices, the Fund generally increased its net long exposure as bullish trends reasserted themselves following a chaotic March, while only maintaining a marginal short exposure in Japan. Trading in fixed income yielded flat results as gains in long positions were offset by losses from short positions.
In many ways, the commodity markets took center stage in May. The petroleum complex sold off substantially on May 5th, despite the lack of any oil-related fundamental data. In addition, precious metals saw a significant decline with the price of silver dropping 24%, giving back the entire April rally. While the Fund suffered losses in these sectors, our models significantly reduced long commodity exposure on the abrupt reversal in price action and spike in volatility throughout the month. Trading in global equities also generated losses on softer economic data, Wall Street lowering U.S. growth forecasts, and renewed European sovereign debt concerns mainly focused on Greece. While positions have been reduced in this sector, regional risk was rotated out of Europe and back to the U.S. Losses were also recorded in currency trading as the U.S. Dollar rallied against most major currencies. The Fund's long Euro position produced the biggest currency loss, as the European Central Bank disappointed expectations of rate hikes at its May policy meeting. Fixed income trading produced strong positive results, helping to mitigate losses in riskier assets as the flight-to-quality theme was dominant in May.
The Greek debt crisis continued to dominate price movement in June, leading to the eventual passage of an austerity plan at month-end. In addition, the U.S. Federal Reserve, which continues to expect that economic conditions are likely to warrant exceptionally low interest rates for an extended period, gave no hint of a new “QE3” program. Commodity trading was difficult in June, particularly in the energy complex, as prices continued to fall from late April/early May highs. Concerns about the European sovereign debt crisis, discord with OPEC, and an unexpected and controversial use of U.S. and European strategic petroleum reserves by the IEA (International Energy Agency) and the DOE (Department of Energy) weighed heavy on prices. Additional losses were recorded in precious and base metals. Trading in global equities also produced negative results as stock markets around the world declined on Greek debt concerns and weak economic data. While the Fund’s models generally reduced overall long stock index exposure throughout the month, concentrations remained in the U.S. and Europe with mixed positioning in Asia. Risky assets rallied and bond prices fell across the globe during the last few days of the month after the austerity package in Greece was finally passed. Small losses were recorded in fixed income trading, particularly on the short-end of the curve. Foreign exchange markets were largely unchanged in June, despite a rollercoaster of headlines that caused the currency markets to fluctuate intra-month. The Fund continues to maintain a short U.S. Dollar exposure versus most major currencies.
During the month of July, the markets were fixated on the ongoing sovereign debt crisis in both Europe and the U.S. As risky assets suffered, bond prices were driven higher from investors flocking to the safety of fixed income, yielding strong gains for the Fund’s global long position. While U.S. Treasuries finished the month up over 2%, U.K. Gilts finished up 4%, German Bunds were up 3.5%, Japanese Bonds closed up 5% and Canadian Bonds increased by 2.5%. Additional gains were recorded in foreign exchange trading as the U.S. Dollar continued its downward trend against most major currencies. The U.S. Dollar, in particular, fell to new all-time lows against the Swiss Franc and the New Zealand Dollar, some of the best performing markets for the Fund in July. Commodity trading was also strongly positive in July, particularly from precious metals, as safe-haven buying supported prices in gold and silver. Additional profits came from soft commodities as sugar continued its upward trend, gaining 12% in July, on signs that Brazil’s production would not match expectations. The base metals and energy sector yielded small gains, while grains yielded small losses. The stock index sector was the only losing sector during the month as European sovereign debt remained a concern, economic data was mixed to weaker–than-expected, and the U.S. debt-ceiling and deficit-reduction debate took center stage. While the Fund reduced net long exposure in Europe, position exposure increased in the Pacific Rim and in North America.
Volatility was extremely elevated in August stemming mainly from the S&P downgrade of the United States Triple-A credit rating after weeks of contentious political debate. Strong gains in fixed income were recorded during the month as risk appetite diminished sending yields in both the U.S. and European fixed income markets lower. However, the reduction in risk appetite was a primary driver for losses in currency trading, stock indices and commodities. As a consequence of market volatility, European Union regulators implemented restrictions on short selling in various stock indices. The Fund’s trading is also subject to these restrictions and appropriate action was taken to be in compliance. While the Fund was still able to short certain stock index contracts in Europe, others have been temporarily removed from the portfolio. The Fund continued to take advantage of stock market volatility (indirectly) through trading in currencies, bonds and commodities.
The markets were in risk aversion mode in September as the pressure of implementing fiscal austerity in the Eurozone continued. Negative sentiment in macroeconomic growth stoked fears of recessions and overwhelmed some tentative signs of optimism. The Fund was able to benefit from the flight out of risky assets as bond prices pushed higher. Equity Indices also yielded gains in the Fund, primarily from short positions in Europe and Asia as stocks globally finished lower. These gains were not enough to offset losses experienced in the other sectors. Risk assets struggled during the month, and the recipient of the need for perceived safety was the U.S. Dollar which was up nearly 6% for the month. The Fund, having been positioned with the prevailing trend of a weaker U.S. Dollar, recorded its largest losses in the Foreign Exchange sector as a result of the Greenback’s rally. The Fund’s models adjusted positioning in response to the dramatic move; however, the losses in this sector were difficult to offset. Commodities amplified the theme of bearish global macroeconomic conditions resulting in overall losses in the sector for the Fund. Precious metals reversed significantly, with nearly a 28% decline in silver and 11% in gold, perhaps implying deflation was on the horizon. Base metal positions helped dampen losses from energy trading, despite some well positioned shorts during the month. Uncertainty continues to plague the market which can prove challenging for a portfolio that has trend-following at its core.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Introduction
Past Results Not Necessarily Indicative of Future Performance
The Fund is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or a substantial amount of the Fund’s assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund’s main line of business.
Market movements result in frequent changes in the fair market value of the Fund’s open positions and, consequently, in its earnings and cash flow. The Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund’s open positions and the liquidity of the markets in which it trades.
The Fund rapidly acquires and liquidates both long and short positions in a wide range of difference markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund’s past performance is not necessarily indicative of its futures results.
Standard of Materiality
Materiality as used in this section, “Quantitative and Qualitative Disclosures About Market Risk,” is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage and multiplier features of the Fund’s market sensitive instruments.
Quantifying the Fund’s Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Fund’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact (such as the dollar amount of maintenance margin required for market risk sensitive instruments held at the end of the reporting period).
The Fund's risk exposure in the various market sectors traded is estimated in terms of Value at Risk ("VaR"). The Fund estimates VaR using a model based upon realized returns (with a confidence level of 97.5%) which involves constructing a distribution of actual daily changes in the value of a trading portfolio. The VaR model takes into account linear exposures to risks, including equity and commodity prices, interest rates, foreign exchange rates, and correlation among these variables. The changes in portfolio value are based on daily percentage changes observed in key market indices or other market factors to which the portfolio is sensitive. The Fund's VaR at a one day 97.5% confidence level of the Fund's VaR corresponds to the negative change in portfolio value that, based on observed market risk factors, would have been exceeded once in 40 trading days or one day in 40. VaR typically does not represent the worst case outcome.
The Fund uses approximately one quarter of realized portfolio's returns to estimate volatility. Normal distribution assumption is then applied to the volatility to generate the return distribution. The VaR is the 2.5 percentile of this distribution.
The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The current methodology used to calculate the aggregate VaR represents the VaR of the Fund’s open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes.
The Fund’s VaR computations are based on the risk representation of the underlying benchmark for each instrument or contract and does not distinguish between exchange and non-exchange dealer-based instruments. It is also not based on exchange and/or dealer-based maintenance margin requirements.
VaR models, including the Fund’s, are continually evolving as trading portfolios become more diverse and modeling techniques and systems capabilities improve. Please note that the VaR model is used to numerically quantify market risk for historic reporting purposes only and is not utilized by the Fund in its daily risk management activities. Please further note that VaR as described above may not be comparable to similarly titled measures used by other entities.
Because the business of the Fund is the speculative trading of futures and forwards, the composition of the Fund’s trading portfolio can change significantly over any given time period, or even within a single trading day, which could positively or negatively materially impact market risk as measured by VaR.
The Fund’s Trading Value at Risk in Different Market Sectors
The following tables indicate the trading Value at Risk associated with the Fund’s open positions by market category as of September 30, 2012 and December 31, 2011 and the trading gains/losses by market category for the nine months ended September 30, 2012 and the year ended December 31, 2011.
| Market Sector | | Value at Risk* | | | Trading Gain/(Loss)** | |
| | | 0.67 | % | | | 0.35 | % |
| Currencies | | | 0.71 | % | | | (4.20 | )% |
| Interest Rates | | | 1.30 | % | | | 6.78 | % |
| Stock Indices | | | 0.95 | % | | | 2.17 | % |
| | | | | | | | | |
| Aggregate/Total | | | 1.82 | % | | | 5.10 | % |
| * | | — The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Fund’s open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. |
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| ** | | — Represents the gross trading for the Fund for the nine months ended September 30, 2012. |
Of the 2012 year-to-date increase of 0.67% for Class A, approximately 5.10% was due to trading gains (before commissions) and approximately 0.08% due to investment income, offset by approximately 4.51% due to brokerage fees, advisory fees, general partner fees, performance fees, selling agent fees, offering costs and operating expenses borne by Class A.
Of the 2012 year-to-date increase of 0.83% for Class B, approximately 5.10% was due to trading gains (before commissions) and approximately 0.10% due to investment income, offset by approximately 4.37% due to brokerage fees, advisory fees, general partner fees, selling agent fees, offering costs and operating expenses borne by Class B.
Of the 2012 year-to-date increase of 1.75% for Class C, approximately 5.10% was due to trading gains (before commissions) and approximately 0.08% due to investment income, offset by approximately 3.43% due to brokerage fees, advisory fees, general partner fees, performance fees, selling agent fees, offering costs and operating expenses borne by Class C.
Of the 2012 year-to-date increase of 2.33% for Class D, approximately 5.10% was due to trading gains (before commissions) and approximately 0.09% due to investment income, offset by approximately 2.86% due to brokerage fees, advisory fees, general partner fees, performance fees, offering costs and operating expenses borne by Class D.
| Market Sector | | Value at Risk* | | | Trading Gain/(Loss)** | |
| | | 0.73 | % | | | (6.62 | )% |
| Currencies | | | 0.70 | % | | | (0.85 | )% |
| Interest Rates | | | 1.36 | % | | | 21.71 | % |
| Stock Indices | | | 0.48 | % | | | (9.64 | )% |
| | | | | | | | | |
| Aggregate/Total | | | 1.59 | % | | | 4.60 | % |
| * | | — The VaR for a sector represents the one day downside risk for the aggregate exposures associated with this sector. The aggregate VaR represents the VaR of the Fund’s open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes. |
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| ** | | — Represents the gross trading for the Fund for the year ended December 31, 2011. |
Of the 2011 decrease of (1.99)% for Class A, approximately 4.60% was due to trading gains (before commissions) and approximately 0.05% was due to investment income, offset by approximately (6.64)% due to brokerage fees, advisory fees, general partner fees, selling agent fees, offering costs and operating expenses borne by Class A.
Of the period from May 1, 2011 (commencement of trading) through December 31, 2011 decrease of (5.75)% for Class B, approximately (0.30)% was due to trading losses (before commissions) and approximately (5.47)% was due to brokerage fees, advisory fees, general partner fees, selling agent fees, offering costs and operating expenses borne by Class B, offset by approximately 0.02% due to investment income.
Of the 2011 decrease of (0.10)% for Class C, approximately 4.60% was due to trading gains (before commissions) and approximately 0.05% was due to investment income, offset by approximately (4.75)% due to brokerage fees, advisory fees, general partner fees, performance fees, selling agent fees, offering costs and operating expenses borne by Class C.
Of the period from May 1, 2011 (commencement of trading) through December 31, 2011 decrease of (4.00)% for Class D, approximately (0.30)% was due to trading losses (before commissions) and approximately (3.72)% was due to brokerage fees, advisory fees, general partner fees, offering costs and operating expenses borne by Class D, offset by approximately 0.02% due to investment income.
Material Limitations of Value at Risk as an Assessment of Market Risk
The following limitations of VaR as an assessment of market risk should be noted:
| 1) | | Past changes in market risk factors will not always result in accurate predictions of the distributions and correlations of future market movements; |
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| 2) | | Changes in portfolio value caused by market movements may differ from those of the VaR model; |
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| 3) | | VaR results reflect past trading positions while future risk depends on future positions; |
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| 4) | | VaR using a one day time horizon does not fully capture the market risk of positions that cannot be liquidated or hedged within one day; and |
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| 5) | | The historical market risk factor data for VaR estimation may provide only limited insight into losses that could be incurred under certain unusual market movements. |
VaR is not necessarily representative of historic risk nor should it be used to predict the Fund’s future financial performance or its ability to manage and monitor risk. There can be no assurance that the Fund’s actual losses on a particular day will not exceed the VaR amounts indicated or that such losses will not occur more than once in 40 trading days.
Non-Trading Risk
The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial. The Fund may also incur non-trading market risk as a result of investing a portion of its available assets in U.S. Treasury Bills held at the broker and over-the-counter counterparty. The market risk represented by these investments is minimal. Finally, the Fund has non-trading market risk on fixed income securities held as part of its cash management program. The cash managers will use their best endeavors in the management of the assets of the Fund but provide no guarantee that any profit or interest will accrue to the Fund as a result of such management.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Fund’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund’s primary market risk exposures as well as the strategies used and to be used by Campbell & Company for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Fund.
The following were the primary trading risk exposures of the Fund as of September 30, 2012, by market sector.
Currencies
The Fund’s currency exposure is to foreign exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Fund trades in a large number of currencies, including cross-rates — i.e., positions between two currencies other than the U.S. Dollar. Campbell & Company does not anticipate that the risk profile of the Fund’s currency sector will change significantly in the future.
Interest Rates
Interest rate movements directly affect the price of the sovereign bond positions held by the 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 materially impact the Fund’s profitability. The Fund’s primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries. Campbell & Company anticipates that G-7 interest rates will remain the primary rate exposure of the Fund for the foreseeable future. Changes in the interest rate environment will have the most impact on longer dated fixed income positions at points of time throughout the year. The majority of the speculative positions held by the Fund may be held in medium to long-term fixed income positions.
Stock Indices
The Fund’s primary equity exposure is to equity price risk in the G-7 countries and several other countries or regions (Australia, Hong Kong, Spain, Taiwan and the Netherlands). The stock index futures traded by the Fund are by law limited to futures on broadly based indices. The Fund is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Japanese indices. Markets that trade in a narrow range could result in the Fund’s positions being “whipsawed” into numerous small losses.
Energy
The Fund’s primary energy market exposure is to natural gas, crude oil and derivative product price movements, often resulting from international political developments and ongoing conflicts in the Middle East and the perceived outcome. Oil and gas prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.
Metals
The Fund’s metals market exposure is to fluctuations in the price of aluminum, copper, gold, silver, nickel, and zinc.
Agricultural
The Fund’s agricultural exposure is to the fluctuations in the price of wheat, corn, coffee, sugar, soy, hogs, cattle and cotton.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the primary non-trading risk exposures of the Fund as of September 30, 2012.
Foreign Currency Balances
The Fund’s primary foreign currency balances are in Australian Dollar, Japanese Yen, British Pounds and Euros. The Fund controls the non-trading risk of these balances by regularly converting these balances back into U.S. Dollars (no less frequently than twice a month, and more frequently if a particular foreign currency balance becomes unusually large).
Fixed Income Securities
The Fund’s primary market exposure in instruments (other than treasury positions described in the subsequent section) held other than for trading is in its fixed income portfolio. The cash manager, Horizon, has authority to make certain investments on behalf of the Fund. All securities purchased by the cash manager on behalf of the Fund will be held in the Fund’s custody account at the custodian. The cash manager will use its best endeavors in the management of the assets of the Fund but provides no guarantee that any profit or interest will accrue to the Fund as a result of such management.
Treasury Bill Positions Held for Margin Purposes
The Fund also has market exposure in its Treasury Bill portfolio. The Fund holds Treasury Bills (interest bearing and credit risk-free) with maturities no longer than six months. Violent fluctuations in prevailing interest rates could cause minimal mark-to-market losses on the Fund’s Treasury Bills, although substantially all of these short-term investments are held to maturity.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Fund and Campbell & Company, severally, attempt to manage the risk of the Fund’s open positions is essentially the same in all market categories traded. Campbell & Company applies risk management policies to its trading which generally limit the total exposure that may be taken per “risk unit” of assets under management. In addition, Campbell & Company follows diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as reducing position sizes dynamically in response to trading losses.
Campbell & Company manages the risk of the Fund's non-trading instruments of Treasury Bills held for margin purposes by limiting the duration of such instruments to no more than six months. Campbell & Company manages the risk of the Fund’s fixed income securities held for cash management purposes by restricting the cash managers to investing in securities that are modeled after those investments allowed by the futures broker as defined under The Commodity Exchange Act, Title 17, Part 1, § 1.25 Investment of customer funds. Investments can include, but are not limited to, (i) U.S. Government Securities, Government Agency Securities, Municipal Securities, banker acceptances and certificates of deposits; (ii) commercial paper; and (iii) corporate debt.
General
The Fund is unaware of any (i) anticipated known demands, commitments or capital expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii) trends or uncertainties that will have a material effect on operations. From time to time, certain regulatory agencies have proposed increased margin requirements on futures contracts. Because the Fund generally will use a small percentage of assets as margin, the Fund does not believe that any increase in margin requirements, as proposed, will have a material effect on the Fund’s operations.
Item 4. Controls and Procedures.
Campbell & Company, Inc., the general partner of the Fund, with the participation of the general partner’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Fund as of the end of the period covered by this quarterly report. Based on their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. Effective August 1, 2012, SEI Global Services, Inc. (SEI) became the administrator for the Fund. The administrator's primary responsibilities are portfolio accounting and fund accounting services including calculation of the Fund's net asset value. There were no additional changes in the general partner’s internal control over financial reporting applicable to the Fund identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the last fiscal quarter that have materially affected, or is reasonably likely to materially affect, internal control over financial reporting applicable to the Fund.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 1A. Risk Factors.
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None
| Exhibit Number | | Description of Document |
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| 3.01 | | | Amended Certificate of Limited Partnership (1) |
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| 3.02 | | | Fourth Amended and Restated Agreement of Limited Partnership (included to the Prospectus as Exhibit A) (2) |
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| 4.01 | | | Limited Partner Privacy Notice (as included in the Prospectus) (2) |
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| 10.01 | | | Advisory Agreement between Campbell Global Trend Fund, L.P. and Campbell & Company, Inc. (3) |
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| 10.02 | | | Subscription Agreement and Power of Attorney (as included in the Prospectus) (2) |
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| 31.01 | | | Certification of G. William Andrews, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. |
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| 31.02 | | | Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. |
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| 32.01 | | | Certification of G. William Andrews, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. |
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| 32.02 | | | Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. |
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| 101.01 | | | Interactive data file pursuant to Rule 405 of Regulation S-T: (i) Condensed Schedules of Investments, (ii) Statements of Financial Condition, (iii) Statements of Operations, (iv) Statements of Cash Flows, (v) Statements of Changes in Partners’ Capital (Net Asset Value), (vi) Financial Highlights, and (vii) Notes to Financial Statements, tagged as blocks of text. |
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| | (1) Previously filed as an exhibit to the Registration Statement on Form S-1 on April 27, 2010 and incorporated herein by reference. |
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| | (2) Previously filed as an exhibit to Post-Effective Amendment No. 5 to the Registration Statement on Form S-1 on September 13, 2012 and incorporated herein by reference. |
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| | (3) Previously filed as an exhibit on Form S-1 on April 27, 2010 and incorporated herein by reference. |
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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.
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| | CAMPBELL GLOBAL TREND FUND, L.P. (Registrant) | |
| | By: | Campbell & Company, Inc. | |
| | | General Partner | |
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| Date: November 14, 2012 | By: | /s/ G. William Andrews | |
| | | G. William Andrews | |
| | | Chief Executive Officer | |
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EXHIBIT INDEX
| 31.01 | | Certification of G. William Andrews, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. |
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| 31.02 | | Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. |
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| 32.01 | | Certification of G. WIlliam Andrews, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. |
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| 32.02 | | Certification of Gregory T. Donovan, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. |
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