SIDLEY AUSTIN LLP |BEIJING GENEVA SAN FRANCISCO
ONE SOUTH DEARBORN |BRUSSELS HONG KONG SHANGHAI
SIDLEY AUSTIN LLP CHICAGO, IL 60603 |CHICAGO LONDON SINGAPORE
- ----------------| (312) 853 7000 |DALLAS LOS ANGELES TOKYO
SIDLEY | (312) 853 7036 FAX |FRANKFURT NEW YORK WASHINGTON, DC
|
|
|FOUNDED 1866
November 2 2006
VIA EDGAR AND OVERNIGHT
Ms. Amanda McManus
Attorney Advisor
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: UBS Managed Futures LLC (Aspect Series) (the "Registrant") - Form
10
Dear Ms. McManus:
We thank you for your comment letter of September 14, 2006 relating to
the Registrant's Form 10 filed on August 18, 2006. We enclose herewith clean
and redlined courtesy copies of the Registrant's Amendment No. 1 as filed
today via EDGAR. Please note that the changes included in the Registrant's
Amendment No. 1 include changes made in response to your comments as well as
those made to reflect material changes relating to the Registrant that have
occurred since the initial filing of the Form 10. For your convenience, the
comments included in your September 14, 2006 letter are set forth verbatim
below, together with the Registrant's responses thereto.
General
1. Please note that the Form 10 goes effective by lapse of time 60 days
after the original filing date, pursuant to Section 12(g)(1) of the
Securities Exchange Act of 1934. Upon the expiration of this 60-day time
period, you will be subject to the reporting requirements under Section
13(a) of the Securities Exchange Act of 1934. In addition, we will
continue to review your filing until all of our comments have been
addressed.
The Registrant understands that the Form 10 is now effective and that,
as a result, it is now subject to the reporting requirements under Section
13(a) of the Securities Exchange Act of 1934. The Registrant will continue to
work with the Commission in addressing further comments.
2. Throughout your filing you use terminology that represents industry
jargon which may not be readily understood by an investor not in your
industry. Examples include the use of terms like "quantitative,"
"systematic," "fundamental" and "discretionary" to
Sidley Austin LLP is a limited liability partnership practicing in affiliation
with other Sidley Austin partnerships.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 2
describe your trading strategies. Please revise your disclosure to
define industry terms the first time you use them and limit your use of
industry jargon to the extent possible.
We have done so.
3. We note your use of the term "fund" throughout this Form 10 and your
disclosure on page 6 that the trading advisor is registered as an
investment advisor with the SEC. Please include disclosure addressing
the fact that the pool is not a registered investment company and that
unitholders in the pool do not have the protections afforded by the
Investment Company Act of 1940.
We have added such a disclosure in the risk factor entitled "Risk of
Fewer Statutory Protections for Members Due to Limited Regulatory Oversight."
4. Please revise your disclosure in the organization chart on page 1 to
clearly identify the registrant, explain its relationship with
affiliated companies and describe the class of securities to be
registered. For instance, it is not clear whether the registrant in the
organizational chart is "UBS Managed Futures LLC" or "UBS Managed
Futures (Aspect) LLC." Please also clarify that UBS Managed Futures
(Aspect) LLC is a separate entity. Finally, we note that the registrant
on the cover page is identified as UBS Managed Futures LLC (Aspect
Series).
We have revised the disclosure as requested in order to clarify that UBS
Managed Futures LLC (Aspect Series), a segregated series of UBS Managed
Futures LLC, is the Registrant.
5. Please disclose any significant adverse business developments suffered
by pools for which Aspect Capital Limited served as trading advisor.
Aspect Capital Limited has confirmed that no such "significant adverse
business developments" have been suffered by any pool for which it has served
as trading advisor.
Item 1: Business
Organization Chart, page 1
6. We note your reference to "this offering" in the first sentence under
this heading. Please revise or explain, since your filing is not
registering an offering of securities.
We have removed this reference.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 3
7. Please revise to include the percentage ownership in UBS Managed Futures
LLC by each of the U.S. Investors and UBS Managed Futures SPC.
The percentage of ownership in UBS Managed Futures LLC by U.S. investors
and UBS Managed Futures SPC is unknown, as such percentage is contingent upon
subscriptions by U.S. investors in UBS Managed Futures LLC and by non-U.S.
investors in UBS Managed Futures SPC. Subscriptions have not yet been
accepted. In addition, subscriptions will be received monthly from investors
and thus the percentage of ownership in UBS Managed Futures LLC by U.S.
investors and by UBS Managed Futures SPC will vary on a monthly basis. For
these reasons, the Registrant does not intend to include such percentages of
ownership.
(a) General Development of business, page 2
8. Please provide an overview of the flow of funds from an investor to an
investment by the series. For example, please describe how the series'
assets are deposited with and held by commodity brokers, whether and how
they may be used as margin and whether the series currently has a source
for short-term borrowings available, and if so, the dollar amounts
available.
We have done so.
9. We note your disclosure in the second paragraph on page 2 that "one
Series [of unitholders] should not be liable for the obligations of any
other Series [of unitholders]" (emphasis added). Please describe when a
unitholder may be liable for the obligations of another series'
unitholder.
We have done so.
10. We note your disclosure in the second paragraph on page 3 that the
"Platform anticipates that Series should be treated as a separate
partnership for U.S. federal income tax purposes." Please disclose
whether you have received an opinion of counsel to this effect and
generally describe any uncertainties as to this conclusion. We note in
this regard your use of terms such as "anticipates" and "should."
We have done so.
11. Please identify, in the third paragraph on page 2, who the parent
company of the "Trading Funds" will be.
We have done so.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 4
(c) Narrative description of business, page 3
12. Please expand your discussion to provide more detail about the selected
physical commodities and derivatives in which the Program invests in the
first paragraph under this heading.
We have done so.
13. Please explain the timeline you are referring to when you state that the
core objectives of the program are to produce "medium-term" capital
appreciation.
We have done so.
14. Revise your disclosure to specify the "predefined and monitored" risk
limits referenced in paragraph (iv) on page 3.
We have done so.
15. Please revise your disclosure in the first full paragraph on page 4 to
explain what you mean when you say that the program trades "across a
variety of frequencies to exploit trends over a range of timescales" and
that "[p]ositions are taken according to the aggregate signal and are
adjusted to control risk."
We have done so.
16. Explain what you mean by "liquidity constraints" in the third full
paragraph on page 4.
We have done so.
17. Refer to the final paragraph on page 4. Please explain what you mean by
the "significance of market impact ... on the Series' performance."
We have removed this reference.
The Administrator, page 6
18. Please expand your discussion to describe the services to be provided by
the administrator in more detail. In addition, please indicate when you
expect that the parties will enter into the administrative services
agreement.
We have done so.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 5
The Trading Advisor, page 6
19. Please disclose whether the Trading Advisor has any current affiliation
with ED7F Man Investment Products Limited.
We have done so.
20. Please reconcile your disclosure in the first paragraph under this
heading that the trading advisor is registered with the SEC as an
investment advisor since 2003 with your disclosure in the second full
paragraph on page 7 suggesting that the trading advisor may terminate
the advisory agreement if it determines that its activities thereunder
would cause it to have to register as an investment advisor.
We have done so.
21. We note your disclosure in the full paragraph on page 8 that if the
advisory agreement is terminated the series will "dissolve." Please
describe in more detail the mechanism for this dissolution, including
identifying the parties that will oversee winding up of the series'
affairs such as selling of assets and distribution of proceeds to
investors, including any winding-up fees to be paid to those parties.
We have done so.
The Series, page 8
22. We note your disclosure that "the Platform intends to offer Members a
selection of different Series of the Platform." Please explain in more
detail how you will hold Members' funds and at what entity level. Will
members deposit funds with the "Platform," to invest from time to time
in various series, or will each investment be immediately allocated to a
particular series?
We have done so.
The Offering, page 8
23. Please provide an analysis as to why the filing of this Form 10 would
not be considered a "general solicitation" prohibited under Rule 502(c)
in connection with Regulation D private placements. Please address in
your analysis the fact that Form 10 was filed voluntarily and includes
extensive offering information. Please also address the relationship of
the timing of the initial filing and amendments to the Form 10 to the
commencement of the private offering.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 6
The issue concerning whether filing reports pursuant to the Securities
Exchange Act of 1934, as amended (the "1934 Act") constitutes "holding oneself
out to the public" as an investment adviser or a "public offering" of a fund
is one which has been on the minds of private fund lawyers for as long as the
undersigned has been practicing. In the present instance, only the latter
question is relevant, as no securities-related advice is being given. The view
of the Bar has generally been that "holding out to the public" is a stricter
standard than making a public offering, as a wider range of "publicity" could
be deemed to be holding oneself out to the public as being in the business of
providing securities-related advice, than could credibly be deemed to
constitute making a public offering of securities. Be that distinction as it
may, the view taken by numerous firms is that filing 1934 Act reports does not
constitute making a public offering, because: (a) these reports (unlike a
prospectus under the Securities Act of 1933 (the "1933 Act") are not delivered
in the context of an offering of securities; and (b) are required by law.
The prohibitions of Rule 502(c) under the 1933 Act are that securities
not be offered publicly. Outside of the context of offering securities, 502(c)
does not apply. A good example of this distinction relates to "Prospective
Employee Presentations" by private fund managers. When soliciting new hires,
these managers are free to make disclosures which their lawyers would never
think of tolerating in such managers' offering materials, because the context
has nothing to do with the offering of securities. All one need do is compare
the format and content of the Form 10 to that of the Private Placement
Memorandum, and it is immediately obvious that they have been written for very
different purposes. The Form 10 provides the information required of 1934 Act
registrants; not only is it not used, but it could not be used, to market
interests in the Fund because the Form 10 does not comply with applicable
CFTC/NFA regulations, nor has the Form 10 been filed for review with the
CFTC/NFA.
We emphasize that the Fund will, in the marketing of its interests,
follow all of the requirements of 502(c). Only prospective investors with
"pre-existing substantive relationships" with the Sponsor will be solicited,
and UBS -- as a major broker-dealer -- has extensive private placement
procedures in place. It is UBS's responsibility to ensure that the Fund is
offered privately. What is at issue is solely the question of whether filing
1934 Act reports per se precludes making a private offering. In this regard,
we wish to point out that not only do a very large number of public companies
routinely make private offerings of their securities while also filing 1934
Act reports, but also that there are a substantial number of private funds
which are registered under the 1934 Act. If one were to take the position that
filing 1934 Act reports precludes making a private offering, the consequences
to the capital markets would be dramatic, and significant recent precedent in
the area of private funds being registered under the 1934 Act, reversed. We
understand, of course, that the Staff's position is likely not any such per se
conclusion but rather that the Form 10 is an indirect means of publicly
marketing the Fund. We understand that this is a question of fact on which the
Staff will not provide UBS with any comfort. However, we can assure you that
we have carefully reviewed these matters with UBS, and are confident that the
interests in the Fund will be offered privately.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 7
The Staff may be interested to know that there were once a number of
firms that took the position that a private fund could not file a Form D as
that constituted impermissible publicity. That view, if still held by any
firms, is vastly in the minority. In our view the same analysis should apply
to the filing of a Form 10 and subsequent 1934 Act reports; in fact, even more
so as the Form 10 and the 1934 Act reports are required, whereas a Form D is
voluntary (Regulation D not being an exclusive safe-harbor) and, moreover,
directly announces the offering of a security.
24. Please revise your disclosure to clarify the time period during which
the units will be issued at $1,000.
We have done so.
Exchanges, page 10
25. Please advise us what exemption from the Securities Act you will rely
upon in connection with an exchange.
We have done so.
Custody of Assets, page 10
26. Please disclose the portion of the pool's capital that is expected to be
maintained in cash and cash equivalents.
We have done so.
Interest, page 10
27. Please disclose which open positions, if any, earn interest based on
unrealized gain and loss marked to market daily. Refer to the first
sentence of this subsection.
We have done so.
28. Refer to the second paragraph on page 11. Please revise to clarify the
reference to "additional economic benefit ... derived from possession of
the Series' Cash Assets."
We have done so.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 8
Net Asset Value, page 11
29. Please explain the reason why the sponsor might determine the series NAV
as of a day other than the last business day of the calendar month.
We have done so.
Financial Terms, page 12
30. Please clarify whether sponsor fees are charged to the Series or to
individual members. We note you reference to fees being waived for
certain members.
We have done so.
31. Please clarify how the "average month-end assets" referred to in the
final sentence differs from NAV.
We have done so.
32. Please clarify, where appropriate, whether the placement fee described
is payable upon "exchanges" within the platform, since you treat the
exchange as a redemption and new subscription.
We have done so.
33. The discussion of Organizational and Initial Offering Costs on page 15
indicates that the Series will reimburse the Sponsor for certain
expenses. Please disclose whether the Sponsor has already advanced a
portion of those expenses and clarify whether the Series is only
required to repay these fees to the sponsor in the event of a successful
offering.
We have done so.
34. Your disclosure indicates that you intend to account for organizational
costs in a manner that is contrary to accounting principals generally
accepted in the United States. Please note that only unqualified
opinions meet the criteria of Rules 2-02 and 4-01 of Regulation S-X.
Please revise your disclosure accordingly.
We have done so.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 9
35. Please disclose clearly how the proposed amortization of organizational
costs will affect NAV over the amortization period for redemption
purposes and for purposes of determining various fees paid on the basis
of NAV.
We have done so.
Break-Even Analysis
36. Please describe in a footnote or otherwise the basis for estimating the
brokerage commissions at .8% of NAV.
We have done so.
37. Please clarify footnote (4) to explain what "performance of 5%" means.
In particular, please note, if true, that the performance for each
quarter in the second 12-month period would need to be 5% over the
highest quarterly profits for the previous 12 month period and so on.
Please also explain more clearly whey the trading advisor could receive
substantial performance fees during breakeven or losing periods, in
light of the fact that the fee is only paid if the profits of the series
exceed all previous periods' high water marks.
We have done so.
Reports, page 21
38. We note that you "anticipate" that the Units will be registered under
the Exchange Act. Please update accordingly.
We have done so.
Item 1A: Risk Factors, page 21
39. Please review all risk factor headings to ensure that a risk is
identified, rather than merely a fact about your business. The following
headings are examples which do not appear to identify a risk:
o No Performance History
o Reliance on Trading Advisor Information
o Increased Assets Under Management
o Substantial Charges
o Redemptions Restricted
o Performance Fees
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 10
o No representation of Members
o Mandatory Redemptions
We have done so.
40. Please include risk factor disclosure regarding the series' reliance on
one commodity trading advisor, namely, Aspect Capital Limited.
We have done so.
41. Include a risk factor discussing the possibility that you may need to
liquidate positions at an inopportune time if your relationship with the
trading advisor is terminated and you are forced to "dissolve" the
series.
We have done so.
The Opportunity Costs of Multiple Series, page 22
42. Please provide context for and explain the basis for your statement that
"alternative investments have generally achieved ... their risk control
objectives, but often have not achieved their rate of return
objectives."
We have deleted this language.
Increased Assets Under Management, page 22
43. Please quantify the trading advisor's current assets under management.
We have done so.
Substantial Charges, page 22
44. Please expand your disclosure under this risk factor heading to quantify
the amount of fees described. In addition, clarify that many of these
fees are payable regardless of profitability and indicate that, even
once profits are earned, they will still be subject to substantial
incentive fees.
We have done so.
Redemptions Restricted, page 23
45. Please expand your discussion under this risk factor heading
considerably to describe the mechanics of redemptions and specifically
discuss the limits thereon and affects on unit
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 11
liquidity. In addition, please revise your disclosure to make clearer
that a redeeming unit holder will be paid a redemption price based upon
the NAV as of the redemption date, not as of the date of redemption
notice.
We have done so.
Conflicts of Interest, page 23
46. Please revise this risk factor to remove the cross reference in the
final sentence and identify and briefly discuss the conflicts of
interest and the risks to investors as a result of the identified
conflicts.
We have done so.
Risk Factors Specific to Exchanges, page 25
47. Please disclose whether an exchange will be treated as a taxable event
and if so, describe the attendant risks.
We have done so.
Mandatory Redemptions, page 26
48. Please explain in more detail how a member's ownership of units could be
expected to adversely affect the platform, the series or the trading
fund and disclose the redemption price applicable to mandatory
redemptions.
We have done so.
Volatile Markets; Highly Leveraged Trading, page 26
49. Please provide an estimate of the amount of leverage you expect the
series to employ. In addition, disclose the range of margin historically
employed by the trading advisor.
We have done so.
Members are Taxed Every Year on Their Share of the Series' Profit ..., page 30
50. Please clarify your reference to a "Confidential Disclosure Document" in
the second paragraph under this heading. Please also clarify that unit
holders will be required to make tax payments from their own individual
source of funds, in light of the fact that there may be insufficient
distributions made to cover tax liabilities.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 12
We have removed the reference to a "Confidential Disclosure Document"
and have included the suggested clarification.
Item 5: Directors and Executive Officers, page 31
51. Disclose the age of each person identified. See Item 401(a) of
Regulation S-K.
We have done so.
Item 9: Market Price of...and Other Stockholder Matters, page 37
52. In addition to the information you have provided regarding the series,
please include the information regarding the registrant as required by
Item 201 of Regulation S-K.
As noted in our response to comment number four, UBS Managed Futures LLC
(Aspect Series) is the Registrant.
Item 11: Description of Registrant's Securities, page 37
53. Please revise the final paragraph on page 37 to disclose the percentage
member vote required to approve the applicable listed actions.
We have done so.
54. Revise your discussion of unit redemptions in paragraph (iv) starting on
page 38 to discuss any limits on a unit-holder's ability to redeem,
including those that may be imposed at the discretion of the sponsor,
and to the extent there are limitations, how request in excess of the
limits will be handled.
We have done so.
55. Please expand your discussion of redemptions to disclose when redemption
payments will be made. We note your disclosure on page 12 that there may
be a delay in payment.
We have done so.
Signatures, page 42
56. The filed version of your registration statement is not signed. Please
ensure that all future amendments to this Form 10 are properly signed.
The Registrant has signed the Registrant's Amendment No. 1 and will sign
any future amendments.
SIDLEY AUSTIN LLP
- ----------------|
SIDLEY |
Ms. Amanda McManus
November 2 2006
Page 13
Very truly yours,
/s/ Ezekial Johnson
Zeke Johnson
cc: David Sawyier
Dan Spies