1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
-------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ ---------------------
Commission File number: 0-22260
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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
-------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 52-1823554
- ---------------------------------------------- -----------------------------------
(State of Organization) (IRS Employer Identification Number)
Court Towers Building,
210 West Pennsylvania Avenue,
Baltimore, Maryland 21204
- ------------------------------------------ --------------------
(Address of principal executive offices) (Zip Code)
(410) 296-3301
- ---------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
Total number of Pages: 24
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements of Campbell Strategic Allocation Fund, L.P.
are included in Item 1:
Statements of Financial Condition as of March 31, 2001 (Unaudited) and
December 31, 2000 (Audited)
Statements of Operations for the Three Months Ended
March 31, 2001 and 2000 (Unaudited)
Statements of Cash Flows for the Three Months Ended
March 31, 2001 and 2000 (Unaudited)
Statements of Changes in Partners' Capital (Net Asset Value)
for the Three Months Ended March 31, 2001 and 2000 (Unaudited)
2
3
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
March 31, 2001 (Unaudited) and December 31, 2000 (Audited)
March 31, December 31,
2001 2000
---- ----
ASSETS
Equity in broker trading accounts
Cash $ 82,397,841 $ 46,527,143
United States government securities 348,135,439 318,819,970
Unrealized gain on open futures contracts 19,209,118 24,297,352
-------------- --------------
Deposits with broker 449,742,398 389,644,465
Cash and cash equivalents 101,417,569 87,655,535
United States government securities 189,455,070 163,798,866
Unrealized gain (loss) on open swap contracts (1,491,937) 5,341,674
Unrealized gain (loss) on open forward contracts 12,964,047 (1,247,873)
-------------- --------------
Total assets $ 752,087,147 $ 645,192,667
============== ==============
LIABILITIES
Accounts payable $ 192,298 $ 330,386
Brokerage fee 4,352,904 3,998,772
Performance fee 7,354,533 4,180,241
Offering costs payable 314,022 299,500
Redemptions payable 5,286,804 5,631,710
Subscription deposits 41,064 127,046
-------------- --------------
Total liabilities 17,541,625 14,567,655
-------------- --------------
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner - 3,646.322 and 3,306.761 units
outstanding at March 31, 2001 and
December 31, 2000 7,406,336 6,351,669
Limited Partners - 357,989.081 and 325,004.757
units outstanding at March 31, 2001 and
December 31, 2000 727,139,186 624,273,343
-------------- --------------
Total partners' capital
(Net Asset Value) 734,545,522 630,625,012
-------------- --------------
$ 752,087,147 $ 645,192,667
============== ==============
See accompanying notes.
3
4
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2001 and 2000
(Unaudited)
2001 2000
---- ----
INCOME
Futures trading gains (losses)
Realized $ 69,766,644 $ 12,534,823
Change in unrealized (5,088,234) (12,088,691)
-------------- --------------
Gain from futures trading 64,678,410 446,132
-------------- --------------
Forward and swap trading gains (losses)
Realized (20,766,955) 9,804,973
Change in unrealized 7,378,309 (5,386,232)
-------------- --------------
Gain (loss) from forward and swap trading (13,388,646) 4,418,741
--------------- --------------
Interest income 8,843,258 6,489,772
-------------- --------------
Total income 60,133,022 11,354,645
-------------- --------------
EXPENSES
Brokerage fee 12,561,768 9,641,479
Performance fee 7,354,533 27,870
Operating expenses 231,077 235,385
-------------- --------------
Total expenses 20,147,378 9,904,734
-------------- --------------
NET INCOME $ 39,985,644 $ 1,449,911
============== ==============
NET INCOME PER GENERAL
AND LIMITED PARTNER UNIT
(based on weighted average number of
units outstanding during the period) $ 118.09 $ 5.17
============== ==============
INCREASE IN NET ASSET VALUE
PER GENERAL AND LIMITED PARTNER UNIT $ 110.37 $ 2.85
============== ==============
See accompanying notes.
4
5
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2001 and 2000
(Unaudited)
2001 2000
---- ----
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income $ 39,985,644 $ 1,449,911
Adjustments to reconcile net income to net cash from (for)
operating activities
Net change in unrealized (2,290,075) 17,474,923
Increase (decrease) in accounts payable and accrued expenses 3,390,336 (90,337)
Net (purchases) of investments in United States
government securities (54,971,673) (14,609,813)
--------------- ----------------
Net cash from (for) operating activities (13,885,768) 4,224,684
--------------- ----------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 76,898,523 34,288,897
(Decrease) in subscription deposits (85,982) (102,285)
Redemption of units (12,021,591) (21,025,773)
(Decrease) in redemptions payable (344,906) (3,204,085)
Offering costs charged (942,066) (817,497)
Increase in offering costs payable 14,522 12,904
--------------- ----------------
Net cash from financing activities 63,518,500 9,152,161
--------------- ----------------
Net increase in cash and cash equivalents 49,632,732 13,376,845
CASH AND CASH EQUIVALENTS
Beginning of period 134,182,678 88,164,302
--------------- ----------------
End of period $ 183,815,410 $ 101,541,147
============== ================
End of period cash and cash equivalents consists of:
Cash in broker trading accounts $ 82,397,841 $ 49,540,030
Cash and cash equivalents 101,417,569 52,001,117
--------------- ----------------
Total end of period cash and cash equivalents $ 183,815,410 $ 101,541,147
============== ================
See accompanying notes.
5
6
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
For the Three Months Ended March 31, 2001 and 2000
(Unaudited)
Partners' Capital
------------------------------------------------------------------------------------
General Limited Total
----------------------- -------------------------- ---------------------------
Units Amount Units Amount Units Amount
--------- ---------- ----------- ------------ ----------- -------------
THREE MONTHS ENDED MARCH 31, 2001
Balances at
December 31, 2000 3,306.761 $6,351,669 325,004.757 $624,273,343 328,311.518 $630,625,012
Net income for the three months
ended March 31, 2001 404,170 39,581,474 39,985,644
Additions 339.561 660,000 39,137.218 76,238,523 39,476.779 76,898,523
Redemptions 0.000 0 (6,152.894) (12,021,591) (6,152.894) (12,021,591)
Offering costs (9,503) (932,563) (942,066)
--------- ---------- ----------- ------------ ----------- -------------
Balances at
March 31, 2001 3,646.322 $7,406,336 357,989.081 $727,139,186 361,635.403 $734,545,522
========= ========== =========== ============ =========== =============
THREE MONTHS ENDED MARCH 31, 2000
Balances at
December 31, 1999 2,904.862 $5,040,488 276,039.045 $478,979,616 278,943.907 $484,020,104
Net income for the three months
ended March 31, 2000 2,747 1,447,164 1,449,911
Additions 296.710 530,000 19,079.949 33,758,897 19,376.659 34,288,897
Redemptions 0.000 0 (11,839.749) (21,025,773) (11,839.749) (21,025,773)
Offering costs (8,775) (808,722) (817,497)
--------- ---------- ----------- ------------ ----------- -------------
Balances at
March 31, 2000 3,201.572 $5,564,460 283,279.245 $492,351,182 286,480.817 $497,915,642
========= ========== =========== ============ =========== =============
Net Asset Value Per General and Limited Partner Unit
---------------------------------------------------------------
March 31, December 31, March 31, December 31,
2001 2000 2000 1999
---- ---- ---- ----
$2,031.18 $1,920.81 $1,738.04 $1,735.19
========= ========= ========= =========
See accompanying notes.
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7
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Fund
Campbell Strategic Allocation Fund, L.P. (the Fund) is a Delaware
limited partnership which operates as a commodity investment
pool. The Fund engages in the speculative trading of futures
contracts, forward contracts and swap contracts.
B. Regulation
As a registrant with the Securities and Exchange Commission, the
Fund is subject to the regulatory requirements under the
Securities Act of 1933 and the Securities Exchange Act of 1934.
As a commodity investment pool, the Fund is subject to the
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 and other market makers through
which the Fund trades.
C. Method of Reporting
The Fund's financial statements are presented in accordance with
generally accepted accounting principles, which require the use
of certain estimates made by the Fund's management. Transactions
are accounted for on the trade date. Gains or losses are realized
when contracts are liquidated. Unrealized gains and losses on
open contracts (the difference between contract trade price and
market price) are reported in the statement of financial
condition as a net gain or loss, as there exists a right of
offset of unrealized gains or losses in accordance with Financial
Accounting Standards Board Interpretation No. 39 - "Offsetting of
Amounts Related to Certain Contracts." Any change in net
unrealized gain or loss from the preceding period is reported in
the statement of operations. Brokerage commissions and other
trading fees paid directly to the broker are included in
"brokerage fee" and are charged to expense when contracts are
open. United States government securities are stated at cost plus
accrued interest, which approximates market value.
For purposes of both financial reporting and calculation of
redemption value, Net Asset Value per unit is calculated by
dividing Net Asset Value by the number of outstanding units.
7
8
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
D. Cash and Cash Equivalents
Cash and cash equivalents includes cash and short-term time
deposits held at financial institutions.
E. Income Taxes
The Fund prepares calendar year U.S. and state information tax
returns and reports to the partners their allocable shares of the
Fund's income, expenses and trading gains or losses.
F. Offering Costs
Campbell & Company, Inc. (Campbell & Company) has incurred total
costs in connection with the initial and continuous offering of
units of the Fund (offering costs) of $16,665,123 through March
31, 2001, $11,063,525 of which has already been reimbursed to
Campbell & Company by the Fund. At March 31, 2001, the Fund
reflects a liability in the statement of financial condition for
offering costs payable to Campbell & Company of $314,022. The
Fund's liability for offering costs is limited to the maximum of
total offering costs incurred by Campbell & Company or 2.5% of
the aggregate subscriptions accepted during the initial and
continuous offerings; this maximum is further limited by 30 month
pay-out schedules. The Fund is only liable for payment of
offering costs on a monthly basis as calculated based on the
limitations stated above. If the Fund terminates prior to
completion of payment of the calculated amounts to Campbell &
Company, Campbell & Company will not be entitled to any
additional payments, and the Fund will have no further obligation
to Campbell & Company.
The amount of monthly reimbursement due to Campbell & Company is
charged directly to partners' capital.
8
9
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
G. Foreign Currency Transactions
The Fund's functional currency is the U.S. dollar; however, it
transacts business in currencies other than the U.S. dollar.
Assets and liabilities denominated in currencies other than the
U.S. dollar are translated into U.S. dollars at the rates in
effect at the date of the statement of financial condition.
Income and expense items denominated in currencies other than the
U.S. dollar are translated into U.S. dollars at the rates in
effect during the period. Gains and losses resulting from the
translation to U.S. dollars are reported in income currently.
Note 2. GENERAL PARTNER AND COMMODITY TRADING ADVISOR
The general partner of the Fund is Campbell & Company, which conducts
and manages the business of the Fund. Campbell & Company is also the
commodity trading advisor of the Fund. The Amended Agreement of Limited
Partnership provides that Campbell & Company may make withdrawals of
its units, provided that such withdrawals do not reduce Campbell &
Company's aggregate percentage interest in the Fund to less than 1% of
the net aggregate contributions.
Campbell & Company is required by the Amended Agreement of Limited
Partnership to maintain a net worth equal to at least 5% of the capital
contributed by all the limited partnerships for which it acts as
general partner, including the Fund. The minimum net worth shall in no
case be less than $50,000 nor shall net worth in excess of $1,000,000
be required.
Commencing January 1, 2001, the Fund pays a monthly brokerage fee equal
to 1/12 of 7% (7% annualized) of month-end net assets to Campbell &
Company and $10 per round turn to the broker for execution and clearing
costs. From the 7% fee, a portion (4%) is used to compensate selling
agents for ongoing services rendered and a portion (3%) is retained by
Campbell & Company for trading and management services rendered. The
amount paid to the broker for execution and clearing costs is limited
to 1/12 of 1% (1% annualized) of month-end net assets. From August 1,
2000 through December 31, 2000, the monthly brokerage fee was equal to
1/12 of 7.65% (7.65% annualized) of month-end net assets, with the
amount paid directly to the broker equal to 1/12 of 0.65% (0.65%
annualized) of month-end net assets. Prior to August 1, 2000, the
monthly brokerage fee was equal to 1/12 of 7.7% (7.7% annualized) of
month-end net assets, with the amount paid directly to the broker equal
to 1/12 of 0.7% (0.7% annualized) of month-end net assets. During the
three months ended March 31, 2001 and 2000, the amounts paid directly
to the broker amounted to $691,029 and $876,498, respectively.
9
10
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 2. GENERAL PARTNER AND COMMODITY TRADING ADVISOR (CONTINUED)
Campbell & Company is also paid a quarterly performance fee of 20% of
the Fund's aggregate cumulative appreciation in the Net Asset Value per
unit, exclusive of appreciation attributable to interest income.
Note 3. DEPOSITS WITH BROKER
The Fund deposits assets with a broker subject to Commodity Futures
Trading Commission regulations and various exchange and broker
requirements. Margin requirements are satisfied by the deposit of U.S.
Treasury bills and cash with such broker. The Fund earns interest
income on its assets deposited with the broker.
Note 4. OPERATING EXPENSES
Operating expenses of the Fund are limited by the Amended Agreement of
Limited Partnership to 0.5% per year of the average month-end Net Asset
Value of the Fund. Actual operating expenses were less than 0.5%
(annualized) of average month-end Net Asset Value for the three months
ended March 31, 2001 and 2000.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Fund are made by subscription agreement, subject to
acceptance by Campbell & Company. As of March 31, 2001 and December 31,
2000, amounts received by the Fund from prospective limited partners
who have not yet been admitted to the Fund by Campbell & Company total
$41,064 and $127,046, respectively.
The Fund is not required to make distributions, but may do so at the
sole discretion of Campbell & Company. A limited partner may request
and receive redemption of units owned, subject to restrictions in the
Amended Agreement of Limited Partnership. Redemption fees apply through
the first twelve month-ends following purchase as follows: 4% of Net
Asset Value per unit redeemed through the third month-end, 3% of Net
Asset Value per unit redeemed through the sixth month-end, 2% of Net
Asset Value per unit redeemed through the ninth month-end and 1% of Net
Asset Value per unit redeemed through the twelfth month-end. After the
twelfth month-end following purchase of a unit, no redemption fees
apply.
10
11
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 6. TRADING ACTIVITIES AND RELATED RISKS
The Fund engages in the speculative trading of U.S. and foreign futures
contracts, forward contracts and swap contracts (collectively,
"derivatives"). The Fund is exposed to both market risk, the risk
arising from changes in the market value of the contracts, and credit
risk, the risk of failure by another party to perform according to the
terms of a contract.
Purchase and sale of futures contracts requires margin deposits with
the broker. Additional deposits may be necessary for any loss on
contract value. The Commodity Exchange Act requires a broker to
segregate all customer transactions and assets from such broker's
proprietary activities. A customer's cash and other property (for
example, U.S. Treasury bills) deposited with a broker are considered
commingled with all other customer funds subject to the broker's
segregation requirements. In the event of a broker's insolvency,
recovery may be limited to a pro rata share of segregated funds
available. It is possible that the recovered amount could be less than
total cash and other property deposited.
The amount of required margin and good faith deposits with the broker
and interbank and other market makers usually range from 10% to 30% of
Net Asset Value. The market value of securities held to satisfy such
requirements at March 31, 2001 and December 31, 2000 was $537,590,509
and $482,618,836, respectively, which equals 73% and 77% of Net Asset
Value, respectively.
The Fund trades forward and swap contracts in unregulated markets
between principals and assumes the risk of loss from counterparty
nonperformance. Accordingly, the risks associated with forward and swap
contracts are generally greater than those associated with exchange
traded contracts because of the greater risk of counterparty default.
Additionally, the trading of forward and swap contracts typically
involves delayed cash settlement.
The Fund has a substantial portion of its assets on deposit with
financial institutions. In the event of a financial institution's
insolvency, recovery of Fund assets on deposit may be limited to
account insurance or other protection afforded such deposits.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Fund is exposed to a market risk equal to
the value of futures, forward and swap contracts purchased and
unlimited liability on such contracts sold short.
The unrealized gain (loss) on open futures, forward and swap contracts
is comprised of the following:
11
12
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
Futures Contracts Forward and Swap Contracts
(exchange traded) (non-exchange traded)
March 31, December 31, March 31, December 31,
2001 2000 2001 2000
---- ---- ---- ----
Gross unrealized gains $ 24,558,759 $ 30,981,485 $ 68,613,588 $ 47,234,539
Gross unrealized losses (5,349,641) (6,684,133) (57,141,478) (43,140,738)
------------- ------------ ------------ --------------
Net unrealized gain $ 19,209,118 $ 24,297,352 $ 11,472,110 $ 4,093,801
============= ============ ============ ==============
Open contracts generally mature within three months; as of March 31,
2001, the latest maturity date for open futures contracts is December
2001, and the latest maturity date for open forward and swap contracts
is June 2001. However, the Fund intends to close all contracts prior to
maturity.
Campbell & Company has established procedures to actively monitor
market risk and minimize credit risk, although there can be no
assurance that they will, in fact, succeed in doing so. Campbell &
Company's basic market risk control procedures consist of continuously
monitoring open positions, diversification of the portfolio and
maintenance of a margin-to-equity ratio that rarely exceeds 30%.
Campbell & Company seeks to minimize credit risk primarily by
depositing and maintaining the Fund's assets at financial institutions
and brokers which Campbell & Company believes to be creditworthy. The
limited partners bear the risk of loss only to the extent of the market
value of their respective investments and, in certain specific
circumstances, distributions and redemptions received.
Note 7. INTERIM FINANCIAL STATEMENTS
The statement of financial condition as of March 31, 2001, and the
statements of operations, cash flows and changes in partners' capital
(Net Asset Value) for the three months ended March 31, 2001 and 2000
are unaudited. In the opinion of management, such financial statements
reflect all adjustments, which were of a normal and recurring nature,
necessary for a fair presentation of financial position as of March 31,
2001, and the results of operations and cash flows for the three months
ended March 31, 2001 and 2000.
12
13
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Note 8. FINANCIAL HIGHLIGHTS
The following information contains per unit operating performance data
for a unit outstanding during the entire three months ended March 31,
2001, and other supplemental financial data. This information has been
derived from information presented in the financial statements.
Three months ended
March 31, 2001
(Unaudited)
-----------
PER UNIT PERFORMANCE
(for a unit outstanding throughout the entire period)
-----------------------------------------------------
Net asset value per unit at December 31, 2000 $1,920.81
---------
Income from operations:
Net investment income * (31.34)
Net realized and change in unrealized gain from trading ** 144.49
---------
Total income from operations 113.15
---------
Offering costs (2.78)
---------
Net asset value per unit at March 31, 2001 $2,031.18
=========
TOTAL RETURN *** 5.75%
SUPPLEMENTAL DATA
Ratio to average net assets:
Expenses *, + 11.66%
Net investment income *, + (6.36)%
- ------------------------
* Excludes brokerage commissions and other trading fees paid directly to the
broker.
** Includes brokerage commissions and other trading fees paid directly to the
broker.
*** Not annualized
+ Annualized
13
14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
The offering of Campbell Strategic Allocation Fund's (the "Fund") Units of
Limited Partnership Interest commenced on January 12, 1994, and the initial
offering terminated on April 15, 1994 with proceeds of $9,692,439. The
continuing offering period commenced immediately after the termination of the
initial offering period; additional subscriptions totaling $702,373,428 have
been accepted during the continuing offering period as of April 1, 2001.
Redemptions over the same time period total $176,298,570. The Fund commenced
operations on April 18, 1994.
Capital Resources
The Fund will raise additional capital only through the sale of Units offered
pursuant to the continuing offering, and 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.
Liquidity
Most United States commodity exchanges limit fluctuations in commodity 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. Commodity 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 commodity
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 commodity futures trading operations, the Fund's assets are
expected to be highly liquid.
Results of Operations
The returns for the three months ending March 31, 2001 and 2000 were 5.75% and
.16%, respectively. Of the 5.75% increase, approximately 7.65% was due to
trading gains (before commissions) and approximately 1.37% was due to interest
income offset by approximately 3.27% due to brokerage fees, performance fees,
operating and offering costs borne by the Fund. An analysis of the 7.65% trading
gains by sector is as follows:
14
15
SECTOR % GAIN (LOSS)
- ------ -------------
Interest Rates 8.24%
Stock Indices 2.86
Currencies 2.36
Metals .07
Energy (5.88)
------
7.65%
======
January was a turbulent month due to the underestimated slowdown of the U.S.
economy and difficult transition between presidential administrations. The
Federal Reserve intervened twice by lowering interest rates during the month a
total of 100 basis points. The interest rate reductions resulted in gains in the
Fund's long bond positions, but these were offset by losses in its Swiss and
Sterling currency positions. The most noticeable turnaround for the month were
the energy markets, which incurred the largest losses for the Fund. Overall,
February was a mostly flat month for the Fund. The Federal Reserve's failure to
lower interest rates ahead of its March meeting and the continued declining
consumer confidence pushed U.S. equities lower, with the NASDAQ posting a new
two year low. This economic news was favorable to both the Fund's short equities
positions and long bond positions. The energy markets continued to disappoint
and this sector posted a loss for the month. The currency markets were mixed and
ended flat for February. The first quarter ended well for the Fund. During the
month, all markets were profitable, except the energy sector. In the midst of
some painful trends in the global economy, the Fund's trading principles enabled
it to ride the bear trend in equities while simultaneously benefiting from long
fixed income positions.
OFF-BALANCE SHEET RISK
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 trades in futures, forward and swap contracts and
is therefore 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, Inc., the General Partner (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%.
15
16
In addition to market risk, in entering into futures, forward and swap 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. In the case of forward and
swap contracts, which are traded on the interbank market rather than on
exchanges, the counterparty is generally a single bank or other financial
institution, rather than a group of financial institutions; thus there may be a
greater counterparty credit risk. Campbell & Company trades for the Fund only
with those counterparties which it believes to be creditworthy. All positions of
the Fund are valued each day on a mark-to-market basis. There can be no
assurance that any clearing member, clearinghouse or other counterparty will be
able to meet its obligations to the Fund.
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
substantially all 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 different 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 future results.
Value at Risk is a measure of the maximum amount which the Fund could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Fund's speculative trading and the recurrence in the markets
traded by the Fund of market movements far exceeding expectations could result
in actual trading or non-trading losses far beyond the indicated Value at Risk
or the Fund's experience to date (i.e., "risk of
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ruin"). In light of the foregoing as well as the risks and uncertainties
intrinsic to all future projections, the inclusion of the quantification
included in this section should not be considered to constitute any assurance or
representation that the Fund's losses in any market sector will be limited to
Value at Risk or by the Fund's attempts to manage its market risk.
Standard of Materiality
Materiality as used in this section, "Qualitative and Quantitative
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 by
Campbell & Company is quantified below in terms of Value at Risk. Due to the
Fund's mark-to-market accounting, any loss in the fair value of the Fund's open
positions is directly reflected in the Fund's earnings (realized or unrealized).
Exchange maintenance margin requirements have been used by the Fund as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current
market volatility and economic fundamentals to provide a probabilistic estimate
of the maximum expected near-term one-day price fluctuation. Maintenance margin
has been used rather than the more generally available initial margin, because
initial margin includes a credit risk component which is not relevant to Value
at Risk.
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In the case of market sensitive instruments which are not
exchange-traded (which includes currencies and some energy products and metals
in the case of the Fund), the margin requirements for the equivalent futures
positions have been used as Value at Risk. In those cases in which a
futures-equivalent margin is not available, dealers' margins have been used.
In the case of contracts denominated in foreign currencies, the Value at
Risk figure include foreign margin amounts converted into U.S. Dollars with an
incremental adjustment to reflect the exchange rate risk inherent to the
Dollar-based Fund in expressing Value at Risk in a functional currency other
than Dollars.
In quantifying the Fund's Value at Risk, 100% positive correlation in
the different positions held in each market risk category has been assumed.
Consequently, the margin requirements applicable to the open contracts have
simply been aggregated to determine each trading category's aggregate Value at
Risk. The diversification effects resulting from the fact that the Fund's
positions are rarely, if ever, 100% positively correlated have not been
reflected.
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 March 31, 2001 and December 31,
2000 and the trading gains/losses by market category for the quarter ended March
31, 2001 and the year ended December 31, 2000. All open position trading risk
exposures of the Fund have been included in calculating the figures set forth
below. As of March 31, 2001 and December 31, 2000, the Fund's total
capitalization was approximately $735 million and $631 million, respectively.
MARCH 31, 2001
--------------
% OF TOTAL TRADING
MARKET SECTOR VALUE AT RISK CAPITALIZATION GAIN/(LOSS)*
- ------------- ------------- -------------- ------------
Currencies $29.33 million 3.99% 2.36%
Interest Rates $25.19 million 3.43% 8.24%
Stock Indices $18.22 million 2.48% 2.86%
Energy $ 5.94 million .81% (5.88%)
Metals $ 1.64 million .22% .07%
-------------- -------- -------
Total $80.32 million 10.93% 7.65%
============== ======== =======
* - Of the 5.75% return for the quarter ended March 31, 2001, approximately
7.65% was due to trading gains (before commissions) and approximately 1.37% was
due to interest income, offset
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by approximately 3.27% in brokerage fees, performance fees, operating and
offering costs borne by the Fund.
DECEMBER 31, 2000
-----------------
% OF TOTAL TRADING
MARKET SECTOR VALUE AT RISK CAPITALIZATION GAIN/(LOSS)*
- ------------- ------------- -------------- ------------
Interest Rates $23.16 million 3.67% 2.45%
Currencies $16.58 million 2.63% 3.86%
Stock Indices $13.99 million 2.22% (1.65%)
Energy $10.75 million 1.70% 12.39%
Metals $ 1.24 million .20% (2.44%)
Agriculturals $ 0 million 0% (.27%)
-------------- ------- ------
Total $65.72 million 10.42% 14.34%
============== ====== ======
* - Of the 10.70% return for the year ended December 31, 2000, approximately
14.34% was due to trading gains (before commissions) and approximately 5.83% was
due to interest income, offset by approximately 9.47% in brokerage fees,
performance fees, operating and offering costs borne by the Fund.
MATERIAL LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK
The face value of the market sector instruments held by the Fund is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally ranging between approximately 1% and 10% of
contract face value) as well as many times the capitalization of the Fund. The
magnitude of the Fund's open positions creates a "risk of ruin" not typically
found in most other investment vehicles. Because of the size of its positions,
certain market conditions -- unusual, but historically recurring from time to
time -- could cause the Fund to incur severe losses over a short period of time.
The foregoing Value at Risk tables -- as well as the past performance of the
Fund -- give no indication of this "risk of ruin."
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 also has non-trading market risk as a result
of investing a substantial portion of the its available assets in U.S. Treasury
Bills. The market risk represented by these investments is immaterial.
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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
March 31, 2001, by market sector.
Currencies
Exchange rate risk is the principal market exposure of the Fund. The
Fund's currency exposure is to 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 risk is a significant market exposure of the Fund.
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. However, the Fund
also takes positions in the government debt of Switzerland. Campbell & Company
anticipates that G-7 interest rates will remain the primary market exposure of
the Fund for the foreseeable future. The changes in interest rates which have
the most effect on the Fund are changes in long-term, as opposed to short-term
rates. Most of the
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speculative positions held by the Fund are in medium- to long-term instruments.
Consequently, even a material change in short-term rates would have little
effect on the Fund were the medium- to long-term rates to remain steady.
Stock Indices
The Fund's primary equity exposure is to equity price risk in the G-7
countries and several other countries (Hong Kong and Spain). The stock index
futures traded by the Fund are by law limited to futures on broadly based
indices. As of March 31, 2001, the Fund's primary exposures were in the S&P 500
(USA), DAX (Germany), Nikkei (Japan) and NASDAQ (USA) stock 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. (Static markets would not cause major
market changes but would make it difficult for the Fund to avoid being
"whipsawed" into numerous small losses.)
Energy
The Fund's primary energy market exposure is to gas and oil price
movements, often resulting from political developments in the Middle East. As of
March 31, 2001, crude oil, heating oil and natural gas are the dominant energy
market exposures of the Fund. 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, nickel and zinc. Campbell & Company's gold trading has
been increasingly limited due to the long-lasting and mainly non-volatile
decline in the price of gold over the last 10-15 years.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following were the only non-trading risk exposures of the Fund as of
March 31, 2001.
Foreign Currency Balances
The Fund's primary foreign currency balances are in Japanese Yen,
British Pounds and Euros. The Fund controls the non-trading risk of these
balances by regularly converting these balances back into dollars (no less
frequently than twice a month, and more frequently if a particular foreign
currency balance becomes unusually large).
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Treasury Bill Positions
The Fund's only market exposure in instruments held other than for
trading is in its Treasury Bill portfolio. The Fund holds Treasury Bills
(interest bearing and credit risk-free) with durations no longer than six
months. Violent fluctuations in prevailing interest rates could cause immaterial
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 imposing "stop-loss" points
at which open positions must be closed out.
Campbell & Company controls the risk of the Fund's non-trading
instruments (Treasury Bills held for cash management purposes) by limiting the
duration of such instruments to no more than six months.
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 commodity 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.
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PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submissions of Matters to a vote of Security Holders.
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
None
There are no exhibits to this Form 10-Q.
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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.
CAMPBELL STRATEGIC ALLOCATION FUND, L.P.
(Registrant)
By: Campbell & Company, Inc.
General Partner
Date: May 1, 2001 By: /s/Theresa D. Becks
---------------------------------
Theresa D. Becks
Chief Financial Officer/Treasurer/Director
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