Attached files
file | filename |
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EX-31.02 - EX-31.02 - ML BlueTrend FuturesAccess LLC | a11-7503_7ex31d02.htm |
EX-10.02 - EX-10.02 - ML BlueTrend FuturesAccess LLC | a11-7503_7ex10d02.htm |
EX-32.02 - EX-32.02 - ML BlueTrend FuturesAccess LLC | a11-7503_7ex32d02.htm |
EX-31.01 - EX-31.01 - ML BlueTrend FuturesAccess LLC | a11-7503_7ex31d01.htm |
EX-13.01 - EX-13.01 - ML BlueTrend FuturesAccess LLC | a11-7503_7ex13d01.htm |
EX-32.01 - EX-32.01 - ML BlueTrend FuturesAccess LLC | a11-7503_7ex32d01.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 2010
or
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number: 0-53794
ML BLUETREND FUTURESACCESS LLC
(Exact name of registrant as specified in its charter)
Delaware |
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26-2581977 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
c/o Merrill Lynch Alternative Investments LLC
Four World Financial Center, 10TH. Floor
250 Vesey Street
New York, New York 10080
(Address of principal executive offices)
(Zip Code)
212-449-3517
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited Liability Company Interest
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer x |
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Small reporting company o |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes o No x
The Units of the limited liability company interest of the registrant are not publicly traded. Accordingly, there is no aggregate market value for the registrants outstanding equity that is readily determinable.
As of February 28, 2011 Units of limited liability company interest with an aggregate Net Asset Value of $270,018,072 were outstanding and held by non-affiliates.
Documents Incorporated by Reference
The registrants 2010 Annual Report and Reports of Independent Registered Public Accounting Firms, the annual report to security holders for the year ended December 31, 2010, is incorporated by reference into Part II, Item 8, and Part IV hereof and filed as an Exhibit herewith. Copies of the annual report are available free of charge by contacting Alternative Investments Client Services at 1-866-MER-ALTS.
ML BLUETREND FUTURESACCESS LLC
ANNUAL REPORT FOR 2010 ON FORM 10-K
Table of Contents
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PAGE |
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PART I |
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Item 1. |
Business |
1 |
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Item 1A. |
Risk Factors |
8 |
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Item 1B. |
Unresolved Staff Comments |
11 |
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Item 2. |
Properties |
11 |
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Item 3. |
Legal Proceedings |
11 |
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Item 4. |
(Removed and Reserved) |
11 |
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PART II |
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Item 5. |
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
12 |
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Item 6. |
Selected Financial Data |
14 |
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Item 7. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
22 |
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Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
30 |
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Item 8. |
Financial Statements and Supplementary Data |
34 |
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Item 9. |
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
34 |
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Item 9A. |
Controls and Procedures |
34 |
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Item 9B. |
Other Information |
35 |
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PART III |
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Item 10. |
Directors, Executive Officers and Corporate Governance |
36 |
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Item 11. |
Executive Compensation |
38 |
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Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
38 |
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Item 13. |
Certain Relationships and Related Transactions and Director Independence |
39 |
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Item 14. |
Principal Accounting Fees and Services |
39 |
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PART IV |
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Item 15. |
Exhibits and Financial Statement Schedules |
41 |
PART I
Item 1: Business
(a) General Development of Business:
ML BlueTrend FuturesAccess LLC (the Fund), a Merrill Lynch FuturesAccess Program (the Program) Fund, was organized under the Delaware Limited Liability Company Act on April 30, 2008 and commenced trading activities on September 1, 2008. The Fund issues new units of limited liability company interest (Units) at Net Asset Value per Unit (see Item 6 for discussion of net asset value and net asset value per unit for subscriptions and redemptions purposes hereinafter referred to as Net Asset Value and Net Asset Value per Unit) as of the beginning of each calendar month. The Fund engages in the speculative trading of futures, options on futures and forward contracts on a wide range of commodities. BlueCrest Capital Management LLP (BlueCrest) is the Trading Advisor of the Fund (Trading Advisor).
Merrill Lynch Alternative Investments LLC (MLAI) is the sponsor (Sponsor) and manager (Manager) of the Fund. MLAI is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. (Merrill Lynch). Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S), a wholly-owned subsidiary of Merrill Lynch, is the Funds commodity broker. Merrill Lynch is a wholly-owned subsidiary of Bank of America Corporation.
The Program is a group of commodity pools sponsored by MLAI (each pool is a Program Fund or FuturesAccess Fund or collectively, Program Funds) each of which places substantially all of its assets in a managed futures or forward trading account managed by a single or multiple commodity trading advisors. Each Program Fund is generally similar in terms of fees, Classes of Units and redemption rights. Each of the Program Funds implements a different trading strategy.
The Fund calculates the Net Asset Value per unit of each class of units as of the close of business on the last business day of each calendar month and such other dates as MLAI may determine in its discretion. The Funds Net Asset Value as of any calculation date will generally equal the value of the Funds account under the management of its trading advisor as of such date, plus any other assets held by the Fund, minus accrued brokerage commissions, sponsors, management and performance fees, organizational expense amortization and any operating costs and other liabilities of the Fund. MLAI is authorized to make all net asset value determinations.
As of December 31, 2010, the Net Asset Value of the Fund was $261,333,948. As of December 31, 2010, the Net Asset Value per Unit was $1.1785 for Class A, $1.1639 for Class C, $1.1993 for Class D, $1.1904 for Class I, $1.4128 for Class DS and $1.1650 for Class DT.
Since the Fund began trading activities, the highest month-end Net Asset Value per Unit for Class A was $1.1785 (December 31, 2010) and the lowest was $1.0208 (August 31, 2009). The highest month-end Net Asset Value per Unit for Class C was $1.1639 (December 31, 2010) and the lowest was $1.0199 (August 31, 2009). The highest month-end Net Asset Value per Unit for Class D was $1.1993 (December 31, 2010) and the lowest was $1.0221 (August 31, 2009). The highest month-end Net Asset Value per Unit for Class I was $1.1904 (December 31, 2010) and the lowest was $1.0211 (August 31, 2009). The highest month-end Net Asset Value per Unit for Class DS was $1.4128 (December 31, 2010) and the lowest was $1.0408 (September 30, 2008). The highest month-end Net Asset Value per Unit for Class DT was $1.1650 (December 31, 2010) and the lowest was $1.0350 (February 28, 2010).
(b) Financial Information about Segments:
The Funds business constitutes only one segment for financial reporting purposes, i.e., a speculative commodity pool. The Fund does not engage in sales of goods or services.
(c) Narrative Description of Business:
Trading Advisors Trading Model
The Fund trades in the futures and forward markets with the objective of achieving substantial capital appreciation.
The Fund and MLAI have entered into an Advisory Agreement with BlueCrest whereby BlueCrest trades the Funds assets through a managed account using the BlueTrend Program (the Trading Program). BlueCrest trades in the U.S. and international futures and forwards markets pursuant to the Trading Program.
The Trading Advisor of the Fund, may exercise discretion in connection with its technical trading program in order to enforce risk parameters, address extraordinary market events or as otherwise determined by the Trading Advisor. Although the Trading Advisors trading program is continually evolving, there were no fundamental or material charges to the trading program during the 2010 fiscal year.
The Trading Advisor trades the following instruments on U.S. and non-U.S. exchanges and markets: (a) futures, options, options on futures, and forward contracts on currencies, interest rates, interest rate instruments, commodities, individual stocks, stock indices and other indices; and (b) spot currencies, in all cases ((a) and (b)) traded on regulated markets and/or OTC markets. The Trading Advisor does not, however, currently trade futures, options, options on futures or forward contracts on individual stocks for the Fund. Over time, the underlying values of futures, options, options on futures and forward contracts traded may also include other economic variables which are now or may hereafter become the subject of organized futures, options or forward trading. Over time, the instruments that the Trading Advisor trades may also include swaps or other derivative, margined instruments, in each case traded on regulated and/or OTC markets.
The applied principles of risk management play a dominant role in the Trading Advisors trading methodology. The Trading Program is designed to pursue capital growth within the limits of a defined risk tolerance. The Trading Program is entirely based on quantitative analysis of signaled price behavior of outright markets and of intra-market and/or inter-market combinations of the instruments concerned, and therefore not on fundamental analysis.
The Trading Program may enter into both long and short positions in any of the instruments involved, or it may have no position. Long and short positions are likely to be leveraged and unhedged and/or uncovered. The degree of leverage is implicitly determined by the risk/reward profile selected by the Fund. The degree of leverage can be expressed as the number of contracts traded or held in position per millions of U.S. dollars under management. A higher degree of leverage represents a higher degree of risk as it goes hand in hand with a higher number of contracts held in a position for each U.S. dollar under management. As such, a selected risk profile has a consequence for the number of contracts traded and/or held in a position for each U.S. dollar under management.
The Trading Program is systematic by nature and requires a consistent application. Therefore, discretionary inputs are not essential to the effectiveness of the Trading Program. Exceptional market circumstances of the observed past, both favorable and unfavorable, are integrally reflected in the presented performance profile of the Trading Program. While the Trading Advisor generally will not use discretionary inputs in trading client accounts, in the event of exceptional market circumstances the Trading Advisor may use discretion in an attempt to limit risk to a position or an account. The use of discretion by the Trading Advisor may have a positive or negative impact on performance of the Fund.
The portfolio composition and the relative weighting of instruments within each portfolio is defined irrespective of the outcome of historical trades. The guiding principle is strategic diversification in pursuit of a maximum attainable risk spreading, taking correlation analysis and degrees of profit expectancy into account.
As the applied strategies require particular transaction sizes to allow for multiple entry and exit points and because certain minimum transaction sizes may be required or recommendable, the attainable degree of diversification is, among others, a function of the amount under management. Generally, larger accounts have a higher degree of diversification.
Specific risk provisions are computed for each market exposure. The risk provisions are designed to have a pre-defined reliability. In all trading systems the assessment of price volatility plays a prominent role. Risk assessments are determined on the basis of a regular or continuous evaluation of daily price behavior, possibly leading to regular adjustments during the lifetime of exposures.
The applied market approach does not forecast markets or price levels but participates in a systematic and dynamic way in signaled price patterns. The Trading Program exploits directional price movement of outright prices, of time spreads in one or more time frames and of inter-market and -product combinations.
Although the Trading Advisors Trading Program is continually evolving, there were no fundamental or material changes to the Trading Program during the 2010 fiscal year.
Employees
The Fund has no employees.
Use of Proceeds and Cash Management Income
Subscription Proceeds
The Funds cash is used as security for and to pay the Funds trading losses as well as its expenses and redemptions. The primary use of the proceeds of the sale of the Units is to permit BlueCrest to trade on a speculative basis in a wide range of different futures and forwards markets on behalf of the Fund. While being used for this purpose, the Funds assets are also generally available for cash management, as more fully described below under Cash Assets.
Market Sectors
BlueCrest applies its proprietary systems to a broadly-diversified portfolio of futures and forward markets pursuant to their BlueTrend Program. The BlueTrend Program may trade in the following markets: CBOT, CME, EUREX, IME, LME, LIFFE, MATIF, ME, MEFF, NYMEX, NZFOE, SFE, SIMEX, TIFFE, TSE and may expand to include trading in other markets.
The Funds commitments to different types of markets U.S. and non-U.S., regulated and non-regulated differ substantially from time to time, as well as over time. The Fund has no policy restricting its relative commitment to any of these different types of markets.
CONDENSED SCHEDULE OF INVESTMENTS
The Funds investments, defined as Net unrealized profit (loss) on open contracts in the Statements of Financial Condition, as of December 31, 2010 and 2009 are as follows:
December 31, 2010
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Long Positions |
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Short Positions |
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Net Unrealized |
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Commodity Industry |
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Number of |
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Unrealized |
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Percent of |
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Number of |
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Unrealized |
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Percent of |
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Profit (Loss) |
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Percent of |
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| |||
Sector |
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Contracts |
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Profit (Loss) |
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Members Capital |
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Contracts |
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Profit (Loss) |
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Members Capital |
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on Open Positions |
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Members Capital |
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Maturity Dates |
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Agriculture |
|
330 |
|
$ |
586,527 |
|
0.22 |
% |
|
|
$ |
|
|
0.00 |
% |
$ |
586,527 |
|
0.22 |
% |
March 11 |
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Currencies |
|
2,852,187,119 |
|
6,292,330 |
|
2.41 |
% |
(1,929,042,262 |
) |
(3,230,067 |
) |
-1.24 |
% |
3,062,263 |
|
1.17 |
% |
March 11 |
| |||
Energy |
|
1,501 |
|
4,746,214 |
|
1.82 |
% |
|
|
|
|
0.00 |
% |
4,746,214 |
|
1.82 |
% |
January 11 - April 11 |
| |||
Interest rates |
|
3,883 |
|
382,086 |
|
0.15 |
% |
(600 |
) |
(37,834 |
) |
-0.01 |
% |
344,252 |
|
0.14 |
% |
March 11 - June 13 |
| |||
Metals |
|
525 |
|
5,470,493 |
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2.09 |
% |
(279 |
) |
(3,554,866 |
) |
-1.36 |
% |
1,915,627 |
|
0.73 |
% |
January 11 - April 11 |
| |||
Stock indices |
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3,492 |
|
(1,439 |
) |
0.00 |
% |
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0.00 |
% |
(1,439 |
) |
0.00 |
% |
January 11 - March 11 |
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Total |
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$ |
17,476,211 |
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6.69 |
% |
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|
$ |
(6,822,767 |
) |
-2.61 |
% |
$ |
10,653,444 |
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4.08 |
% |
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|
December 31, 2009
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Long Positions |
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Short Positions |
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Net Unrealized |
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Commodity Industry |
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Number of |
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Unrealized |
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Percent of |
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Number of |
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Unrealized |
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Percent of |
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Profit (Loss) |
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Percent of |
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| |||
Sector |
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Contracts |
|
Profit (Loss) |
|
Members Capital |
|
Contracts |
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Profit (Loss) |
|
Members Capital |
|
on Open Positions |
|
Members Capital |
|
Maturity Dates |
| |||
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| |||
Agriculture |
|
37 |
|
$ |
18,635 |
|
0.02 |
% |
(44 |
) |
$ |
(17,718 |
) |
-0.02 |
% |
$ |
917 |
|
0.00 |
% |
March 10 |
|
Currencies |
|
47,800,234 |
|
(66,336 |
) |
-0.07 |
% |
(42,482,119 |
) |
(240,350 |
) |
-0.27 |
% |
(306,686 |
) |
-0.34 |
% |
March 10 |
| |||
Energy |
|
379 |
|
481,139 |
|
0.54 |
% |
|
|
|
|
0.00 |
% |
481,139 |
|
0.54 |
% |
January 10 - April 10 |
| |||
Interest rates |
|
3,437 |
|
(2,232,094 |
) |
-2.51 |
% |
|
|
|
|
0.00 |
% |
(2,232,094 |
) |
-2.51 |
% |
March 10 - December 10 |
| |||
Metals |
|
89 |
|
73,051 |
|
0.08 |
% |
(24 |
) |
(163,255 |
) |
-0.18 |
% |
(90,204 |
) |
-0.10 |
% |
January 10 - March 10 |
| |||
Stock indices |
|
1,249 |
|
1,261,228 |
|
1.42 |
% |
|
|
|
|
0.00 |
% |
1,261,228 |
|
1.42 |
% |
January 10 - March 10 |
| |||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total |
|
|
|
$ |
(464,377 |
) |
-0.52 |
% |
|
|
$ |
(421,323 |
) |
-0.47 |
% |
$ |
(885,700 |
) |
-0.99 |
% |
|
|
No individual contracts unrealized profit or loss comprised greater than 5% of the Members Capital as of December 31, 2010 and 2009.
Market Types
The Fund trades on a variety of United States and foreign futures exchanges. Substantially all of the Funds off-exchange trading takes place in the highly liquid, institutionally-based currency forward markets.
Many of the Funds currency trades are executed in the spot and forward foreign exchange markets (the FX Markets) where there are no direct execution costs. Instead, the participants, banks and dealers in the FX Markets take a spread between the prices at which they are prepared to buy and sell a particular currency and such spreads are built into the pricing of the spot or forward contracts with the Fund.
Custody of Assets
Substantially all of the Funds assets are currently held in one or more Commodity Futures Trading Commission (CFTC) regulated customer accounts at MLPF&S.
Cash Assets
The Fund will generally earn interest, as described below, on its Cash Assets, which can be generally described as the cash actually held by the Fund plus its open trade equity (unrealized gain and loss marked to market daily on open positions). Cash Assets are held primarily in U.S. dollars, and to a lesser extent in foreign currencies, and are comprised of the Funds cash balances held in the offset accounts (as described below) which include open trade equity (unrealized gain and loss on open positions) on United States futures contracts, which is paid into or out of the Funds account on a daily basis; the Funds cash balance in foreign currencies derived from its trading in non-U.S. dollar denominated futures and options contracts, which includes open trade equity on those exchanges which settle gains and losses on open positions in such contracts prior to closing out such positions. Cash Assets do not include, and the Fund does not earn interest income on the Funds gains or losses on its open forward, commodity option and certain foreign futures positions since such gains and losses are not collected or paid until such positions are closed out.
The Funds Cash Assets may be greater than, less than, or equal to the Funds Net Asset Value (on which the redemption value of the Units is based) primarily because Net Asset Value reflects all gains and losses on open positions as well as accrued but unpaid expenses.
Interest Earned on the Funds U.S. Dollar Cash Assets
The Funds U.S. dollar Cash Assets are held in cash at MLPF&S, which utilizes offset accounts
Certain of the Funds U.S. dollar Cash Assets are held by MLPF&S in customer segregated accounts and primarily invested in CFTC-eligible investments (including, without limitation, commercial paper, U.S. government and government agency securities, prime non-U.S. government securities, corporate notes and money market funds). Cash Assets may also be maintained in offset accounts at major U.S. banks, interest bearing savings accounts maintained with major U.S. banks unaffiliated with Merrill Lynch and/or money market investment funds that are managed by third party managers, including affiliates of Merrill Lynch.
Offset accounts are non-interest bearing demand deposit accounts maintained with banks unaffiliated with Merrill Lynch. MLPF&S may in the future elect to maintain accounts of this nature with one or more of its affiliates. Offset account deposits reduce Merrill Lynchs borrowing costs with such banks. An integral feature of the offset arrangements is that the participating banks specifically acknowledge that the offset accounts are for the benefit of MLPF&S customers, not subject to any Merrill Lynch liability.
To the extent that Cash Assets are placed with affiliates of Merrill Lynch, Merrill Lynch indirectly receives certain economic benefits and therefore has a conflict of interest in selecting such third parties. For example, Merrill Lynch may invest in money market funds managed by BlackRock, Inc. or its affiliates (BlackRock). Merrill Lynch is a stockholder in BlackRock and, therefore, potentially benefits from its economic interest in BlackRock whenever BlackRock receives compensation for managing Cash Assets invested in money market investment funds managed by BlackRock.
Interest Paid by Merrill Lynch on the Funds Non-U.S. Dollar Cash Assets
The Fund will generally earn interest, as described below, on its Cash Assets, which can be generally described as the cash actually held by the Fund, plus its open trade equity (unrealized gain and loss marked to market daily on open positions). Cash Assets are held primarily in U.S. dollars, and to a lesser extent in non-U.S. currencies, and comprise the following: (a) the Funds cash balances, plus open trade equity on U.S. futures; and (b) the Funds cash balances held in non-U.S. currencies as a result of realized profits and losses derived from its trading in non-U.S. dollar-denominated futures and options contracts, plus open trade equity on those exchanges which settle gains and losses on open positions in such contracts prior to closing out such positions. Cash Assets do not include, and the Fund does not earn interest income on, the Funds gains or losses on their open forward, commodity option and certain non-U.S. futures positions as such gains and losses are not collected or paid until such positions are closed out.
The Funds Cash Assets may be greater than, less than or equal to the Funds Net Asset Value (on which the redemption value of the Units is based) primarily because Net Asset Value reflects all gains and losses on open positions as well as accrued but unpaid expenses.
MLPF&S intends to pay interest on the Funds Cash Assets (irrespective of how such Cash Assets are held or invested) at the most favorable rate payable by MLPF&S to accounts of Merrill Lynch affiliates, from time to time, although the actual rate paid to the Fund may be lower. In no event, however, will the rate so paid on such Cash Assets be less than 75% of such prevailing rate. MLPF&S retains the additional economic benefit derived from possession of the Funds Cash Assets.
MLPF&S, in the course of acting as commodity broker for the Fund, lends certain currencies to, and borrows certain currencies from, the Fund. In the course of doing so, MLPF&S both retains certain amounts of interest and receives other economic benefits. In doing so, MLPF&S follows its standard procedures (as such procedures may change over time) for paying interest on the assets of the commodity pools sponsored by MLAI and other MLPF&S affiliates and traded through MLPF&S.
Charges
The following table summarizes the charges incurred by the Fund for the years ended December 31, 2010, 2009 and 2008.
|
|
2010 |
|
2009 |
|
2008 |
| |||||||||
Charges |
|
Dollar |
|
% of Average |
|
Dollar |
|
% of Average |
|
Dollar |
|
% of Average |
| |||
Other Expenses |
|
$ |
649,724 |
|
0.28 |
% |
$ |
293,309 |
|
0.48 |
% |
$ |
77,733 |
|
0.19 |
% |
Sponsor fees |
|
751,285 |
|
0.32 |
% |
76,798 |
|
0.15 |
% |
|
|
0.00 |
% | |||
Management fees |
|
4,237,743 |
|
1.83 |
% |
1,255,634 |
|
2.06 |
% |
290,672 |
|
0.70 |
% | |||
Performance fees |
|
10,688,758 |
|
4.60 |
% |
839,877 |
|
1.38 |
% |
2,619,030 |
|
6.26 |
% | |||
Total |
|
$ |
16,327,510 |
|
7.03 |
% |
$ |
2,465,618 |
|
4.07 |
% |
$ |
2,987,435 |
|
7.15 |
% |
(1) Not annualized
The foregoing table does not reflect the bid-ask spreads paid by the Fund on its forward trading, or the benefits which may be derived by Merrill Lynch from the deposit of certain of the Funds U.S. dollar assets maintained at MLPF&S.
The Funds average month-end Net Asset Values during 2010, 2009 and 2008 equaled $218,928,048, $61,066,568 and $41,805,928, respectively.
During 2010, the interest expense of the Fund was $(3,199), or approximately 0.00% of the Funds average month-end Net Asset Values. During 2009, the Fund earned $7,933 in interest income, or approximately 0.01% of the Funds average month-end Net Asset Values. During 2008, the Fund earned $91,446 in interest income, or approximately 0.22% of the Funds average month-end Net Asset Values.
Description of Current Charges
Recipient |
|
Nature of Payment |
|
Amount of Payment |
|
|
|
|
|
MLPF&S |
|
Brokerage Commissions |
|
During 2010, 2009 and 2008 the round-turn (each purchase and sale or sale and purchase of a single futures contract) rate of the Funds flat-rate Brokerage Commissions were approximately $5.62, $6.85 and $9.51, respectively. |
|
|
|
|
|
MLPF&S |
|
Use of assets |
|
Merrill Lynch may derive an economic benefit from the deposit of certain of the Funds U.S. dollar assets in accounts maintained at MLPF&S. |
|
|
|
|
|
MLAI |
|
Sponsor Fees |
|
A flat-rate monthly charge of 0.125 of 1% (1.50% annual rate) on Class A units, flat-rate monthly charge of 0.2083 of 1% (2.50% annual rate) on Class C units, a flat-rate monthly charge of 0.0917 of 1% (1.10% annual rate) on Class I units (including the monthly interest credit and before reduction for accrued month-end redemptions, distributions, brokerage commissions, sponsor fees, management fees or performance fees, in each case as of the end of the month of determination). Class D, DS and DT do not pay sponsor fees. |
|
|
|
|
|
MLPF&S |
|
Sales Commissions |
|
Class A Units are subject to a sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D and Class I Units are subject to sales commissions up to 0.5%. Sales commissions are deducted from proceeds prior to entering the Fund. Shares purchased and reflected in the Fund records are net of any commissions charged by MLPF&S. Class C, Class DS and Class DT Units are not subject to any sales commissions. |
|
|
|
|
|
Merrill Lynch International Bank (MLIB) (or an affiliate); Other counterparties |
|
Bidask spreads |
|
Bidask spreads are not accounted for separately as an accounting item because bid-ask spreads are an integral part of the price paid or received on all contracts for generally accepted accounting principles. |
|
|
|
|
|
MLIB (or an affiliate); Other counterparties |
|
EFP differentials |
|
Certain of the Funds currency trades may be executed in the form of exchange of futures for physical transactions, in which a counterparty (which may be MLIB or an affiliate) receives an additional differential spread for exchanging the Funds cash currency positions for equivalent futures positions. |
|
|
|
|
|
BLUECREST |
|
Annual Performance Fees |
|
25% of any New Trading Profits, as defined, generated by the Fund as a whole, as of the end of each calendar year. New Trading Profits equal any increase in the Net Asset Value of the Fund, prior to reduction for any accrued performance fee, as of the current performance fee calculation date over the Funds High Water Mark. The High Water Mark attributable to the Fund equals the highest Net Asset Value after reduction for the performance fee then paid, as of any preceding performance fee calculation date. Net Asset Value, solely |
|
|
|
|
for purposes of calculating the performance fee, does not include any interest income earned by the Fund. |
|
|
|
|
|
BLUECREST and MLAI |
|
Management fees |
|
All classes pay a flat-rate monthly charge of 0.1667 of 1% of the Funds month-end assets (a 2.0% annual rate) except for Class DT which charges 1.50%. MLAI receives 25% of the management fees. |
|
|
|
|
|
Others |
|
Operating expense of Fund including audit, legal and tax services |
|
Actual payments to third parties. |
|
|
|
|
|
MLAI; Others |
|
Initial Offering Costs reimbursed |
|
Actual costs incurred. |
Regulation
The CFTC has delegated to the National Futures Association responsibility for the registration of commodity trading advisors, commodity pool operators, futures commission merchants, introducing brokers and their respective associated persons, and floor brokers and floor traders. The Commodity Exchange Act requires commodity pool operators such as MLAI, commodity trading advisors such as the Trading Advisor and commodity brokers or futures commission merchants (FCMs) such as MLPF&S to be registered and to comply with various reporting and record keeping requirements. CFTC regulations also require FCMs to maintain a minimum level of net capital. In addition, the CFTC and certain commodities exchanges have established limits referred to as speculative position limits on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges. All accounts owned or managed by the Trading Advisor will be combined for position limit purposes. The Trading Advisor could be required to liquidate positions in order to comply with such limits. Any such liquidation could result in substantial costs to the Fund. In addition, many futures exchanges impose limits beyond which the price of a futures contract may not trade during the course of a trading day, and there is a potential for a futures contract to reach its daily price limit for several days in a row, making it impossible for the Trading Advisor to liquidate a position and thereby experiencing dramatic losses. Currency forward contracts currently are not subject to regulation by any U.S. government agency.
Other than in respect of the registration requirements pertaining to the Funds securities under Section 12(g) of the Securities Exchange Act of 1934, the Fund is generally not subject to regulation by the Securities and Exchange Commission (the SEC). However, MLAI is registered as an investment adviser under the Investment Advisers Act of 1940. MLPF&S is also regulated by the SEC and the Financial Industry Regulatory Authority (FINRA).
(d) Financial Information about Geographic Areas
The Fund does not engage in material operations in foreign countries, nor is a material portion of the Funds revenue derived from customers in foreign countries.
The Fund trades on a number of foreign commodity exchanges. The Fund does not engage in the sales of goods or services.
Item 1A: Risk Factors
Past Performance Not Necessarily Indicative of Future Results
Past performance is not necessarily indicative of future results. The trading advisors past performance may not be representative of how it may trade in the future for the Fund.
Volatile Markets; Highly Leveraged Trading
Futures and forward trading is highly leveraged, and market price levels are volatile and materially affected by unpredictable factors such as weather and governmental intervention. The combination of leverage and volatility creates a high degree of risk.
Importance of General Market Conditions
Overall market or economic conditions which neither MLAI nor the trading advisor can predict or control have a material effect on the performance of any managed futures strategy.
Possibility of Additional Government or Market Regulation.
Market disruptions and the dramatic increase in the capital allocated to alternative investment strategies during recent years have led to increased governmental as well as self-regulatory scrutiny of the alternative investment funds industry in general. In addition, certain legislation proposing greater regulation of the industry periodically is considered by the U.S. Congress, as well as the governing bodies of foreign jurisdictions. It is impossible to predict what, if any, changes in the regulations applicable to the Fund, its Manager (MLAI), the markets in which they trade and invest or the counterparties with which they do business may be instituted in the future. Any such regulation could have a material adverse impact on the profit potential of the Fund, as well as require increased transparency as to the identity of the Funds members.
Forward Trading
The Fund will trade in the forward markets, in addition to trading in the futures markets. None of the Commodity Futures Trading Commission, the National Futures Association, futures exchanges or banking authorities currently regulates the forward markets, and accordingly such markets are not subject to the breadth of regulation applicable to the futures markets. The forward markets are over-the-counter, non- exchange, traded markets, and in trading in these forward markets, the Fund will be dependent on the credit standing of the counterparties with which they trade, without the financial support of any clearinghouse system, as well as on the continued operation of the counterparties. This results in the risk that a counterparty may not settle a transaction with the Fund in accordance with its terms, because the counterparty is either unwilling or unable to do so, for example, because of a credit or liquidity problem affecting the counterparty, potentially resulting in significant loss. In addition, the prices offered for the same forward contract may vary significantly among different forward market participants. Forward markets counterparties are under no obligation to enter into forward transactions with the Fund, including transactions through which the Fund is attempting to liquidate open positions.
Effects of Speculative Position Limits
The CFTC and the U.S. commodities exchanges have established limits referred to as speculative position limits on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges. For example, the CFTC currently imposes speculative position limits on a number of agricultural commodities (e.g., corn, oats, wheat, soybeans and cotton). All commodity accounts controlled by the Trading Advisor and its principals and their affiliates are combined for speculative position limit purposes. The Trading Advisor could be required to liquidate positions held for the Fund, or may not be able to fully implement trading instructions generated by its trading models, in order to comply with such limits. Any such liquidation or limited implementation could result in substantial costs to the Fund.
Regulatory Change Could Restrict the Funds Operations
The Fund implements speculative, highly leveraged strategies. From time to time there is governmental scrutiny of these types of strategies and political pressure to regulate their activities. The CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of futures, forward and option transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, several U.S. legislators and the CFTC have expressed the concern that speculative futures traders, and commodity funds in particular, may be responsible for unwarranted and dramatic swings in the prices of commodities. Non-U.S. governments have from time to time blamed the declines of their currencies on speculative currency trading and imposed restrictions on speculative trading in certain markets.
Regulatory changes could adversely affect the Fund by restricting its markets, limiting its trading and/or increasing the taxes to which investors are subject. Adverse regulatory initiatives could develop suddenly and without notice.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Reform Act) was enacted in July 2010. The Reform Act includes provisions that comprehensively regulate the over-the-counter derivatives markets for the first time. The Reform Act requires that a substantial portion of over-the-counter derivatives be executed in regulated markets and submitted for clearing to regulated clearinghouses. Those over-the-counter derivatives may include over-the-counter foreign exchange forwards and swaps which are traded by the Fund, although the U.S. Treasury has the discretion to exclude foreign exchange forwards and swaps from certain of the regulatory requirements. If these forwards and swaps are not so excluded, the Reform Act may require them to be cleared and may subject the Fund, the Trading Advisor, the Sponsor and/or the Funds counterparties to additional regulatory requirements including minimum initial and variation margin requirements, minimum capital requirements, registration with the SEC and/or the CFTC, new business conduct standards, disclosure requirements, reporting and recordkeeping requirements, transparency requirements, position limits, limitations on conflicts of interest and other regulatory burdens. Some or all of these requirements may apply even if forwards and swaps are excluded by the U.S. Treasury. These new regulatory burdens would further increase the dealers costs, which costs are expected to be passed through to other market participants such as the Fund in the form of higher fees and less favorable dealer marks. They may also render certain strategies in which the Trading Advisor might otherwise engage impossible, or so costly that they will no longer be economical, to implement.
Additionally, the Reform Act, under what is commonly referred to as the Volcker Rule, may restrict banking entities or their affiliates, such as MLAI and certain other financial entities, from (i) purchasing units or other ownership interests in, or sponsoring, hedge funds or private equity funds (such as the Fund), with the exception of maintaining a de minimis investment, subject to certain other conditions and/or exceptions, (ii) engaging in proprietary trading and (iii) certain transactions involving conflicts of interest. The regulations and interpretations with respect to the Reform Act have yet to be issued, and the full import of the Reform Act is not yet clear. Once such regulations are issued and become effective, MLAI may take certain actions that it determines, in its sole discretion, to be necessary or advisable to comply with the Reform Act. Such changes may include, but are not limited to, the complete or partial redemption or transfer of any Units held by MLAI and/or the compulsory redemption of U.S. persons from the Fund. These actions may have a material adverse effect on the Fund and investors.
Increased Assets Under Management
There appears to be a tendency for the rates of return achieved by managed futures advisors to decline as assets under management increase. The Trading Advisor has not agreed to limit the amount of additional equity which it may manage.
Trading Advisor Risk
The Fund is subject to the risk of the bad judgment, negligence or misconduct of its Trading Advisor. There have been a number of instances in recent years in which private investment funds have incurred substantial losses due to Trading Advisor misconduct.
Changes in Trading Strategy
The trading advisor may make material changes in its trading strategies without the knowledge or seeking approval of MLAI.
Illiquid Markets
Certain positions held by the Fund may become illiquid, preventing the Funds Trading Advisor from acquiring positions otherwise indicated by its strategy or making it impossible for the trading advisor to close out positions against which the market is moving.
Certain futures markets are subject to daily price limits, restricting the maximum amount by which the price of a particular contract can change during any given trading day. Once a contracts price has moved the limit, it may be impossible or economically non-viable to execute trades in such contract. From time to time, prices have moved the limit for a number of consecutive days, making it impossible for traders against whose positions the market was moving to prevent large losses.
Trading on Non-U.S. Exchanges
The Trading Advisor may trade extensively on non-U.S. exchanges. These exchanges are not regulated by any United States governmental agency. The Fund could incur substantial losses trading on foreign exchanges to which it would not have been subject had its Trading Advisor limited its trading to U.S. markets.
The profits and losses derived from trading foreign futures and forwards will generally be denominated in foreign currencies; consequently, the Fund will be subject to a certain degree of exchange-rate risk in trading such contracts.
Risk of Loss Due to the Bankruptcy or Failure of Counterparties, Brokers and Exchanges
The Fund is subject to the risk of the insolvency of its counterparties (such as broker-dealers, futures commission merchants, exchanges, clearinghouses, banks or other financial institutions, including MLPF&S). Consequently, losses to the Fund could develop and substantially affect performance if insolvency of any of these counterparties occurs. The Funds assets could be lost or impounded during a counterpartys bankruptcy or insolvency proceedings and a substantial portion or all of the Funds assets may become unavailable to it either permanently or for a matter of years. Were any such bankruptcy or insolvency to occur or were the threat of such bankruptcy or insolvency here to occur, MLAI might decide to liquidate the Fund or suspend limit or otherwise alter trading, perhaps causing the Fund to miss significant profit opportunities. In connection with offshore futures and over-the-counter forward trading, there are increased risks in dealing with offshore brokers and unregulated trading counterparties, including the risk that assets may not benefit from the protection afforded to customer funds deposited with regulated brokers and dealers.
Item 1B: Unresolved Staff Comments
Not applicable.
Item 2: Properties
The Fund does not use any physical properties in the conduct of its business.
The Funds sponsor offices are the administrative offices of MLAI (Merrill Lynch Alternative Investments LLC, Four World Financial Center, 10th Floor, 250 Vesey Street New York, New York 10080). MLAI performs administrative services for the Fund from MLAIs offices.
Item 3: Legal Proceedings
None.
Item 4: (Removed and Reserved)
PART II
Item 5: Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 5(a)
(a) Market Information:
There is no established public trading market for the Units, and none is likely to develop. Members may redeem Units on ten days written notice to MLAI as of the last day of each month at their Net Asset Value, subject to certain early redemption charges.
(b) Holders:
As of December 31, 2010, there were 524 holders of Units including MLAI, none of whom owned 5% or more of the Funds Units.
(c) Dividends:
MLAI has not made and does not contemplate making any distributions on the Units.
(d) Securities Authorized for Issuance Under Equity Compensation Plans:
Not applicable.
(e) Performance Graph:
Not applicable.
(f) Recent Sales of Unregistered Securities:
Issuance to accredited investors pursuant to Regulation D and Section 4(6) under the Securities Act. The selling agent of the following Class of Units was MLPF&S.
CLASS A
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
Jan-10 |
|
$ |
611,375 |
|
570,100 |
|
$ |
1.0724 |
|
Feb-10 |
|
446,318 |
|
432,144 |
|
1.0328 |
| ||
Mar-10 |
|
433,867 |
|
406,661 |
|
1.0669 |
| ||
Apr-10 |
|
1,617,510 |
|
1,434,344 |
|
1.1277 |
| ||
May-10 |
|
|
|
|
|
1.1575 |
| ||
Jun-10 |
|
|
|
|
|
1.0771 |
| ||
Jul-10 |
|
|
|
|
|
1.0787 |
| ||
Aug-10 |
|
|
|
|
|
1.0816 |
| ||
Sep-10 |
|
|
|
|
|
1.0775 |
| ||
Oct-10 |
|
|
|
|
|
1.1152 |
| ||
Nov-10 |
|
|
|
|
|
1.1493 |
| ||
Dec-10 |
|
|
|
|
|
1.1128 |
| ||
Jan-11 |
|
|
|
|
|
1.1785 |
| ||
Feb-11 |
|
|
|
|
|
1.1843 |
| ||
CLASS C
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
Jan-10 |
|
$ |
2,800,138 |
|
2,617,441 |
|
$ |
1.0698 |
|
Feb-10 |
|
2,434,944 |
|
2,365,401 |
|
1.0294 |
| ||
Mar-10 |
|
4,958,659 |
|
4,666,973 |
|
1.0625 |
| ||
Apr-10 |
|
4,956,775 |
|
4,417,016 |
|
1.1222 |
| ||
May-10 |
|
|
|
|
|
1.1508 |
| ||
Jun-10 |
|
|
|
|
|
1.0700 |
| ||
Jul-10 |
|
|
|
|
|
1.0707 |
| ||
Aug-10 |
|
|
|
|
|
1.0727 |
| ||
Sep-10 |
|
|
|
|
|
1.0677 |
| ||
Oct-10 |
|
|
|
|
|
1.1041 |
| ||
Nov-10 |
|
|
|
|
|
1.1369 |
| ||
Dec-10 |
|
|
|
|
|
1.1000 |
| ||
Jan-11 |
|
|
|
|
|
1.1639 |
| ||
Feb-11 |
|
|
|
|
|
1.1687 |
| ||
CLASS D
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
Jan-10 |
|
$ |
|
|
|
|
$ |
1.0750 |
|
Feb-10 |
|
482,139 |
|
465,116 |
|
1.0366 |
| ||
Mar-10 |
|
1,699,999 |
|
1,585,524 |
|
1.0722 |
| ||
Apr-10 |
|
|
|
|
|
1.1347 |
| ||
May-10 |
|
|
|
|
|
1.1661 |
| ||
Jun-10 |
|
|
|
|
|
1.0864 |
| ||
Jul-10 |
|
|
|
|
|
1.0895 |
| ||
Aug-10 |
|
|
|
|
|
1.0938 |
| ||
Sep-10 |
|
|
|
|
|
1.0910 |
| ||
Oct-10 |
|
|
|
|
|
1.1306 |
| ||
Nov-10 |
|
|
|
|
|
1.1666 |
| ||
Dec-10 |
|
|
|
|
|
1.1310 |
| ||
Jan-11 |
|
|
|
|
|
1.1993 |
| ||
Feb-11 |
|
|
|
|
|
1.2067 |
| ||
CLASS I
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
Jan-10 |
|
$ |
1,026,564 |
|
951,491 |
|
$ |
1.0789 |
|
Feb-10 |
|
1,575,618 |
|
1,515,892 |
|
1.0394 |
| ||
Mar-10 |
|
1,172,493 |
|
1,091,605 |
|
1.0741 |
| ||
Apr-10 |
|
442,420 |
|
389,557 |
|
1.1357 |
| ||
May-10 |
|
|
|
|
|
1.1660 |
| ||
Jun-10 |
|
|
|
|
|
1.0854 |
| ||
Jul-10 |
|
|
|
|
|
1.0874 |
| ||
Aug-10 |
|
|
|
|
|
1.0907 |
| ||
Sep-10 |
|
|
|
|
|
1.0869 |
| ||
Oct-10 |
|
|
|
|
|
1.1253 |
| ||
Nov-10 |
|
|
|
|
|
1.1601 |
| ||
Dec-10 |
|
621,174 |
|
552,843 |
|
1.1236 |
| ||
Jan-11 |
|
|
|
|
|
1.1904 |
| ||
Feb-11 |
|
|
|
|
|
1.1967 |
| ||
CLASS DS
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
Jan-10 |
|
$ |
1,383,609 |
|
1,092,467 |
|
$ |
1.2665 |
|
Feb-10 |
|
62,143,584 |
|
50,887,311 |
|
1.2212 |
| ||
Mar-10 |
|
|
|
|
|
1.2631 |
| ||
Apr-10 |
|
|
|
|
|
1.3368 |
| ||
May-10 |
|
255,479 |
|
185,965 |
|
1.3738 |
| ||
Jun-10 |
|
1,788,945 |
|
1,397,722 |
|
1.2799 |
| ||
Jul-10 |
|
922,332 |
|
718,607 |
|
1.2835 |
| ||
Aug-10 |
|
13,152,619 |
|
10,207,698 |
|
1.2885 |
| ||
Sep-10 |
|
|
|
|
|
1.2852 |
| ||
Oct-10 |
|
2,747,005 |
|
1,951,275 |
|
1.3319 |
| ||
Nov-10 |
|
1,198,193 |
|
871,857 |
|
1.3743 |
| ||
Dec-10 |
|
1,105,699 |
|
829,855 |
|
1.3324 |
| ||
Jan-11 |
|
1,259,955 |
|
891,814 |
|
1.4128 |
| ||
Feb-11 |
|
1,567,614 |
|
1,102,711 |
|
1.4216 |
| ||
CLASS DT
|
|
Subscription |
|
|
| ||||
|
|
Amount |
|
Units |
|
NAV (1) |
| ||
Jan-10 |
|
$ |
|
|
|
|
$ |
|
|
Feb-10 |
|
59,852,165 |
|
59,852,165 |
|
1.0000 |
| ||
Mar-10 |
|
|
|
|
|
1.0350 |
| ||
Apr-10 |
|
|
|
|
|
1.0960 |
| ||
May-10 |
|
|
|
|
|
1.1271 |
| ||
Jun-10 |
|
|
|
|
|
1.0508 |
| ||
Jul-10 |
|
|
|
|
|
1.0543 |
| ||
Aug-10 |
|
|
|
|
|
1.0592 |
| ||
Sep-10 |
|
1,056,507 |
|
999,439 |
|
1.0571 |
| ||
Oct-10 |
|
|
|
|
|
1.0962 |
| ||
Nov-10 |
|
|
|
|
|
1.1318 |
| ||
Dec-10 |
|
|
|
|
|
1.0980 |
| ||
Jan-11 |
|
|
|
|
|
1.1650 |
| ||
Feb-11 |
|
|
|
|
|
$ |
1.1730 |
| |
(1) Beginning of the month Net Asset Value
Class A Units are subject to sales commission paid to MLPF&S ranging from 1.0% to 2.5%. Class D and Class I Units are subject to sales commissions up to 0.50%. The rate assessed to a given subscription is based upon the subscription amount. Sales commissions are directly deducted from subscription amount. Class C, Class DS and Class DT Units are not subject to any sales commissions.
Item 5(b)
Not applicable.
Item 5(c)
Not applicable.
Item 6: Selected Financial Data
The following selected financial data has been derived from the financial statements of the Fund.
Statements of Operations |
|
For the year |
|
For the period ended |
|
For the period |
| |||
|
|
|
|
|
|
|
| |||
Trading profit (loss) |
|
|
|
|
|
|
| |||
Realized, net |
|
$ |
36,984,257 |
|
$ |
6,853,155 |
|
$ |
10,029,274 |
|
Change in unrealized, net |
|
11,539,144 |
|
(1,740,277 |
) |
854,577 |
| |||
Brokerage commissions |
|
(880,901 |
) |
(230,560 |
) |
(41,658 |
) | |||
Total trading profit (loss) |
|
47,642,500 |
|
4,882,318 |
|
10,842,193 |
| |||
|
|
|
|
|
|
|
| |||
INVESTMENT INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Interest |
|
(3,199 |
) |
7,933 |
|
91,446 |
| |||
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
Management fees |
|
4,237,743 |
|
1,255,634 |
|
290,672 |
| |||
Performance fees |
|
10,688,758 |
|
839,877 |
|
2,619,030 |
| |||
Sponsor fees |
|
751,285 |
|
76,798 |
|
|
| |||
Other |
|
649,724 |
|
293,309 |
|
77,733 |
| |||
Total Expenses |
|
16,327,510 |
|
2,465,618 |
|
2,987,435 |
| |||
|
|
|
|
|
|
|
| |||
NET INVESTMENT INCOME (LOSS) |
|
(16,330,709 |
) |
(2,457,685 |
) |
(2,895,989 |
) | |||
|
|
|
|
|
|
|
| |||
NET INCOME (LOSS) |
|
$ |
31,311,791 |
|
$ |
2,424,633 |
|
$ |
7,946,204 |
|
Balance Sheet Data |
|
December 31, |
|
December 31, 2009 |
|
December 31, 2008 |
| |||
|
|
|
|
|
|
|
| |||
Members Capital |
|
$ |
261,333,948 |
|
$ |
88,998,199 |
|
$ |
48,986,858 |
|
Net Asset Value per Series A Unit* |
|
1.1785 |
|
1.0724 |
|
|
| |||
Net Asset Value per Series C Unit* |
|
1.1639 |
|
1.0698 |
|
|
| |||
Net Asset Value per Series D Unit* |
|
1.1993 |
|
1.0750 |
|
|
| |||
Net Asset Value per Series I Unit* |
|
1.1904 |
|
1.0789 |
|
|
| |||
Net Asset Value per Series DS Unit** |
|
1.4128 |
|
1.2665 |
|
1.2227 |
| |||
Net Asset Value per Series DT Unit*** |
|
1.1650 |
|
|
|
|
| |||
*Units issued on August 1, 2009.
**Units issued on September 1, 2008.
***Units issued on February 1, 2010.
MLAI believes that the Net Asset Value used to calculate subscription and redemption value and report performance to investors throughout the year is useful financial information for the Members of the Fund.
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. |
|
Feb. |
|
Mar. |
|
Apr. |
|
May |
|
June |
|
July |
|
Aug. |
|
Sept. |
|
Oct. |
|
Nov. |
|
Dec. |
| ||||||||||||
2009 |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
$ |
1.0208 |
|
$ |
1.0666 |
|
$ |
1.0683 |
|
$ |
1.1338 |
|
$ |
1.0724 |
| |||||||
2010 |
|
$ |
1.0328 |
|
$ |
1.0669 |
|
$ |
1.1277 |
|
$ |
1.1575 |
|
$ |
1.0771 |
|
$ |
1.0787 |
|
$ |
1.0816 |
|
$ |
1.0775 |
|
$ |
1.1152 |
|
$ |
1.1493 |
|
$ |
1.1128 |
|
$ |
1.1785 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. |
|
Feb. |
|
Mar. |
|
Apr. |
|
May |
|
June |
|
July |
|
Aug. |
|
Sept. |
|
Oct. |
|
Nov. |
|
Dec. |
| ||||||||||||
2009 |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
$ |
1.0199 |
|
$ |
1.0648 |
|
$ |
1.0656 |
|
$ |
1.1301 |
|
$ |
1.0698 |
| |||||||
2010 |
|
$ |
1.0294 |
|
$ |
1.0625 |
|
$ |
1.1222 |
|
$ |
1.1508 |
|
$ |
1.0700 |
|
$ |
1.0707 |
|
$ |
1.0727 |
|
$ |
1.0677 |
|
$ |
1.1041 |
|
$ |
1.1369 |
|
$ |
1.1000 |
|
$ |
1.1639 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. |
|
Feb. |
|
Mar. |
|
Apr. |
|
May |
|
June |
|
July |
|
Aug. |
|
Sept. |
|
Oct. |
|
Nov. |
|
Dec. |
| ||||||||||||
2009 |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
$ |
1.0221 |
|
$ |
1.0693 |
|
$ |
1.0723 |
|
$ |
1.1395 |
|
$ |
1.0750 |
| |||||||
2010 |
|
$ |
1.0366 |
|
$ |
1.0722 |
|
$ |
1.1347 |
|
$ |
1.1661 |
|
$ |
1.0864 |
|
$ |
1.0895 |
|
$ |
1.0938 |
|
$ |
1.0910 |
|
$ |
1.1306 |
|
$ |
1.1666 |
|
$ |
1.1310 |
|
$ |
1.1993 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. |
|
Feb. |
|
Mar. |
|
Apr. |
|
May |
|
June |
|
July |
|
Aug. |
|
Sept. |
|
Oct. |
|
Nov. |
|
Dec. |
| ||||||||||||
2009 |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
$ |
1.0211 |
|
$ |
1.0673 |
|
$ |
1.0693 |
|
$ |
1.1355 |
|
$ |
1.0789 |
| |||||||
2010 |
|
$ |
1.0394 |
|
$ |
1.0741 |
|
$ |
1.1357 |
|
$ |
1.1660 |
|
$ |
1.0854 |
|
$ |
1.0874 |
|
$ |
1.0907 |
|
$ |
1.0869 |
|
$ |
1.1253 |
|
$ |
1.1601 |
|
$ |
1.1236 |
|
$ |
1.1904 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. |
|
Feb. |
|
Mar. |
|
Apr. |
|
May |
|
June |
|
July |
|
Aug. |
|
Sept. |
|
Oct. |
|
Nov. |
|
Dec. |
| ||||||||||||
2008 |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
n/a |
|
$ |
1.0408 |
|
$ |
1.1416 |
|
$ |
1.1916 |
|
$ |
1.2227 |
| ||||||||
2009 |
|
$ |
1.2096 |
|
$ |
1.2138 |
|
$ |
1.2009 |
|
$ |
1.1446 |
|
$ |
1.1820 |
|
$ |
1.1543 |
|
$ |
1.1572 |
|
$ |
1.1827 |
|
$ |
1.2374 |
|
$ |
1.2409 |
|
$ |
1.3191 |
|
$ |
1.2665 |
|
2010 |
|
$ |
1.2212 |
|
$ |
1.2631 |
|
$ |
1.3368 |
|
$ |
1.3738 |
|
$ |
1.2799 |
|
$ |
1.2835 |
|
$ |
1.2885 |
|
$ |
1.2852 |
|
$ |
1.3319 |
|
$ |
1.3743 |
|
$ |
1.3324 |
|
$ |
1.4128 |
|
MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS DT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. |
|
Feb. |
|
Mar. |
|
Apr. |
|
May |
|
June |
|
July |
|
Aug. |
|
Sept. |
|
Oct. |
|
Nov. |
|
Dec. |
| |||||||||||
2010 |
|
n/a |
|
$ |
1.0350 |
|
$ |
1.0960 |
|
$ |
1.1271 |
|
$ |
1.0508 |
|
$ |
1.0543 |
|
$ |
1.0592 |
|
$ |
1.0571 |
|
$ |
1.0962 |
|
$ |
1.1318 |
|
$ |
1.0980 |
|
$ |
1.1650 |
|
ML BLUETREND FUTURESACCESS LLC
(CLASS A UNITS) (5)
December 31, 2010
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: August 1, 2009
Aggregate Subscriptions: $4,741,759
Current Capitalization: $5,027,628
Worst Monthly Drawdown(2): (6.95)% ( May 2010 )
Worst Peak-to-Valley Drawdown(3): (8.91)% (December 2009 April 2010)
Net Asset Value per Unit for Class A, December 31, 2010: $1.1785
Monthly Rates of Return (4)
Month |
|
2010 |
|
2009 |
|
January |
|
(3.69 |
)% |
0.00 |
% |
February |
|
3.30 |
|
|
|
March |
|
5.70 |
|
|
|
April |
|
2.64 |
|
|
|
May |
|
(6.95 |
) |
|
|
June |
|
0.15 |
|
|
|
July |
|
0.27 |
|
|
|
August |
|
(0.38 |
) |
2.08 |
|
September |
|
3.50 |
|
4.49 |
|
October |
|
3.06 |
|
0.16 |
|
November |
|
(3.18 |
) |
6.13 |
|
December |
|
5.90 |
|
(5.42 |
) |
Compound Annual Rate of Return |
|
9.89 |
% |
7.23 |
% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since August 1, 2009 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since August 1, 2009 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 17.85%.
ML BLUETREND FUTURESACCESS LLC
(CLASS C UNITS) (5)
December 31, 2010
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: August 1, 2009
Aggregate Subscriptions: $25,586,362
Current Capitalization: $26,142,926
Worst Monthly Drawdown(2): (7.02)% (May 2010)
Worst Peak-to-Valley Drawdown(3): (8.91)% (December 2009 April 2010)
Net Asset Value per Unit for Class C, December 31, 2010: $1.1639
Monthly Rates of Return (4)
Month |
|
2010 |
|
2009 |
|
January |
|
(3.77 |
)% |
0.00 |
% |
February |
|
3.22 |
|
|
|
March |
|
5.62 |
|
|
|
April |
|
2.55 |
|
|
|
May |
|
(7.02 |
) |
|
|
June |
|
0.07 |
|
|
|
July |
|
0.19 |
|
|
|
August |
|
(0.47 |
) |
1.99 |
|
September |
|
3.41 |
|
4.40 |
|
October |
|
2.97 |
|
0.08 |
|
November |
|
(3.25 |
) |
6.05 |
|
December |
|
5.81 |
|
(5.34 |
) |
Compound Annual Rate of Return |
|
8.80 |
% |
6.93 |
% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since August 1, 2009 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since August 1, 2009 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 16.25%.
ML BLUETREND FUTURESACCESS LLC
(CLASS D UNITS) (5)
December 31, 2010
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: August 1, 2009
Aggregate Subscriptions: $13,431,625
Current Capitalization: $14,733,244
Worst Monthly Drawdown(2): (6.83)% (May 2010)
Worst Peak-to-Valley Drawdown(3): (9.03)% ( December 2009 April 2010 )
Net Asset Value per Unit for Class D, December 31, 2010: $1.1993
Monthly Rates of Return (4)
Month |
|
2010 |
|
2009 |
|
January |
|
(3.57 |
)% |
0.00 |
% |
February |
|
3.43 |
|
|
|
March |
|
5.83 |
|
|
|
April |
|
2.77 |
|
|
|
May |
|
(6.83 |
) |
|
|
June |
|
0.29 |
|
|
|
July |
|
0.39 |
|
|
|
August |
|
(0.26 |
) |
2.21 |
|
September |
|
3.63 |
|
4.62 |
|
October |
|
3.18 |
|
0.28 |
|
November |
|
(3.05 |
) |
6.27 |
|
December |
|
6.04 |
|
(5.66 |
) |
Compound Annual Rate of Return |
|
11.56 |
% |
7.56 |
% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since August 1, 2009 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since August 1, 2009 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit . The inception to date total return is 19.93%.
ML BLUETREND FUTURESACCESS LLC
(CLASS I UNITS) (5)
December 31, 2010
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: August 1, 2009
Aggregate Subscriptions: $9,752,894
Current Capitalization: $10,263,653
Worst Monthly Drawdown(2): (6.91)% ( May 2010 )
Worst Peak-to-Valley Drawdown(3): (8.46)% ( December 2009 March 2010)
Net Asset Value per Unit for Class I, December 31, 2010: $1.1904
Monthly Rates of Return (4)
Month |
|
2010 |
|
2009 |
|
January |
|
(3.66 |
)% |
0.00 |
% |
February |
|
3.34 |
|
|
|
March |
|
5.74 |
|
|
|
April |
|
2.67 |
|
|
|
May |
|
(6.91 |
) |
|
|
June |
|
0.18 |
|
|
|
July |
|
0.30 |
|
|
|
August |
|
(0.35 |
) |
2.11 |
|
September |
|
3.53 |
|
4.52 |
|
October |
|
3.09 |
|
0.19 |
|
November |
|
(3.15 |
) |
6.19 |
|
December |
|
5.95 |
|
(4.98 |
) |
Compound Annual Rate of Return |
|
10.33 |
% |
7.89 |
% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since August 1, 2009 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since August 1, 2009 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 19.04%.
ML BLUETREND FUTURESACCESS LLC
(CLASS DS UNITS) (5)
December 31, 2010
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: September 1, 2008
Aggregate Subscriptions: $138,335,378
Current Capitalization: $159,599,857
Worst Monthly Drawdown(2): (6.84)% ( May 2010 )
Worst Peak-to-Valley Drawdown(3): (7.42)% ( December 2009 March 2010)
Net Asset Value per Unit for Class DS, December 31, 2010: $1.4128
Monthly Rates of Return (4)
Month |
|
2010 |
|
2009 |
|
2008 |
|
January |
|
(3.57 |
)% |
(1.08 |
)% |
|
|
February |
|
3.43 |
|
0.35 |
|
|
|
March |
|
5.83 |
|
(1.06 |
) |
|
|
April |
|
2.77 |
|
(4.69 |
) |
|
|
May |
|
(6.84 |
) |
3.27 |
|
|
|
June |
|
0.28 |
|
(2.34 |
) |
|
|
July |
|
0.39 |
|
0.25 |
|
|
|
August |
|
(0.26 |
) |
2.20 |
|
|
|
September |
|
3.63 |
|
4.63 |
|
4.08 |
% |
October |
|
3.18 |
|
0.28 |
|
9.68 |
|
November |
|
(3.05 |
) |
6.30 |
|
4.38 |
|
December |
|
6.03 |
|
(3.99 |
) |
2.62 |
|
Compound Annual Rate of Return |
|
11.55 |
% |
3.29 |
% |
22.27 |
% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since September 1, 2008 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since September 1, 2008 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 41.31%.
ML BLUETREND FUTURESACCESS LLC
(CLASS DT UNITS) (5)
December 31, 2010
Type of Pool: Single Advisor Non-Principal Protected(1)
Inception of Trading: February 1, 2010
Aggregate Subscriptions: $1,056,507
Current Capitalization: $45,566,640
Worst Monthly Drawdown(2): (6.77)% ( May 2010 )
Worst Peak-to-Valley Drawdown(3): (6.77)% ( May - October 2010)
Net Asset Value per Unit for Class DT, December 31, 2010: $1.1650
Monthly Rates of Return (4)
Month |
|
2010 |
|
January |
|
0.00 |
% |
February |
|
3.50 |
|
March |
|
5.89 |
|
April |
|
2.84 |
|
May |
|
(6.77 |
) |
June |
|
0.33 |
|
July |
|
0.46 |
|
August |
|
(0.20 |
) |
September |
|
3.70 |
|
October |
|
3.25 |
|
November |
|
(2.99 |
) |
December |
|
6.10 |
|
Compound Annual Rate of Return |
|
16.50 |
% |
(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment. The CFTC refers to such funds as principal protected. The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly Rate of Return experienced since September 1, 2008 by the Fund; a drawdown is measured on the basis of month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since September 1, 2008 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end. For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total capital of the Fund as of the beginning of such month.
(5) The information presented is based on Net Asset Value and Net Asset Value per Unit. The inception to date total return is 16.59%.
Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
Operational Overview
This performance summary is an outline description of how the Fund performed in the past, not necessarily any indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not in fact have caused such movements, but simply occurred at or about the same time.
The Fund is unlikely to be profitable in markets in which such trends do not occur. Static or erratic prices are likely to result in losses. Similarly, unexpected events (for example, a political upheaval, natural disaster or governmental intervention) can lead to major short-term losses, as well as gains.
While there can be no assurance that the Fund will be profitable under any given market condition, markets in which substantial and sustained price movements occur typically offer the best profit potential for the Fund.
Results of Operations
General
BlueCrests objective in providing trading management services is to effect appreciation of the assets of its clients through the speculative trading of financial instruments of any kind, which includes without limitation: (i) futures contracts that are now traded, or may be traded in the future, on exchanges located in the United States and abroad and options on such futures contracts and (ii) foreign currencies, foreign currency futures contracts, foreign currency forward contracts, foreign currency forward contracts and options relating thereto.
Performance Summary
This performance summary is an outline description of how the Fund performed in the past, not necessarily any indication of how it will perform in the future. In addition, the general causes to which certain price movements are attributed may or may not have caused such movements, but simply occurred at or about the same time.
Year ended December 31, 2010
|
|
Total Trading |
| |
|
|
Profit (Loss) |
| |
Stock Indices |
|
$ |
7,216,549 |
|
Metals |
|
4,175,627 |
| |
Agricultural Commodities |
|
645,680 |
| |
Currencies |
|
4,109,014 |
| |
Energy |
|
(898,266 |
) | |
Interest Rates |
|
33,274,797 |
| |
Subtotal |
|
48,523,401 |
| |
Change in Brokerage Commissions Payable |
|
(880,901 |
) | |
Total |
|
$ |
47,642,500 |
|
The Fund experienced a net trading profit before brokerage commissions and related fees for the year ended December 31, 2010 of $48,523,401. Profits were primarily attributable to the Fund trading in the interest rate, stock indices, metals, currency and agriculture sectors posting profits while the energy sector posted losses.
The interest rate sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the first quarter. Fixed income benefitted from the risk off theme and fears that the pace of the global recovery may not be as fast as previously thought. Short interest rates were the first to react with the three major strips all printing contract highs. As the month and equity weakness progressed, the rally further out the curve gathered momentum culminating in U.S. Ten Year Treasury Note trading at a one and a half month high on the final day of January. Profits continued to be posted to the Fund in the middle of the first quarter. Of the Fixed Income block, the highlight contributors were the programs long positions in the short rate contracts (Euribor, Eurodollar and Short Sterling). The underperformance in the bonds sector was predominantly due to exposure to the U.S. Ten Year Treasury Note and long positions in U.S. bonds where stronger than expected resulting in losses being posted to the Fund at the end of the first quarter. Profits were posted to the Fund at the beginning of the second quarter as the burgeoning European debt crisis increased demand for fixed income in all parts of the curve. Profits were also posted to the Fund as a bid for ex-region debt also accrued profit from the Japanese Government bond positions. The trading programs short positions also posted profits to the Fund due to a flattening of the Euribor curve. Profits continued to be posted to the Fund in the middle of the second quarter due to the trading programs stable bid in the bonds sector. Sovereign debt issues in Europe focused market sentiment into a wave of risk aversion which saw the Chicago Board Options Exchange Volatility Index spike to a 13 month high on May 5th. Profits continued to be posted to the Fund due to the trading programs fixed income allocation yielding positive returns in the bonds sectors and short positions in interest rates. Profits were posted to the Fund at the end of the second quarter as sovereign debt fears in Europe added to persistent volatility as governments began to consolidate fiscal policies, with the G20 talks doing little to coordinate strategy. Profits were posted to the Fund at the beginning of the third quarter. The majority of the positive performance resulted from a month end rally in the short interest rate sector positions, with those who participated in the risky asset rally ready to book profits after a weak U.S. quarter on quarter gross domestic product figures in the final session forced many contracts to new life highs. Profits continued to be posted to the Fund in the middle of the third quarter. The closest watched events were the Federal Open Market Committee (FOMC) rate decision on August 10th along with the United States Federal Reserve Chairmans speech at the annual Jackson Hole symposium on August 27th. Weakening data had led to talk of more easing but the FOMC elected to keep the balance sheet elevated as opposed to introducing new measures with the U.S. Federal Reserve appearing to offer stimulus if the economic picture deteriorated. The third quarter ended with losses being posted to the Fund. Losses were posted to the Fund throughout the fourth quarter. The price action in October was dictated by speculation pertaining to the quantitative easing the U.S. Federal Reserve was to announce at the FOMC meeting in early November. Assumptions affiliated to the structure of U.S. Federal Reserve measures were the primary cause of excessive swings as rhetoric and commentary from U.S. Federal Reserve officials impacted markets. In Australia, forecasts have risen of imminent and continuing rate hikes by the Reserve Bank of Australia as falling unemployment and increased demand from China and India suggest further Australian economic expansion. A volatile month with returns in November impaired by insecurities relating to the European Sovereign debt crisis which weighed on the Funds long fixed income exposure. Also, returns in bonds and short rates also came in below par.
The stock indices sector posted profits to the Fund. Losses were initially posted to the Fund at the beginning of the first quarter due to continued rumors of the Chinese tightening lending and comments from the Obama administration about risks and banking practices. The S&P500 Index fell to trade at a two and a half month low while Eurostoxx and the Nikkei also fell in January. Losses were posted to the Fund in the middle of the first quarter as equities continued to post losses. Equity strength was sustained through the month of March as the S&P500 broke key upper resistance levels amid more upbeat language from the Federal Open Market Committee, stating on March 16th that the labor market is stabilizing. The first quarter ended with profits being posted to the Fund. Losses were posted to the Fund at the beginning of the second quarter with the losses hedged in part by the trading programs bid in the short end of the fixed income curve. Losses continued to be posted to the Fund in the middle of the second quarter as returns had been adversely affected by a period of high volatility as global macroeconomic uncertainty dominated the financial markets. In addition, the flash-crash event of May 6th added further to market volatility as the S&P500 dropped significantly in one session. The Dow Jones Industrial Average and the Dow Jones Eurostoxx dropped over the month of May due to considerable volatility causing losses in the equities sector. Losses were posted to the Fund at the end of the second quarter as macroeconomic data through June was generally weak due to a bearish non farm payroll figure on June 4th setting the tone for the month of June. Equities were equally range bound, with the Dow Jones Eurostoxx trading up and ending the month down which adversely affected the trading programs predominantly long exposure to equity indices. Losses were posted to the Fund at the beginning of the third quarter. The month of July began with weak macroeconomic data in Europe, Asia and the U.S. with initial jobless claims on July 1st setting the tone. As the month progressed, healthy second quarter earnings in the U.S. and fading concern of a persistent banking crisis in Europe saw equity indices rise steadily along with the Funds risk allocation.
Infrequent surprises to the downside via weak macro prints ended up yielding losses as the main indices reacted accordingly. Losses were posted to the Fund in the middle of the third quarter. Positive data surprises were relatively few in August while there were several disappointments in U.S. housing related data, an up trend in jobless claims, and private payrolls did not increase as much as was hoped for. A more robust September saw performance in the Funds trading program led by significant returns in equities resulting in profits being posted to the Fund at the end of the third quarter. Profits were posted to the Fund at the beginning of the fourth quarter. A continuation of the stellar performance of last month continued with returns in October influenced by noteworthy contributions from equities. U.S. economic figures avoided any major disappointments with Q3 Gross Domestic Product estimates in line with consensus while retail sales and existing home sales grew. Also, the British Government introduced the Comprehensive Spending Review with the announcement of large scale public sector job cuts, deemed a proactive step towards stabilizing the economy. A volatile month with returns in November impaired by insecurities relating to the European Sovereign debt crisis which weighed on the trading programs long equity exposure resulted in losses posted to the Fund in the middle of the fourth quarter. With Ireland finally submitting to the inevitable and applying for a bail out and questions arising as per the austerity of other PIIGS nations namely, Portugal, Italy and Greece there was a clamber for safe haven assurance with equity markets retracing gains as they realized the full extent of the European desolation. A strong month for returns in December with noteworthy performance attributed to equities resulting in profits posted to the Fund at the end of the fourth quarter. With the holiday season at the forefront of market thoughts, liquidity was the focus in the few weeks of December with Christmas volumes prevailing in the latter part. Price action was dominated by rebalancing flow while the general market theme remained focused on the ongoing macro recovery.
The metals sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the first quarter. The U.S. dollar strength triggered large macro stops in gold and the fears over Chinese tightening hit base metals. Losses continued to be posted to the Fund in the middle of the first quarter due to lack of trend and choppiness in the global markets. The commodity markets experienced a variety of different trends with base metal prices increasing resulting in profits at the end of the first quarter. The metals sector posted overall losses to the Fund throughout the second quarter due to volatility in global markets. Losses were posted to the Fund at the beginning of the third quarter due to long gold positions which fell by months end as large speculative long positions were unwound. Profits were posted to the Fund in the middle through the end of the third quarter in lieu of market volatility. Profits were posted to the Fund throughout the fourth quarter. The trading program reduced risk in November as markets faded but gradually increased risk later on as markets stabilized and partially retraced with the metals sector providing profits to the Fund which continued into December.
The currency sector posted profits to the Fund. Losses were posted to the Fund at the beginning of the first quarter. Trend went into the month long high beta currencies. Despite the trading program largely reducing its long positions in the New Zealand dollar versus the U.S. dollar, the pair still ended the month of January posting losses to the Fund. The trading program held short conviction in the euro and the British pound as the region suffered with the Greek sovereign debt situation aggravating an already bleak economic outlook resulting in profits being posted to the Fund in the middle of the quarter. The focus of broad macroeconomic concern remains the consequences of a cross the curve and the consequences of a strong U.S. dollar on commodities positioning and the market reversal triggered by monetary policy exit strategy. The first quarter ended with profits being posted to the Fund. Profits were posted to the Fund at the beginning of the second quarter amidst considerable macroeconomic instability. Losses were posted to the Fund in the middle of the second quarter as the euro was heavily sold against the U.S. dollar as market participants reduced exposure to the PIGS crisis (Portugal, Ireland, Greece and Spain). Losses continued to be posted to the Fund at the end of the second quarter due to the effect of a sharp market reversal caused by abrupt shifts in monetary policy and the effect of a stronger U.S. dollar on the trading programs long positioning in dollar denominated risky assets. Losses were posted to the Fund at the beginning of the third quarter. Underperformance came from short positions in the euro as it strengthened against the U.S. dollar with the disparity between U.S. macro weakness and burgeoning eurozone stability forcing a rally over the month. Profits were posted to the Fund in the middle of the third quarter as returns remained constant after a period of global economic uncertainty prevailed. Profits were posted to the Fund at the end of the third quarter due to the much publicized Bank of Japan intervention which may herald other central bank intervention, while the U.S. Congress passed the Currency Reform for Fair Trades Act, a signal to China on its exchange rate policies. Profits were posted to the Fund at the beginning of the fourth quarter. The price action in October was dictated by speculation pertaining to the quantitative easing the U.S. Federal Reserve was to announce at the Federal Open Market Committee meeting, due to take place in early November. Assumptions affiliated to the structure of U.S. Federal Reserve measures were the primary cause of excessive swings as rhetoric and commentary from U.S. Federal Reserve officials impacted markets, primarily the U.S. dollar, although losses were stemmed as quantitative easing expectations were reined in. Losses were posted to the Fund in the middle of the fourth quarter. November started in colossal fashion with risky assets rallying as the U.S. Federal Reserves long awaited announcement of Quantitative Easing round 2 in which it plans to purchase $600 billion of Treasuries by the second quarter of 2011. With most of the Quantitative Easing already priced in, the market quickly shifted to the eurozone anguish which had been simmering beneath the surface while the media preferred to focus on the U.S. Federal Reserve. November saw increased euro weakness with the euro and the U.S. dollar falling and returns in the FX sector down while returns in bonds and short rates also came in below par. Profits were posted to the Fund at the end of the fourth quarter as eurozone sovereign worries calmed when Irelands parliament passed
the International Monetary Funds bail out plan which had been reaffirmed by the European Central Bank increasing its financial support for the region. In addition the United States extended cuts in payroll taxes and unemployment benefits helping fuel the positive sentiment.
The agriculture sector posted profits to the Fund. Profits were posted to the Fund at the beginning of the first quarter due to the fall in corn after a very bearish United States Department of Agriculture report and extended a short bias across all agricultural products as South American production continued to put pressure on U.S. crops. Losses were posted to the Fund in the middle of the first quarter due to volatility in global markets. The commodity markets experienced a variety of different trends with cattle prices increasing while the grain markets weakened. Through this mixture of trends and their diversifying character, the agriculture sector posted profits to the Fund at the end of the first quarter. Losses were posted to the Fund at the beginning and end of the second quarter due to volatility in global markets. Profits were posted to the Fund in the middle of the second quarter as grains continued its slide from the previous month. Losses were posted to the Fund at the beginning through the middle of the third quarter due to volatility in global markets only to be offset at the end of the third quarter with profits being posted to the Fund. Profits were posted to the Fund at the beginning and the end of the fourth quarter. Losses were posted to the Fund in November due to volatility in the global markets.
The energy sector posted losses to the Fund. Losses were posted to the Fund at the beginning of the first quarter. Energies started the month of January strongly with pent up demand spilling over from the holiday period. However, the rally in energies that began in the second half of December started to look increasingly out of step with fundamentals, West Texas Intermediate crude oil ended January down from the previous month. Profits were posted to the Fund in the middle through the end of the first quarter. Risk levels in the program remain above average with the margin to equity ratio increasing concordant with an expanding opportunity set. With a significant component of the portfolios VaR in energies, the volatile path of oil as it approached year-to-date highs has been responsible for this risk. Profits were posted to the Fund at the beginning of the second quarter as bullish non-farm-payroll data sent oil to an18 month high and the West Texas Intermediate crude oil at more than $87 per barrel. Losses were posted to the Fund in the middle of the second quarter due to the West Texas Intermediate crude oil dropping to $22 per barrel through to May 25th and all other energies were similarly affected, causing a drop in the energies sector. Losses were posted to the Fund at the end of the second quarter as risk levels steadily increased through the month of June most notably in the Energies sector. West Texas Intermediate crude oil traded within a $10 range as the BP oil spill and Hurricane Alex sparked rallies to retest the $80 per barrel level but ultimately ended the month where it began, around $76 per barrel and other energies followed a similar path, culminating in a loss in this sector. Losses were posted to the Fund at the beginning of the third quarter. The refined energy products rallied against a weak U.S. dollar and managed to hold flat on average across all regions. Losses continued to be posted to the Fund in the middle of the third quarter as the model trimmed risky assets over the course of the month with exposure comprehensively cut in energies. Therefore, the third quarter ended with profits posted to the Fund. Losses were posted to the Fund at the beginning of the fourth quarter as the trading program moderately scaled back equity exposure while increasing risk in energies. Profits were posted to the Fund in the middle through the end of the fourth quarter. The Funds performance can be credited to positive macro sentiment adding speculative interest into the commodity space in December. With the long term outlook for commodities remaining positive and fueled by continued Asian growth, the move higher was underpinned by an increase in demand, resulting in large falls in the Department of Energy inventory reserves. Brent Crude, West Texas Intermediate crude oil, heating oil and Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline all rose over 5% in December.
Year ended December 31, 2009
|
|
Total Trading |
| |
|
|
Profit (Loss) |
| |
Stock Indices |
|
$ |
6,832,896 |
|
Metals |
|
41,606 |
| |
Agricultural Commodities |
|
(259,796 |
) | |
Currencies |
|
(1,372,119 |
) | |
Energy |
|
(1,594,326 |
) | |
Interest Rates |
|
1,464,617 |
| |
Subtotal |
|
5,112,878 |
| |
Change in Brokerage Commissions Payable |
|
(230,560 |
) | |
Total |
|
$ |
4,882,318 |
|
The Fund experienced a net trading profit before brokerage commissions and related fees of $5,112,878. Profits were primarily attributable to the stock indices, interest rates and metals sectors posting profits and the agriculture, currencies and energy sectors posted losses.
Losses were posted to the Fund at the beginning of the first quarter. The Funds fixed income related positions were the major detractor from performance as bond yields rose against the Funds long positions. The Funds currency positions posted overall gains due to the Funds long U.S. dollar positions versus the British pound and the Australian dollar. The commodities and equities sectors contributed marginally to the Funds return at the end of January. Profits were posted to the Fund in the middle of the first quarter as equity-index related positions were the best performing sector for the Fund. While the Funds total equity exposure was a small net short position, the recent fall in equity markets was large enough to produce profits for the Fund. All other sectors posted losses for the Fund. The Fund had been concentrating its exposure in the last three months in fixed income as the Funds overall long exposure produced mixed results with overall losses to the Fund. The Funds currency sector positions also posted losses, primarily due to the Funds long positions in the Euro and short positions in the Australian dollar. The Fund had long fixed-income related positions going into March and the choppiness in the markets did not change its positioning significantly. With yields ending the month lower across the board, the Fund was able to generate strong profits in fixed income, which were not enough to offset losses from the Funds positions in currencies and short position in commodities. The Funds biggest losses came from its currency positions. The Fund was correctly positioned with respect to long positions in the Euro and short positions in the British pound; however the Fund was incorrectly positioned with respect to short positions in the Australian dollar, which experienced the largest price movement over the period. The Funds commodity short positions posted losses as most commodities ended the month higher resulting in losses being posted to the Fund at the end of the first quarter.
Losses were posted to the Fund at the beginning of the second quarter. The Funds losses in equity indices, currencies and commodities were muted due to the reduction of its positions in these sectors. Fixed income was the worst performing sector, followed by currencies. Beginning the second quarter on a slightly bearish tone, the commodity markets were volatile as the change in economic sentiment took effect. Despite higher than expected U.S. oil inventory numbers, energies were generally buoyed by the improved outlook and the volatility in the markets led to a reduction in the Funds exposure, resulting in losses posted for the Fund. The Fund posted losses in the metals and agricultural markets due to their volatility. Profits were posted to the Fund in the middle of the second quarter in all sectors with the exception of currencies. As investor sentiment generally became more optimistic that the worst of the recent economic crisis had occurred, and the Fund was well positioned as equities moved higher, energies rose and short rates rallied. The U.S. dollar was sold off as investors sold their safe U.S. assets and chased yield. Profits were posted to the Fund from long positions in the New Zealand dollar versus the U.S. dollar and short positions in the U.S. dollar versus the South African rand, however, these positions could not offset the losses from the Funds short positions in the British pound and Swedish krona. The improvement in sentiment and the weak United States dollar pushed energies higher as oil traded up to $66 per barrel, a level not seen since the beginning of November 2008. The metals sector posted profits to the Fund due to its long positions in gold and silver. The agriculture sector posted profits due to a rally in soymeal and soybeans. Losses were posted to the Fund at the end of the second quarter as short term rates suffered a sharp reversal during the first week of June and the U.S. dollar had a similar reversal, gaining against most currencies. The up trends in equities and commodities reversed in the middle of June as sentiment became risk averse again, resulting in losses being posted to the Fund. Declines in non-farm payrolls caused liquidation of long positions in the rates markets, erasing virtually all of the markets 2009 gains. Bonds also suffered a sell off due to inflation fears. The Fund posted profits in energies as oil traded above $73 a barrel to hit a seven month high, due
to the improved growth prospects and a drawdown in Department of Energy inventory numbers. The Fund posted profits in agricultural despite a fall in corn. The Fund posted losses in metals due to it not being positioned to benefit from the falls in precious metals, particularly the slump in silver.
Profits were posted to the Fund at the beginning of the third quarter as corporate earnings came in better than expected plus a series of economic figures that indicated the worst may be over including an upward revision to the United States Gross Domestic Product giving equity markets a lift in the final days of the July. Long positions in equities performed strongly as stock indices rebounded with many trading to 2009 highs. The early sell off of energies and the Funds subsequent risk reduction resulted in the Fund not benefiting from the energy rally, resulting in losses posted to the Fund. The currency sector posted profits to the Fund due to the rally in the New Zealand dollar, Australian dollar and the Canadian dollar. The agriculture sector posted losses to the Fund as the short positions in wheat and corn could not compensate for losses sustained in short positions in soybean and soymeal and the metals sector posted profits for the Fund due to a rally in copper. Profits were posted to the Fund in the middle of the third quarter as the United States Gross Domestic Product rate of decline diminished; homes sales were buoyed and confidence bounced. The United Kingdom and Europe also had positive figures as European business and consumer confidence rose plus the United Kingdom consumer spending and retail sales were also up. Equities were the most profitable sector as the MSCI World Index (U.S. dollar) rose. The Fund held onto its long positions in stocks from July and added to them during the early part of August with the European stock indices posting the highest profits to the Fund. The United States Federal Reserve Chairman Bernankes comments on holding interest rates for an extended period contributed to the Fund posting profits in short position in the interest rate sector. Short positions in natural gas posted profits to the Fund which could not offset losses in the energies sector, the poorest performing sector in August. Long positions held in the currency market began to prosper as the New Zealand dollar versus the U.S. dollar rallied and the British pound versus the Australian dollar fell. Short positions in wheat and corn were profitable but could not compensate for the for swift price action in the soy complex resulting in losses being posted to the Fund. The metals sector was flat as profits from long base positions were unable to compensate for the losses sustained from the gold and silver positions. Profits were posted to the Fund at the end of the third quarter due to the Funds long positions in equity indices in all geographies which benefited from continued up trends in most markets except in Asia. Fixed income posted profits to the Fund due to the Funds maintaining its long positioning at both the short and long ends of the yield curve and continued to ride the trends in those markets. The currency sector posted profits to the Fund due to two primary currency positions, the long positions in the Australian dollar, the short positions in the euro and British pound. The short positions in the euro lost money but that was offset by gains in the long positions in the Australian dollar and the short position in the British pound. The energy sector posted losses to the Fund. In addition to overall choppiness, there was a big reversal in natural gas and the Funds short positions in natural gas which rallied over the month caused significant losses. All other commodity sectors were roughly flat as the third quarter ended.
Profits were posted to the Fund at the beginning of the fourth quarter due to key macroeconomic data releases, including improved household and business confidence. Fixed income futures rallied as sentiment began to swing back towards interest rates being on hold for an extended period of time. The long equities positions rallied for the reasons outlined earlier with the Fund viewing most dips within the month of October as buying opportunities. Losses were posted to the Fund in the energy sector due to long positions in crude oil and refined energy products after unexpected build up in inventories caused a large sell off. The currency sector also posted profits to the Fund. The United States dollar Index Future traded down to levels not seen since September 2008 as Central Banks and macro funds shunned the United States dollar on improving global sentiment. The agriculture sector posted profits to the Fund due to short wheat positions which benefited from bearish harvest yields pushing it to a year low. The metals sector also posted profits to the Fund due to long gold and silver positions, the former trading above $1000. Profits were posted to the Fund in the middle of the fourth quarter due to large fixed income and equity long positions. On the macroeconomics front a number of better than expected U.S. figures and comments from the U.S. Federal Reserve Chairman Ben Bernanke signaling interest rates would remain on hold for an extended period of time resulted in short positions in interest rates to post profits to the Fund and stock indices to bounce from their selloff in October. Despite fears of a Dubai default at the end of November the stock indices posted profits to the Fund due to gains in the Standard & Poors 500 Index, the Financial Times and Stock Exchange and Deutscher Aktien-Index up at the end of the month. Energies posted losses for the Fund trading in a relatively narrow range as the model retained its long albeit much reduced oil and oil products position against short positions in natural gas. Currencies posted profits to the Fund due to the Funds continuing to hold short positions in the U.S. dollar. The metals sector posted profits to the Fund due to the rise in gold with its best monthly return in ten months and silver also rallied but not as high as gold. Most agricultural positions were much reduced as wheat rallied and soy moved higher resulting in profits being posted to the Fund. Losses were posted to the Fund at the end of the fourth quarter as its long positions in equities failed to offset the losses sustained from rising yields and volatile energy prices. Profits were posted to the Fund in stock indices due to its long positions across all indices. Small cap outperformed large cap as the Russell 2000 was the programs best monthly performer. Interest rates posted losses to the Fund as better than expected economic figures plus continued comments from the U.S. Federal Reserve stating interest rates will remain low caused inflation expectations to rise and subsequently, yields to rise. Short rates and bonds were aggressively sold off in relatively thin markets amid a high supply of new issues. Unlike previous months,
positive data in December fed into the U.S. dollar strength as the U.S. Dollar Index Futures index climbed resulting in losses being posted to the Fund. The Fund was positioned to gain from the U.S. dollar weakness plus the New Zealand dollar and the Norwegian krone only to be reversed in December resulting in losses. Long positions were held across all energy products in with an emphasis in oil. West Texas Intermediate Crude Oil prices fell in the beginning of December only to rebound by the end of the month as the energy sector posted losses to the Fund. The agriculture sector posted losses to the Fund due to the volatile crop markets. The Fund was not positioned for the sell off in precious metals resulting in losses being posted to the Fund at the end of the fourth quarter.
Period ended December 31, 2008
|
|
Total Trading |
| |
|
|
Profit (Loss) |
| |
|
|
|
| |
Stock Indices |
|
$ |
3,801,550 |
|
Metals |
|
494,013 |
| |
Agricultural Commodities |
|
151,137 |
| |
Currencies |
|
1,420,774 |
| |
Energy |
|
680,435 |
| |
Interest Rates |
|
4,306,568 |
| |
Subtotal |
|
10,854,477 |
| |
Change in Brokerage Commissions Payable |
|
(12,284 |
) | |
Total |
|
$ |
10,842,193 |
|
From September 1, 2008, the date the Fund commenced trading, through June 30, 2009, the Funds sole investor was Systematic Momentum, a fund of funds allocating and reallocating its capital under the direction of the Sponsor.
September 1, 2008 to December 31, 2008
The Fund experienced a net trading profit before brokerage commissions and related fees from September 1, 2008 to December 31, 2008 of $10,854,477. Profits were primarily attributable to all of the Funds sectors which are agriculture, energy, interest rates, metals, stock indices and currencies.
The Fund posted an overall gain in September 2008, with the biggest gain attributable to returns from short equity positions as equity prices continued to slide. Other contributing factors to the Funds overall gain came from long positions in short term interest rates and short positions in crops and metals. Currency positions were the largest detractor from performance as the U.S. dollar continued to rally against the previously established negative long-term trends particularly in the U.S. dollar versus the Euro. The Fund has since reduced currency positions significantly.
The Fund posted an overall gain in October 2008 amidst a difficult market environment. The biggest contribution to this overall gain in October continued to be the Funds short equity-related positions as equity prices continued to slide. The Fund also posted gains on returns from its FX positions and also from short positions in commodities. Long positions in fixed income, primarily on the short end of the curve, also contributed to the Funds gains.
In November 2008, the Fund posted an overall gain, with the largest portion attributable to long positions in fixed-income related instruments, as central banks around the world continued to cut interest rates, resulting in lower yields. The Fund also profited from short equity positions, short positions in British pounds and Australian dollars versus the U.S. dollar and short energy positions.
The Fund posted an overall gain in December 2008. The largest contributors to the Funds gains were its long positions in fixed-income related instruments across the curve, as yields continued to fall dramatically. Short positions in commodities such as energy and long positions in the Euro versus short positions in the British pound also posted gains for the Fund. Equity-related returns were flat on the month as risk in stocks was minimal.
Variables Affecting Performance
The principal variables that determine the net performance of the Fund are gross profitability from the Funds trading activities and interest income.
The Fund currently earns interest based on the prevailing Fed Funds rate plus a spread for short cash positions and minus a spread for long cash positions. The current short term interest rates have remained extremely low when compared with historical rates and thus has contributed negligible amounts to overall Fund performance.
During all periods set forth above in Selected Financial Data, the interest rates in many countries were at unusually low levels. In addition, low interest rates are frequently associated with reduced fixed income market volatility, and in static markets the Funds profit potential generally tends to be diminished. On the other hand, during periods of higher interest rates, the relative attractiveness of a high risk investment such as the Fund may be reduced as compared to high yielding and much lower risk fixed-income investments.
The Funds Management Fees and Sponsor Fees are a constant percentage of the Funds assets. Brokerage Commissions, which are not based on a percentage of the Funds assets, are based on actual round turns. The Performance Fees payable to BlueCrest are based on the new Trading Profits generated by the Fund excluding interest and after reduction of the Brokerage Commissions.
Unlike many investment fields, there is no meaningful distinction in the operation of the Fund between realized and unrealized profits. Most of the contracts traded by the Fund are highly liquid and can be closed out at any time.
Except in unusual circumstances, factorsregulatory approvals, cost of goods sold, employee relations and the likewhich often materially affect an operating business, have no material impact on the Fund.
Liquidity; Capital Resources
The Fund borrows only to a limited extent and only on a strictly short-term basis in order to finance losses on non-U.S. dollar denominated trading positions pending the conversion of the Funds U.S. dollar deposits. These borrowings are at a prevailing short-term rate in the relevant currency.
Substantially all of the Funds assets are held in cash. The Net Asset Value of the Funds cash is not affected by inflation. However, changes in interest rates could cause periods of strong up or down price trends, during which the Funds profit potential generally increases. Inflation in commodity prices could also generate price movements, which the strategies might successfully follow.
Because substantially all of the Funds assets are held in cash, the Fund should be able to close out any or all of its open trading positions and liquidate any or all of its securities holdings quickly and at market prices, except in very unusual circumstances. This permits the Fund to limit losses as well as reduce market exposure on short notice should its strategies indicate doing so. In addition, because there is a readily available market value for the Funds positions and assets, the Funds monthly Net Asset Value calculations are precise, and investors need to provide ten business days notice to receive the full redemption proceeds of their Units on the last business day of any month.
As a commodity pool, the Fund maintains an extremely large percentage of its assets in cash, which it must have available to post initial and variation margin on futures contracts. This cash is also used to fund redemptions. While the Fund has the ability to fund redemption proceeds from liquidating positions, as a practical matter positions are not liquidated to fund redemptions. In the event that positions were liquidated to fund redemptions, MLAI, as the Manager of the Fund, has the ability to override decisions of the Trading Advisor to fund redemptions if necessary, but in practice the Trading Advisor would determine in its discretion which investments should be liquidated.
(The Fund has no applicable off-balance sheet arrangements or tabular disclosure of contractual obligations of the type described in Items 3.03(a)(4) and 3.03(a)(5) of Regulation S-K.)
Recent Accounting Developments
Recent accounting developments are discussed in Exhibit 13.01.
Item 7A: Quantitative and Qualitative Disclosures About Market Risks
Introduction
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 Funds 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 Funds main line of business.
Market movements result in frequent changes in the fair market value of the Funds open positions and, consequently, in its earnings and cash flow. The Funds market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Funds open positions and the liquidity of the markets in which it trades.
The Fund, under the direction of BlueCrest, rapidly acquires and liquidates both long and short positions in currency markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Funds 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 Funds 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 Funds experience to date (i.e., risk of ruin). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the quantifications included in this section should not be considered to constitute any assurance or representation that the Funds losses in any market sector will be limited to Value at Risk or by the Funds attempts to manage its market risk.
Quantifying The Funds Trading Value At Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Funds market risk exposures contain forward-looking statement 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.
The Funds risk exposure in the various market sectors traded by the Fund is quantified below in terms of Value at Risk. Due to the Funds fair value accounting, any loss in the fair value of the Funds open positions is directly reflected in the Funds earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).
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 loss in the fair value of any given contract incurred in 95%-99% of the one-day time periods included in the historical sample (generally approximately one year) researched for purposes of establishing margin levels. The maintenance margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.
In the case of market sensitive instruments which are not exchange-traded (almost exclusively currencies in the case of the Fund), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, dealers margins have been used.
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 been aggregated to determine each trading categorys aggregate Value at Risk. The diversification effects resulting from the fact that the Funds positions are rarely, if ever, 100% positively correlated have not been reflected.
The Funds Trading Value at Risk in Different Market Sectors
The following table indicates the average, highest and lowest trading Value at Risk associated with the Funds open positions by market category for the fiscal periods. During the years ended December 31, 2010 and 2009, the Funds average month-end Net Asset Value was approximately $218,928,048 and $61,066,658, respectively.
December 31, 2010
|
|
Average Value |
|
% of Average |
|
Highest Value |
|
Lowest Value |
|
Market Sector |
|
at Risk |
|
Capitalization |
|
at Risk |
|
at Risk |
|
|
|
|
|
|
|
|
|
|
|
Agriculture |
|
589,374 |
|
0.27 |
% |
1,471,254 |
|
27,599 |
|
Currencies |
|
2,287,660 |
|
1.04 |
% |
5,514,820 |
|
147,501 |
|
Energy |
|
6,721,998 |
|
3.07 |
% |
12,600,870 |
|
1,640,134 |
|
Interest Rates |
|
7,741,202 |
|
3.54 |
% |
15,950,486 |
|
3,352,084 |
|
Metals |
|
1,485,764 |
|
0.68 |
% |
2,855,932 |
|
432,204 |
|
Stock Indices |
|
5,960,442 |
|
2.72 |
% |
9,520,869 |
|
2,199,496 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
24,786,440 |
|
11.32 |
% |
47,914,231 |
|
7,799,018 |
|
December 31, 2009
|
|
Average Value |
|
% of Average |
|
Highest Value |
|
Lowest Value |
| |||
Market Sector |
|
at Risk |
|
Capitalization |
|
at Risk |
|
at Risk |
| |||
|
|
|
|
|
|
|
|
|
| |||
Agriculture |
|
$ |
12,924 |
|
0.02 |
% |
$ |
26,489 |
|
$ |
2,790 |
|
Currencies |
|
51,778 |
|
0.08 |
% |
181,592 |
|
1,994 |
| |||
Energy |
|
107,757 |
|
0.18 |
% |
297,378 |
|
4,902 |
| |||
Interest Rates |
|
5,900,760 |
|
9.66 |
% |
10,777,045 |
|
3,028,763 |
| |||
Metals |
|
24,028 |
|
0.04 |
% |
68,527 |
|
4,051 |
| |||
Stock Indices |
|
217,874 |
|
0.36 |
% |
734,880 |
|
9,805 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Total |
|
$ |
6,315,120 |
|
10.33 |
% |
$ |
12,085,914 |
|
$ |
3,052,303 |
|
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 Funds 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 table as well as the past performance of the Fund gives no indication of this risk of ruin.
Non-Trading Risk
Foreign Currency Balances; Cash on Deposit with MLPF&S
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 on the approximately 90%-95% of its assets which are held in cash at MLPF&S or BlackRock. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Funds 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 Funds primary market risk exposures as well as the strategies used and to be used by MLAI and BlueCrest for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Funds 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, and 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 Funds 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 the time value of their investment in the Fund.
The following were the primary trading risk exposures of the Fund as of December 31, 2010, by market sector.
Interest Rates.
Interest rate movements directly affect the price of derivative 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 Funds profitability. The Funds 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 smaller nations e.g., Australia. MLAI anticipates that G-7 interest rates will remain the primary market exposure of the Fund for the foreseeable future.
Currencies.
The Fund trades in a number of currencies. The Fund does not anticipate that the risk profile of the Funds currency sector will change significantly in the future. The currency trading Value at Risk figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk of maintaining Value at Risk in a functional currency other than U.S. dollars.
Stock Indices
The Funds primary equity exposure is to S&P 500, Nikkei and German DAX equity index price movements. The Fund is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Asian indices.
Metals.
The Funds metals market exposure is to fluctuations in the price of precious and non-precious metals.
Agricultural Commodities.
The Funds primary agricultural commodities exposure is to agricultural price movements which are often directly affected by severe or unexpected weather conditions. Soybeans, grains, and livestock accounted for the substantial bulk of the Funds agricultural commodities exposure as of December 31, 2010. However, it is anticipated that the Fund will maintain an emphasis on cotton, grains and sugar, in which the Fund has historically taken its largest positions.
Energy.
The Funds primary energy market exposure is to natural gas and crude oil price movements, often resulting from political developments in the Middle East. Oil prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Fund as of December 31, 2010.
Foreign Currency Balances.
The Funds primary foreign currency balances are in Japanese Yen, Swedish Krona and Euros.
U.S. Dollar Cash Balance.
The Fund holds U.S. dollars only in cash at MLPF&S or BlackRock. The Fund has immaterial cash flow interest rate risk on its cash on deposit with MLPF&S in that declining interest rates would cause the income from such cash to decline.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
Trading Risk
MLAI has procedures in place intended to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. While MLAI does not intervene in the markets to hedge or diversify the Funds market exposure, MLAI may urge BlueCrest to reallocate positions in an attempt to avoid over-concentrations. However, such interventions are unusual, except in cases in which it appears that BlueCrest has begun to deviate from past practice and trading policies or to be trading erratically, MLAIs basic control procedures consist of simply of the ongoing process of monitoring BlueCrest with the market risk controls being applied by BlueCrest itself.
Risk Management
BlueCrest attempts to control risk in all aspects of the investment process from confirmation of a trend to determining the optimal exposure in a given market, and to money management issues such as the startup or upgrade of investor accounts. BlueCrest double checks the accuracy of market data, and will not trade a market without multiple price sources for analytical input. In constructing a portfolio, BlueCrest seeks to control overall risk as well as the risk of any one position, and BlueCrest trades only markets that have been identified as having positive performance characteristics. Trading discipline requires plans for the exit of a market as well as for entry. BlueCrest factors the point of exit into the decision to enter (stop loss). The size of the Funds positions in a particular market is not a matter of how large a return can be generated but of how much risk it is willing to take relative to that expected return.
To attempt to reduce the risk of volatility while maintaining the potential for excellent performance, proprietary research is conducted on an ongoing basis to refine the BlueCrest investment strategies. Research may suggest substitution of alternative investment methodologies with respect to particular contracts; this may occur, for example, when the testing of a new methodology has indicated that its use might have resulted in different historical performance. In addition, risk management research and analysis may suggest modifications regarding the relative weighting among various contracts, the addition or deletion of particular contracts for a program, or a change in position size in relation to account equity. The weighting of capital committed to various markets in the investment programs is dynamic, and BlueCrest may vary the weighting at its discretion as market conditions, liquidity, position limit considerations and other factors warrant.
BlueCrest may determine that risks arise when markets are illiquid or erratic, which may occur cyclically during holiday seasons, or on the basis of irregularly occurring market events. In such cases, BlueCrest at its sole discretion may override computer-generated signals and may at times use discretion in the application of its quantitative models, which may affect performance positively or negatively.
Adjustments in position size in relation to account equity have been and continue to be an integral part of BlueCrests investment strategy. At its discretion, BlueCrest may adjust the size of a position in relation to equity in certain markets or entire programs. Such adjustments may be made at certain times for some programs but not for others.
Factors which may affect the decision to adjust the size of a position in relation to account equity include ongoing research, program volatility, assessments of current market volatility and risk exposure, subjective judgment, and evaluation of these and other general market conditions
Non-Trading Risk
The Fund controls the non-trading exchange rate risk by regularly converting foreign balances back into U.S. dollars at least once per week, and more frequently if a particular foreign currency balance becomes unusually high.
The Fund has cash flow interest rate risk on its cash on deposit with MLPF&S and in the BlackRock sponsored money market mutual fund in that declining interest rates would cause the income from such cash to decline. However, a certain amount of cash or cash equivalents must be held by the Fund in order to facilitate margin payments and pay expenses and redemptions. MLAI does not take any steps to limit the cash flow risk on its cash held on deposit at MLPF&S and in the BlackRock sponsored money market mutual fund.
Item 8: Financial Statements and Supplementary Data
Net Income(Loss) by Quarter
Eight Quarters through December 31, 2010
|
|
Fourth |
|
Third |
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
|
First |
| ||||||||
|
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
| ||||||||
|
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
2009 |
|
2009 |
|
2009 |
|
2009 |
| ||||||||
Total Income (Loss) |
|
$ |
21,677,906 |
|
$ |
13,374,487 |
|
$ |
(11,857,170 |
) |
$ |
24,444,078 |
|
$ |
1,805,924 |
|
$ |
5,417,563 |
|
$ |
(1,709,522 |
) |
$ |
(623,717 |
) |
Total Expenses |
|
6,749,064 |
|
4,480,000 |
|
(1,850,661 |
) |
6,949,107 |
|
907,022 |
|
946,316 |
|
315,035 |
|
297,243 |
| ||||||||
Net Income (Loss) |
|
$ |
14,928,842 |
|
$ |
8,894,487 |
|
$ |
(10,006,509 |
) |
$ |
17,494,971 |
|
$ |
898,902 |
|
$ |
4,471,247 |
|
$ |
(2,024,557 |
) |
$ |
(920,960 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net Income (Loss) per weighted average Unit (1) |
|
$ |
0.0743 |
|
$ |
0.0440 |
|
$ |
(0.0491 |
) |
$ |
0.1107 |
|
$ |
0.0134 |
|
$ |
0.0854 |
|
$ |
(0.0439 |
) |
$ |
(0.0216 |
) |
(1) The net income per weighted average unit is based on the weighted average of the total units for each quarter.
The financial statements required by this Item are included in Exhibit 13.01.
The supplementary financial information (information about oil and gas producing activities) specified by Item 302(b) of Regulation S-K is not applicable.
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no disagreements with the respective independent registered public accounting firms on accounting and financial disclosure.
Item 9A: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
MLAIs Chief Executive Officer and the Chief Financial Officer, on behalf of the Fund, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Fund as of and for the year which ended December 31, 2010, and, based on its evaluation, has concluded that these disclosure controls and procedures are effective.
Managements Annual Report on Internal Control over Financial Reporting:
The Funds management is responsible for establishing and maintaining adequate internal control over financial reporting. The Funds internal control over financial reporting is a process designed under the supervision of MLAIs Chief Executive Officer and the Chief Financial Officer, on behalf of the Fund and is effected by management, other personnel and service providers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and included those policy and procedures that:
· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Fund.
· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Fund are being made only in accordance with authorizations of management and directors of the Fund; and
· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Funds assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in condition, or that the degree of compliance with the policies or procedures may deteriorate.
The Funds management assessed the effectiveness of the Funds internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on its assessment the Funds management concluded that at December 31, 2010, the Funds internal control over financial reporting was effective.
This annual report does not include an attestation report of the Funds independent registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Funds independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Fund to provide only managements report for this annual report.
Changes in Internal Control over Financial Reporting
No change in internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the quarter ended December 31, 2010 that has materially affected, or is reasonable likely to materially affect, the Funds internal control, over financial reporting.
Item 9B: Other Information
Not applicable.
PART III
Item 10: Directors, Executive Officers and Corporate Governance
10(a) and 10(b) Identification of Directors and Executive Officers:
As a limited liability company, the Fund has no officers or directors and is managed by MLAI. Trading decisions are made by BlueCrest on behalf of the Fund.
The managers and executive officers of MLAI and their respective business backgrounds are as follows:
Justin C. Ferri |
|
Chief Executive Officer, President and Manager |
|
|
|
Barbra E. Kocsis |
|
Chief Financial Officer |
|
|
|
Deann Morgan |
|
Vice President and Manager |
|
|
|
James L. Costabile |
|
Vice President and Manager |
|
|
|
Paul D. Harris |
|
Vice President and Manager |
|
|
|
Colleen R. Rusch |
|
Vice President and Manager |
Justin C. Ferri is the Chief Executive Officer, President and Manager of MLAI. Mr. Ferri, 35 years old, has been the Chief Executive Officer and President of MLAI since August 2009. Mr. Ferri has been a Manager of MLAI and has been listed as a principal of MLAI since July 29, 2008. He has been registered with NFA as an associated person of MLAI since September 11, 2009. He also serves as Managing Director within the Merrill Lynch Global Wealth & Investment Management group and the Global Investments Solutions group (GWIM and GIS, respectively), responsible for heading GWIMs Alternative Investments business. In addition, Mr. Ferri also serves as President of IQ Investment Advisors LLC (IQ), an indirect, wholly-owned investment adviser subsidiary of Merrill Lynch & Co., and through December 10, 2010, served as President of each of IQs publicly traded closed-end mutual fund companies. Prior to his role in GIS, Mr. Ferri was a Director in the MLPF&S Global Private Client Market Investments & Origination group, and before that, he served as a Vice President and head of the MLPF&S Global Private Client Rampart Equity Derivatives team. Prior to joining Merrill Lynch in 2002, Mr. Ferri was a Vice President within the Quantitative Development group of mPower Advisors LLC from 1999 to 2002, and prior to that, he worked in the Private Client division of J.P. Morgan & Co. He holds a B.A. degree from Loyola College in Maryland.
Barbra E. Kocsis is the Chief Financial Officer for MLAI. Ms. Kocsis, 44 years old, has been the Chief Financial Officer of MLAI since October 2006. Ms. Kocsis has been listed with the NFA as a principal of MLAI since May 21, 2007 and is a Director within the Merrill Lynch Global Wealth Investment Management Services group, positions she has held since October 2006. Prior to serving in her current roles, she was the Fund Controller of MLAI from May 1999 to September 2006. Before joining MLAI, Ms. Kocsis held various accounting and tax positions at Derivatives Portfolio Management LLC from May 1992 until May 1999, at which time she held the position of accounting director. Prior to that, she was an associate at Coopers & Lybrand in both the audit and tax practices from September 1988 to February 1992. She graduated cum laude from Monmouth College with a Bachelor of Science in Business Administration - Accounting.
Deann Morgan is a Vice President and Manager of MLAI. Ms. Morgan, 41 years old, has been a Vice President of MLAI since March 2008 and Managing Director of GIS since January 2009. As Managing Director of GIS, Ms. Morgan heads Alternative Investments Origination. From April 2006 until March 2008, Ms. Morgan was a Director for Merrill Lynchs Investments, Wealth Management & Insurance group, where she was responsible for origination of private equity and listed alternative investments. Between August 1999 and April 2006, Ms. Morgan worked for Merrill Lynchs Investment Banking Group covering Asian corporate clients. She received her M.B.A. from University of Chicago and her B.B.A. from University of Michigan. Ms. Morgan has been registered with NFA as an associated person and listed as a principal of MLAI since August 21, 2009. Ms. Morgan has also been registered with NFA as an associated person of MLPF&S since April 13, 2009.
James L. Costabile, is a Vice President and Manager of MLAI. Mr. Costabile, 34 years old, has been a Managing Director within the Global Investments Solutions group (GIS) responsible for alternative investment distribution for Merrill Lynch since June 2007 and US Trust since January 2009. Mr. Costabile has been listed as a principal of MLAI since July 14, 2010. He has also been registered with NFA as an associated person of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (MLPF&S) since August 20, 2007. Mr. Costabile was previously registered as an associated person of Citigroup Global Markets Inc. from November 13, 2003 to July 6, 2007. As part of the MLAI management team, Mr. Costabile oversees a team of specialists responsible for supporting hedge funds, private equity and real asset offerings. Prior to joining Merrill Lynch in 2007, Mr. Costabile spent ten years with Citigroup Inc., most recently as a Managing Director for Citigroup Alternative Investments responsible for co-heading Smith Barney Alternative Investment Distribution from February 2005 to June 2007. Prior to that, Mr. Costabile held a number of positions involving sales, marketing, product management and financial advisor training within different divisions of Citigroup, Inc. including: Citigroup Alternative Investments from May 2003 to February 2005 (sales manager for hedge funds, private equity funds, structured products and exchange funds); the Private Capital Group from February 2001 to May 2003 (sales desk manager for alternative funds for Smith Barney and Citi Private Bank); Salomon Smith Barney Alternative Investment Group from February 1999 to February 2001 (producing sales desk manager for alternative investment funds); Smith Barney Alternative Investments from March 1998 to February 1999 (sales desk supervisor for alternative investment funds) and Smith Barney Capital Management from November 1997 to March 1998 (participating in sales, marketing and product management). Mr. Costabile received a B.S. from Fordham University and holds the Chartered Alternative Investment Analyst designation.
Paul D. Harris, is a Vice President and Manager of MLAI. Mr. Harris, 40 years old, has been Managing Director and head of Strategy and Marketing in the Alternative Investment group within GIS since December 2009. Mr. Harris has been listed as a principal of MLAI since August 26, 2010. Mr. Harris is responsible for leading Strategy, Marketing and Information Management functional teams in developing alternative investment solutions, including hedge funds, managed futures, private equity and real assets investments for financial advisors. Prior to joining Merrill Lynch in December 2009, Mr. Harris was a Managing Director at PH Investment Group, LLC from May 2008 to November 2009, and before that a Director at Bridgewater Associates from June 2007 to March 2008. Mr. Harris was also a Director at Citigroup Alternative Investments and the Strategy and M&A team at Citigroups investment bank from January 2003 to January 2007. From January 2002 to January 2003, Mr. Harris was the Director of Business Development at Pomona Capital. In addition, Mr. Harris worked in strategic consulting as a Project Leader at the Boston Consulting Group from September 1999 to January 2002. Mr. Harris began his career with Barclays Capital and Goldman Sachs in investment banking and capital markets in September 1992. Mr. Harris holds an MBA from Harvard Business School and a BA in Economics and Politics from Essex University, UK.
Colleen R. Rusch, is a Vice President and Manager of MLAI. Ms. Rusch, 42 years old, has been a Director within GIS responsible for overseeing Merrill Lynch Global Wealth & Investment Management groups Alternative Investments product and trading platform since 2007. Ms. Rusch has applied to be listed as a principal of MLAI. In addition, Ms. Rusch serves as Chief Administrative Officer and Vice President of IQ Investment Advisors LLC (IQ), an indirect wholly-owned investment adviser subsidiary of Merrill Lynch & Co., and serves as Vice President and Secretary of each of IQs publicly-traded closed-end mutual funds. Prior to her role in GIS, Ms. Rusch was a Director in the MLPF&S Global Private Client - Market Investment & Origination Group (MIO) from July 2005 to 2007. Prior to her role as a Director in MIO, Ms. Rusch was a Director of Merrill Lynch Investment Managers from January 2005 to July 2005 and a Vice President from April 1993 to December 2004. Ms. Rusch holds a B.S. degree in Business Administration from Saint Peters College in New Jersey.
MLAI acts as the sponsor, general partner or manager to eight public futures funds whose units of limited partner or member interests are registered under the Securities Exchange Act of 1934: ML Aspect Futures Access LLC, ML Bluetrend FuturesAccess LLC, MAN AHL FuturesAccess LLC, ML Select Futures I L.P., ML Systematic Momentum FuturesAccess LLC, ML Transtrend DTP Enhanced FuturesAccess LLC, ML Trend-Following Futures Fund L.P, and ML Winton FuturesAccess LLC. Because MLAI serves as the sole sponsor, general partner or manager of each of these funds, the officers and managers of MLAI effectively manage them as officers and directors of such funds.
(c) Identification of Certain Significant Employees:
None.
(d) Family Relationships:
None.
(e) Business Experience:
See Item 10(a) and (b) above.
(f) Involvement in Certain Legal Proceedings:
None.
(g) Promoters and Control Persons:
Not applicable.
(h) Section 16(a) Beneficial Ownership Reporting Compliance:
Not contained herein.
Code of Ethics:
MLAI and Merrill Lynch have adopted a code of ethics which applies to the Funds (MLAIs) principal executive officer and principal financial officer or persons performing similar functions on behalf of the Fund. A copy of the code of ethics is available to any person, without charge, upon request by calling 1-866-MER-ALTS.
Nominating Committee:
Not applicable. (Neither the Fund nor MLAI has a nominating committee.)
Audit Committee: Audit Committee Financial Expert:
Not applicable. (Neither the Fund nor MLAI has an audit committee. There are no listed shares of the Fund or MLAI.)
Item 11: Executive Compensation
The managers and officers of MLAI are remunerated by Merrill Lynch in their respective positions. The Fund does not have any officers, managers or employees. The Fund pays Brokerage Commissions to an affiliate of MLAI and Sponsor Fees to MLAI. MLAI or its affiliates may also receive certain economic benefits from possession of the Funds U.S. dollar assets. The managers and officers receive no other compensation from the Fund, and the managers receive no compensation for serving as managers of MLAI. There are no compensation plans or arrangements relating to a change in control of either the Fund or MLAI.
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
(a) Security Ownership of Certain Beneficial Owners:
Not applicable. (The Units represent limited liability company interests. The Fund is managed by its Manager, MLAI.)
(b) Security Ownership of Management:
As of December 31, 2010 MLAI owned no Unit-equivalent Member interests. The principals of MLAI did not own any Units, and BlueCrest did not own any Units.
(c) Changes in Control:
None.
(d) Securities Authorized for Issuance Under Equity Compensation Plans:
Not applicable.
Item 13: Certain Relationships and Related Transactions, and Director Independence
(a) Transactions between Merrill Lynch and the Fund
Some of the service providers to the Fund are affiliates of Merrill Lynch. However, none of the fees paid by the Fund to such Merrill Lynch affiliates were negotiated and such fees charged to the Fund might be higher than would have been obtained in arms-length negotiations.
The Fund pays indirectly Merrill Lynch through MLPF&S and MLAI substantial Brokerage Commissions and Sponsor Fees as well as bid-ask spreads on forward currency trades. The Fund also pays MLPF&S interest on short-term loans extended by MLPF&S to cover losses on foreign currency positions.
Within the Merrill Lynch organization, MLAI is the beneficiary of the revenues received by different Merrill Lynch entities from the Fund. MLAI controls the management of the Fund and serves as its promoter. Although MLAI has not sold any assets, directly or indirectly, to the Fund, MLAI makes substantial profits from the Fund due to the foregoing revenues.
No loans have been, are, or will be outstanding between MLAI or any of its principals and the Fund.
MLAI pays substantial selling commissions and trailing commissions to MLPF&S for distributing the Units. MLAI is ultimately paid back for these expenditures from the revenues it receives from the Fund.
(b) Certain Business Relationships:
MLPF&S, an affiliate of MLAI, acts as the principal commodity broker for the Fund.
In 2010 the Fund expensed: (i) Brokerage Commissions of $880,901 to MLPF&S and $4,237,743 in management fees earned by BlueTrend and MLAI, (ii) Sponsor Fees of $751,285 to MLAI. In addition, MLAI and its affiliates may have derived certain economic benefits from possession of a portion of the Funds assets, as well as from foreign exchange and EFP trading.
See Item 1(c), Narrative Description of Business Charges and Description of Current Charges for a discussion of other business dealings between MLAI affiliates and the Fund.
(c) Indebtedness of Management:
None.
(d) Transactions with Promoters:
Not applicable.
(e) Director Independence:
No person who served as a manager of MLAI would be considered independent (based on the definition of an independent director under NASDAQ rules).
Item 14: Principal Accounting Fees and Services
(a) Audit Fees
Aggregate fees billed for professional services rendered by PricewaterhouseCoopers LLP in connection with the audit of the Funds financial statements as of and for the years ended December 31, 2010 and 2009 were $93,000 and $93,000, respectively.
(b) Audit-Related Fees
There were no other audit-related fees billed for the year ended December 31, 2010 related to the Fund.
(c) Tax Fees
No fees were billed by PricewaterhouseCoopers LLP or any member firms of PricewaterhouseCoopers and their respective affiliates for the years ended December 31, 2010 and 2009 for professional services rendered to the Fund in connection with tax compliance, tax advice and tax planning.
(d) All Other Fees
Aggregate fees billed for professional services rendered by PricewaterhouseCoopers LLP in connection with the quarterly review of the Funds financial statements as of and for the years ended December 31, 2010 and 2009 were $52,000 and $52,000, respectively.
Neither the Fund nor MLAI has an audit committee to pre-approve principal accountant fees and services. In lieu of an audit committee, the managers and the principal financial officer pre-approve all billings prior to the commencement of services.
PART IV
Item 15: Exhibits and Financial Statement Schedules
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Financial Statements (found in Exhibit 13.01): |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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FINANCIAL STATEMENTS: |
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Statements of Financial Condition as of December 31, 2010 and 2009 |
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Statements of Operations for the years ended December 31, 2010 and 2009 and for the period September 1, 2008 (commencement of operations) to December 31, 2008 |
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Statements of Changes in Members Capital for the years ended December 31, 2010 and 2009 and for the period September 1, 2008 (commencement of operations) to December 31, 2008 |
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Financial Data Highlights for the years ended December 31, 2010 and 2009 and for the period September 1, 2008 (commencement of operations) to December 31, 2008 |
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Notes to Financial Statements |
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2. Financial Statement Schedules:
Financial statement schedules not included in this Form 10-K have been omitted for the reason that they are not required or are not applicable or that equivalent information has been included in the financial statements or notes thereto.
3. Exhibits:
The following exhibits are incorporated by reference or are filed herewith to this Annual Report on Form 10-K:
Designation |
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Description |
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3.01 |
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Certificate of Formation of ML BlueTrend FuturesAccess LLC. |
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Exhibit 3.01: |
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Is incorporated by reference from Exhibit 3.01 contained in the Registrants Registration Statement on Form 10 (File No. 000-53794) under the Securities Exchange Act of 1934, filed on September 29, 2009 (Initial Registration Statement). |
3.02 |
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Amended and Restated Limited Liability Company Operating Agreement of ML BlueTrend FuturesAccess LLC |
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Exhibit 3.02 |
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Is incorporated by reference from Exhibit 3.02 contained in the Registrants Report on Form 10-K for the year-ended December 31, 2009, filed on March 31, 2010. |
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10.01 |
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Institutional Futures Client Account between ML BlueTrend FuturesAccess LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated. |
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Exhibit 10.01: |
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Is incorporated by reference from Exhibit 10.1 contained in the Initial Registration Statement. |
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10.02 |
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Amended and Restated Advisory Agreement among ML BlueTrend FuturesAccess LLC, |
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Merrill Lynch Alternative Investments LLC and BlueCrest Capital Management LLP. |
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Exhibit 10.02: |
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Is filed herewith. |
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13.01 |
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2010 Annual Report and Report of Independent Registered Public Accounting Firm. |
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Exhibit 13.01: |
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Is filed herewith. |
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31.01 and 31.02 |
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Rule 13a-14(a)/15d-14(a) Certifications |
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Exhibit 31.01 |
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and 31.02: |
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Are filed herewith. |
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32.01 and 32.02 |
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Section 1350 Certifications |
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Exhibit 32.01 |
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and 32.02: |
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Are filed herewith. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ML BLUETREND FUTURESACCESS LLC | ||
By: |
MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC, Manager | |
By: |
/s/Justin C. Ferri |
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Justin C. Ferri |
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Chief Executive Officer, President and Manager |
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(Principal Executive Officer) |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed on March 31, 2010 by the following persons on behalf of the Registrant and in the capacities indicated.
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Title |
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Date |
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/s/ Justin C. Ferri |
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Chief Executive Officer, President and Manager |
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March 15, 2011 |
Justin C. Ferri |
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/s/ Barbra E. Kocsis |
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Chief Financial Officer |
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March 15, 2011 |
Barbra E. Kocsis |
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(Principal Financial and Accounting Officer) |
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s/ Deann Morgan |
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Vice President and Manager |
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March 15, 2011 |
Deann Morgan |
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/s/James L. Costabile |
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Vice President and Manager |
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March 15, 2011 |
James L. Costabile |
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/s/Paul D. Harris |
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Vice President and Manager |
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March 15, 2011 |
Paul D. Harris |
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/s/Colleen R. Rusch |
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Vice President and Manager |
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March 15, 2011 |
Colleen R. Rusch |
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(Being the principal executive officer, the principal financial and accounting officer and a majority of the managers of Merrill Lynch Alternative Investments LLC)
ML BLUETREND FUTURESACCESS LLC
2010 FORM 10-K
INDEX TO EXHIBITS
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Exhibit |
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Exhibit 10.02 |
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Amended and Restated Advisory Agreement among ML BlueTrend FuturesAccess LLC, Merrill Lynch Alternative Investments LLC, and BlueCrest Capital Management LLP. |
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Exhibit 13.01 |
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2010 Annual Report and Report of Independent Registered Public Accounting Firm |
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Exhibit 31.01 and 31.02 |
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Rule 13a - 14(a) / 15d - 14(a) Certifications |
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Exhibit 32.01 and 32.02 |
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Sections 1350 Certifications |