UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 10-Q

 

☒

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Quarterly Period Ended: September 30, 2018

 

Or

 

☐

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission File Number: 000-54028

 

MILLBURN MULTI-MARKETS FUND L.P.

 

(Exact name of registrant as specified in its charter)

 

Delaware		26-4038497
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

c/o MILLBURN RIDGEFIELD CORPORATION 411 West Putnam Avenue Greenwich, Connecticut 06830

 

 (Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (203) 625-7554

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Yes  ☐           No  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No ☒

 

 

PART I. FINANANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

Millburn Multi-Markets Fund L.P.
Financial statements
For the three and nine months ended September 30, 2018 and 2017 (unaudited)
Statements of Financial Condition (a)		1
Statements of Operations (c)		2
Statements of Changes in Partners’ Capital (b)		4
Statements of Financial Highlights (c)		5
Notes to Financial Statements		9

 

(a) At September 30, 2018 and December 31, 2017 (unaudited)

 

(b) For the nine months ended September 30, 2018 and 2017 (unaudited)

 

(c) For the three and nine months ended September 30, 2018 and 2017 (unaudited)

 

 

Millburn Multi-Markets Fund L.P.

Statements of Financial Condition (UNAUDITED)

 

		September 30, 2018				December 31, 2017
ASSETS
Investment in Millburn Multi-Markets
Trading L.P. (the “Master Fund”)		$	155,807,223			$	180,404,424
Due from the Master Fund			1,267,515				1,565,482
Cash and cash equivalents			—				1,283,292
Total assets		$	157,074,738			$	183,253,198
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Capital contributions received in advance		$	—			$	1,283,000
Capital withdrawal payable to Limited Partners			1,267,515				1,165,481
Capital withdrawal payable to General Partner			—				400,000
Due to the Master Fund			—				292
Total liabilities			1,267,515				2,848,773
PARTNERS’ CAPITAL:
General Partner			2,619,527				2,597,268
Limited partners:
Series A (123,785.6919  and 140,430.1803 units outstanding)			140,796,414				163,192,225
Series B (6,871.3151 and 7,036.0325 units outstanding)			8,980,117				9,255,157
Series C (1,988.6036 and 3,956.9329 units outstanding)			2,651,643				5,310,547
Series D (593.8529 and 37.5601 units outstanding)			759,522				49,228
Total limited partners			153,187,696				177,807,157
Total partners’ capital			155,807,223				180,404,425
TOTAL		$	157,074,738			$	183,253,198
NET ASSET VALUE PER UNIT OUTSTANDING:
Series A		$	1,137.42			$	1,162.09
Series B		$	1,306.90			$	1,315.39
Series C		$	1,333.42			$	1,342.09
Series D		$	1,278.97			$	1,310.65

 

See notes to financial statements (Unaudited)

 

Millburn Multi-Markets Fund L.P. 

Statements of Operations (UNAUDITED)

		For the three months ended
		September 30, 2018				September 30, 2017
INVESTMENT INCOME:
Interest income (allocated from the Master Fund)		$	732,791			$	399,476
EXPENSES:
Management fees			771,433				912,657
Brokerage commissions (allocated from the Master Fund)			130,991				144,862
Selling commissions and platform fees			707,588				847,959
Administrative and operating expenses			156,156				159,790
Custody fees and other expenses (allocated from the Master Fund)			6,809				8,005
Total expenses			1,772,977				2,073,273
NET INVESTMENT LOSS			(1,040,186	)			(1,673,797	)
REALIZED AND UNREALIZED GAINS (LOSSES) ALLOCATED FROM THE MASTER FUND
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			5,894,444				(684,481	)
Foreign exchange translation			(152,689	)			258,680
Net change in unrealized:
Futures and forward currency contracts			(1,266,013	)			7,997,669
Foreign exchange translation			92,647				(14,722	)
Net gains (losses) from U.S. Treasury notes:
Realized			(9,669	)			—
Net change in unrealized			(5,172	)			42,731
Net realized and unrealized gains allocated from the Master Fund			4,553,548				7,599,877
NET INCOME			3,513,362				5,926,080
LESS PROFIT SHARE ALLOCATION TO THE MASTER FUND			4,445				386,837
NET INCOME AFTER PROFIT SHARE		$	3,508,917			$	5,539,243

 

(Continued)

 

 

Millburn Multi-Markets Fund L.P.

Statements of Operations (UNAUDITED)

 

		For the nine months ended
		September 30, 2018				September 30, 2017
INVESTMENT INCOME:
Interest income (allocated from the Master Fund)		$	1,906,901			$	1,005,972
EXPENSES:
Management fees			2,434,628				2,709,419
Brokerage commissions (allocated from the Master Fund)			409,766				391,150
Selling commissions and platform fees			2,217,258				2,523,380
Administrative and operating expenses			470,241				490,833
Custody fees and other expenses (allocated from the Master Fund)			21,388				24,797
Total expenses			5,553,281				6,139,579
NET INVESTMENT LOSS			(3,646,380	)			(5,133,607	)
REALIZED AND UNREALIZED GAINS (LOSSES) ALLOCATED FROM THE MASTER FUND
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			(7,889,003	)			12,685,017
Foreign exchange translation			157,869				242,374
Net change in unrealized:
Futures and forward currency contracts			7,160,858				(5,837,585	)
Foreign exchange translation			(200,285	)			397,153
Net gains (losses) from U.S. Treasury notes:
Realized			(22,315	)			—
Net change in unrealized			66,827				(73,085	)
Net realized and unrealized gains (losses) allocated from the Master Fund			(726,049	)			7,413,874
NET INCOME (LOSS)			(4,372,429	)			2,280,267
LESS PROFIT SHARE ALLOCATION TO THE MASTER FUND			7,499				446,914
NET INCOME (LOSS) AFTER PROFIT SHARE		$	(4,379,928	)		$	1,833,353

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Fund L.P.

Statements of Changes in Partners’ Capital (UNAUDITED)

For the nine months ended September 30, 2018 and 2017

 

						Limited Partners
		General
		Partner				Series A								Series B								Series C								Series D								Total
		Amount				Amount				Units				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS’ CAPITAL — December 31, 2017		$	2,597,268			$	163,192,225				140,430.1803			$	9,255,157				7,036.0325			$	5,310,547				3,956.9329			$	49,228				37.5601			$	180,404,425
Capital contributions			—				4,251,000				3,819.6186				903,657				698.0107				999,000				771.0009				679,526				556.2928				6,833,183
Capital withdrawals			—				(22,193,628	)			(20,215.3839	)			(1,129,021	)			(906.6850	)			(3,727,808	)			(2,909.7759	)			—				—				(27,050,457	)
Transfers between Series							(277,846	)			(248.7231	)			54,207				43.9569				223,639				170.4457				—				—				—
Net income (loss) before profit share			22,259				(4,175,337	)			—				(103,883	)			—				(153,735	)			—				38,267				—				(4,372,429	)
Profit share							—								—								—								(7,499	)							(7,499	)
PARTNERS’ CAPITAL — September 30, 2018		$	2,619,527			$	140,796,414				123,785.6919			$	8,980,117				6,871.3151			$	2,651,643				1,988.6036			$	759,522				593.8529			$	155,807,223
Net Asset Value per Unit at September 30, 2018										$	1,137.42							$	1,306.90							$	1,333.42							$	1,278.97

						Limited Partners
		General
		Partner				Series A								Series B								Series C								Total
		Amount				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS’ CAPITAL — December 31, 2016		$	2,779,224			$	158,782,193				140,590.2950			$	8,846,058				7,017.8811			$	2,478,858				1,930.6399			$	172,886,333
Capital contributions			—				22,783,577				19,836.2183				952,000				752.2613				315,000				240.6106				24,050,577
Capital withdrawals			—				(17,672,573	)			(15,358.9212	)			(1,011,080	)			(787.2125	)			(424,041	)			(321.7214	)			(19,107,694	)
Transfers between Series							(1,663,205	)			(1,491.4795	)											1,663,205				1,297.3703				—
Net income before profit share			117,920				1,806,103				—				240,618				—				115,626				—				2,280,267
Profit share							(375,069	)							(50,756	)							(21,089	)							(446,914	)
PARTNERS’ CAPITAL — September 30, 2017		$	2,897,144			$	163,661,026				143,576.1126			$	8,976,840				6,982.9299			$	4,127,559				3,146.8994			$	179,662,569
Net Asset Value per Unit at September 30, 2017										$	1,139.89							$	1,285.54							$	1,311.63

 

See notes to financial statements (Unaudited)

 

 

  

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended September 30, 2018

 

The following information presents per unit operating performance data for each series for the three months ended September 30, 2018.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C				Series D
NET ASSET VALUE PER UNIT — Beginning of period		$	1,111.99			$	1,271.31			$	1,297.11			$	1,252.88
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(8.08	)			(2.87	)			(3.37	)			(4.60	)
Total trading and investing gains (1)			33.51				38.46				39.68				40.17
Net income before profit share allocation from Master Fund			25.43				35.59				36.31				35.57
Less: profit share allocation from Master Fund (1) (6)			0.00				0.00				0.00				9.48
Net income from operations after profit share allocation from Master Fund			25.43				35.59				36.31				26.09
NET ASSET VALUE PER UNIT — End of period		$	1,137.42			$	1,306.90			$	1,333.42			$	1,278.97
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			2.29	%			2.80	%			2.80	%			2.74	%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			0.00				0.00				0.00				0.66
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			2.29	%			2.80	%			2.80	%			2.08	%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.76	%			2.75	%			2.75	%			3.53	%
Profit share allocation from Master Fund (2) (6)			0.00				0.00				0.00				0.66
Total expenses			4.76	%			2.75	%			2.75	%			4.19	%
Net investment loss (3) (4) (5)			(2.88	)%			(0.88	)%			(0.88	)%			(1.64	)%

 

(1)

The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

(2)

Not Annualized.

(3)

Annualized.

(4)

Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.

(5)

Excludes profit share allocation from the Master Fund.

(6)

Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

(Continued)

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the nine months ended September 30, 2018

 

The following information presents per unit operating performance data for each series for the nine months ended September 30, 2018.

  

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C				Series D
NET ASSET VALUE PER UNIT — Beginning of period		$	1,162.09			$	1,315.39			$	1,342.09			$	1,310.65
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(26.31	)			(11.16	)			(11.87	)			(16.78	)
Total trading and investing gains (1)			1.64				2.67				3.20				7.05
Net loss before profit share allocation from Master Fund			(24.67	)			(8.49	)			(8.67	)			(9.73	)
Less: profit share allocation from Master Fund (1) (6)			0.00				0.00				0.00				21.95
Net loss from operations after profit share allocation from Master Fund			(24.67	)			(8.49	)			(8.67	)			(31.68	)
NET ASSET VALUE PER UNIT — End of period		$	1,137.42			$	1,306.90			$	1,333.42			$	1,278.97
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			(2.12	)%			(0.65	)%			(0.65	)%			(0.65	)%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			0.00				0.00				0.00				1.77
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			(2.12	)%			(0.65	)%			(0.65	)%			(2.42	)%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.74	%			2.73	%			2.73	%			3.51	%
Profit share allocation from Master Fund (2) (6)			0.00				0.00				0.00				1.77
Total expenses			4.74	%			2.73	%			2.73	%			5.28	%
Net investment loss (3) (4) (5)			(3.19	)%			(1.19	)%			(1.24	)%			(1.80	)%

 

(1)

The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

(2)

Not Annualized.

(3)

Annualized.

(4)

Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.

(5)

Excludes profit share allocation from the Master Fund.

(6)

Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

See notes to financial statements (Unaudited)

(Concluded) 

 

  

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended September 30, 2017

 

The following information presents per unit operating performance data for each series for the three months ended September 30, 2017.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)			Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	1,106.68			$	1,246.45			$	1,271.22
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(10.88	)			(6.39	)			(5.98	)
Total trading and investing gains (1)			46.27				52.12				52.95
Net income before profit share allocation from Master Fund			35.39				45.73				46.97
Less: profit share allocation from Master Fund (1) (6)			2.18				6.64				6.56
Net income from operations after profit share allocation from Master Fund			33.21				39.09				40.41
NET ASSET VALUE PER UNIT — End of period		$	1,139.89			$	1,285.54			$	1,311.63
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			3.19	%			3.66	%			3.68	%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			0.19				0.52				0.50
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			3.00	%			3.14	%			3.18	%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.69	%			2.86	%			2.70	%
Profit share allocation from Master Fund (2) (6)			0.19				0.52				0.50
Total expenses			4.88	%			3.38	%			3.20	%
Net investment loss (3) (4) (5)			(3.83	)%			(1.99	)%			(1.82	)%

 

(1)

The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

(2)

Not Annualized.

(3)

Annualized.

(4)

Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.

(5)

Excludes profit share allocation from the Master Fund.

(6)

Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

(Continued)

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the nine months ended September 30, 2017

 

The following information presents per unit operating performance data for each series for the nine months ended September 30, 2017.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)			Series A				Series B				Series C
NET ASSET VALUE PER UNIT — Beginning of period		$	1,129.40			$	1,260.50			$	1,283.96
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(33.77	)			(20.83	)			(19.08	)
Total trading and investing gains (1)			47.07				52.83				54.61
Net income before profit share allocation from Master Fund			13.30				32.00				35.53
Less: profit share allocation from Master Fund (1) (6)			2.81				6.96				7.86
Net income from operations after profit share allocation from Master Fund			10.49				25.04				27.67
NET ASSET VALUE PER UNIT — End of period		$	1,139.89			$	1,285.54			$	1,311.63
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			1.15	%			2.55	%			2.88	%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			0.22				0.56				0.72
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			0.93	%			1.99	%			2.16	%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.68	%			2.90	%			2.68	%
Profit share allocation from Master Fund (2) (6)			0.22				0.56				0.72
Total expenses			4.90	%			3.46	%			3.40	%
Net investment loss (3) (4) (5)			(3.94	)%			(2.17	)%			(1.93	)%

 

(1)

The net investment loss per unit and profit share allocation from the Master Fund per unit is calculated by dividing the net investment loss and profit share allocation from the Master Fund by the average number of units outstanding during the period. Total trading and investing gains is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.

(2)

Not Annualized.

(3)

Annualized.

(4)

Includes the Partnership’s proportionate share of income and expense allocated from the Master Fund.

(5)

Excludes profit share allocation from the Master Fund.

(6)

Profit share for Series B and C is calculated based on Series B and C aggregate trading profits and may be impacted by rebalancing due to monthly capital activity.

 

See notes to financial statements (Unaudited)

 

(Concluded) 

 

 

 NOTES TO FINANCIAL STATEMENTS

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Millburn Multi-Markets Fund L.P.’s (the “Partnership”) financial condition at September 30, 2018 (unaudited) and December 31, 2017 and the results of its operations for the three and nine months ended September 30, 2018 and 2017 (unaudited).

 

These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Partnership’s 2017 annual report included in Form 10-K filed with the Securities and Exchange Commission. The December 31, 2017 information has been derived from the audited financial statements as of December 31, 2017. 

 

The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”), as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”), requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.

 

The Partnership enters into contracts with various financial institutions that contain a variety of indemnification provisions. The Partnership’s maximum exposure under these arrangements is unknown. However, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

 

The Partnership offers multiple series of Units, which differ in terms of fees charged at the Master Fund level. Initially, the Partnership offered Series A, Series B and Series C Units. On November 1, 2017 the Partnership offered Series D (collectively, the “Series”) and may offer additional series in the future.

 

The Income Taxes topic of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2015 to 2017, Millburn Ridgefield Corporation (the “General Partner”) has determined that no reserves for uncertain tax positions were required.

 

There have been no material changes with respect to the Partnership’s critical accounting policies, off-balance sheet arrangements or disclosure of contractual obligations as reported in the Partnership’s Annual Report on Form 10-K for fiscal year 2017.

 

2. INVESTMENT IN MILLBURN MULTI-MARKETS TRADING L.P.

 

The Partnership invests substantially all of its assets in Millburn Multi-Markets Trading L.P. (the “Master Fund”). The Partnership’s ownership percentage of the Master Fund at September 30, 2018 and December 31, 2017 was 28.97% and 35.47%, respectively, of total partners’ capital of the Master Fund. See the attached financial statements of the Master Fund.

 

3. RELATED PARTY TRANSACTIONS

 

The Partnership bears its own expenses, including, but not limited to, periodic legal, accounting and filing fees. Total operating expenses related to investors in the Partnership (including their pro-rata share of Master Fund expenses) are not expected to exceed 1/2 of 1% per annum of the Partnership’s average month-end partners’ capital.

 

Series A Limited Partners that redeem Units at or prior to the end of the first eleven months after such Units are sold shall be assessed redemption charges calculated based on their redeemed Units’ net asset value as of the date of redemption. All redemption charges will be paid to the General Partner. At September 30, 2018 and December 31, 2017, there were no redemption charges owed to the General Partner.

 

4. FINANCIAL HIGHLIGHTS

 

Per Unit operating performance for Series A, Series B, Series C and Series D Units is calculated based on Limited Partners’ Partnership capital for each series taken as a whole utilizing the beginning and ending net asset value per unit and weighted average number of units during the period. Weighted average number of units of each series is detailed below.

 

		Three months ended September 30,								Nine months ended September 30,
		2018				2017				2018				2017
Series A			127,214.867				148,282.529				134,329.212				146,547.251
Series B			6,914.548				7,014.374				7,207.979				7,010.924
Series C			2,349.102				2,814.813				3,550.886				2,251.568
Series D			531.918				—				341.624				—

 

 

5. SUBSEQUENT EVENTS

 

The General Partner has performed its evaluation of subsequent events from October 1, 2018 to November 13, 2018, the date this form 10-Q was filed. Based on such evaluation, no events were discovered that required disclosure or adjustment to the financial statements.

 

 

Millburn Multi-Markets Trading L.P.

Financial statements

For the three and nine months ended September 30, 2018 and 2017 (unaudited)     

 

Statements of Financial Condition (a)	12
Condensed Schedules of Investments (a)	13
Statements of Operations (c)	17
Statements of Changes in Partners’ Capital (b)	19
Statements of Financial Highlights (c)	20
Notes to Financial Statements	22

 

(a) At September 30, 2018 and December 31, 2017 (unaudited)

 

(b) For the nine months ended September 30, 2018 and 2017 (unaudited)

 

(c) For the three and nine months ended September 30, 2018 and 2017 (unaudited)

 

 

Millburn Multi-Markets Trading L.P. 

Statements of Financial Condition (UNAUDITED)

 

		September 30, 2018				December 31, 2017
ASSETS
EQUITY IN TRADING ACCOUNTS:
Investments in U.S. Treasury notes — at fair value (amortized cost $93,599,191 and $128,131,904)		$	93,491,981			$	127,971,156
Net unrealized appreciation on open futures and forward currency contracts			18,656,168				2,145,457
Due from brokers			24,711,561				289,111
Cash denominated in foreign currencies (cost $13,395,198 and $27,839,061)			13,352,509				28,534,515
Total equity in trading accounts			150,212,219				158,940,239
INVESTMENTS IN U.S. TREASURY NOTES — at fair value (amortized cost $360,829,838 and $358,764,241)			360,474,992				358,229,399
CASH AND CASH EQUIVALENTS			42,660,386				75,905,244
ACCRUED INTEREST RECEIVABLE			1,222,634				1,364,398
DUE FROM MILLBURN MULTI-MARKETS LTD.			300,697				2,750
DUE FROM MILLBURN MULTI-MARKETS FUND L.P.			—				292
TOTAL		$	554,870,928			$	594,442,322
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Net unrealized depreciation on open futures and forward currency contracts		$	2,905,940			$	11,713,535
Subscriptions in advance			—				2,430,000
Capital withdrawal payable to Limited Partners			7,005,059				64,127,936
Capital withdrawal payable to General Partner			—				3,734,700
Management fee payable			671,144				708,614
Selling commissions payable			238,162				275,139
Accrued expenses			471,683				222,956
Due to brokers			5,445,134				2,519,264
Commissions and other trading fees on open futures contracts			42,550				82,629
Accrued profit share			299,224				—
Total liabilities			17,078,896				85,814,773
PARTNERS’ CAPITAL			537,792,032				508,627,549
TOTAL		$	554,870,928			$	594,442,322

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P. 

Condensed Schedule of Investments (UNAUDITED) 

September 30, 2018 

 

FUTURES AND FORWARD CURRENCY CONTRACTS			Net Unrealized Appreciation   (Depreciation)  as a % of    Partners’ Capital				Net Unrealized   Appreciation   (Depreciation)
FUTURES CONTRACTS
Long futures contracts:
Energies			1.17	%		$	6,304,889
Interest rates			(0.12	)			(667,275	)
Livestock			0.00				20,910
Metals			0.06				333,141
Softs			(0.04	)			(230,705	)
Stock indices			1.54				8,281,182
Total long futures contracts			2.61				14,042,142
Short futures contracts:
Energies			(0.02	)			(131,636	)
Grains			0.32				1,694,673
Interest rates:
2 Year U.S. Treasury Note (1,999 contracts, settlement date December 2018)			0.09				465,468
10 Year U.S. Treasury Note (1,296 contracts, settlement date December 2018)			0.03				142,641
Other interest rates			0.37				2,027,919
Total interest rates			0.49				2,636,028
Livestock			0.00				(480	)
Metals			(0.13	)			(680,544	)
Softs			0.03				156,323
Stock indices			0.07				398,820
Total short futures contracts			0.76				4,073,184
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net			3.37				18,115,326
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			0.33				1,762,051
Total short forward currency contracts			(0.77	)			(4,127,149	)
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net			(0.44	)			(2,365,098	)
TOTAL			2.93	%		$	15,750,228

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P. 

Condensed Schedule of Investments (UNAUDITED) 

September 30, 2018

 

U.S. TREASURY NOTES

 

Face Amount				Description		Fair Value as a % of   Partners’ Capital				Fair Value
$	115,340,000			U.S. Treasury notes, 1.250%, 11/15/2018			21.42	%		$	115,218,352
	114,140,000			U.S. Treasury notes, 0.750%, 02/15/2019			21.10				113,477,899
	115,340,000			U.S. Treasury notes, 0.875%, 05/15/2019			21.24				114,215,886
	112,840,000			U.S. Treasury notes, 0.750%, 08/15/2019			20.65				111,054,836
				Total investments in U.S. Treasury notes  (amortized cost $454,429,029)			84.41	%		$	453,966,973

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Trading L.P. 

Condensed Schedule of Investments 

December 31, 2017 

 

FUTURES AND FORWARD CURRENCY CONTRACTS		Net Unrealized  Appreciation   (Depreciation)  as a % of   Partners’ Capital				Net Unrealized  Appreciation   (Depreciation)
FUTURES CONTRACTS
Long futures contracts:
Energies			1.39	%		$	7,066,650
Grains			(0.00	)			(20,390	)
Interest rates:
10 Year U.S. Treasury Note (111 contracts, settlement date March 2018)			0.01				43,344
30 Year U.S. Treasury Bond (209 contracts, settlement date March 2018)			0.06				291,406
Other interest rates			(1.31	)			(6,661,826	)
Total interest rates			(1.24	)			(6,327,076	)
Metals			1.66				8,491,751
Softs			0.07				350,420
Stock indices			0.32				1,647,379
Total long futures contracts			2.20				11,208,734
Short futures contracts:
Energies			(0.17	)			(896,980	)
Grains			0.02				104,011
Interest rates			0.15				764,885
Livestock			(0.01	)			(66,920	)
Metals			(1.73	)			(8,777,976	)
Softs			0.08				404,426
Stock indices			(0.12	)			(594,723	)
Total short futures contracts			(1.78	)			(9,063,277	)
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net			0.42				2,145,457
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			0.32				1,616,927
Total short forward currency contracts			(2.62	)			(13,330,462	)
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net			(2.30	)			(11,713,535	)
TOTAL			(1.88	)%		$	(9,568,078	)

  

(Continued) 

 

 

Millburn Multi-Markets Trading L.P. 

Condensed Schedule of Investments 

December 31, 2017

 

U.S. TREASURY NOTES  

Face Amount				Description		Fair Value as a % of   Partners’ Capital				Fair Value
$	116,040,000			U.S. Treasury notes, 1.000%, 02/15/2018			22.81	%		$	115,994,672
	115,440,000			U.S. Treasury notes, 1.000%, 05/15/2018			22.67				115,293,445
	140,540,000			U.S. Treasury notes, 1.000%, 08/15/2018			27.52				139,991,016
	115,440,000			U.S. Treasury notes, 1.250%, 11/15/2018			22.59				114,921,422
				Total investments in U.S. Treasury notes (amortized cost $486,896,145)			95.59	%		$	486,200,555

 

 

See notes to financial statements (Unaudited)

(Concluded)

 

Millburn Multi-Markets Trading L.P. 

Statements of Operations (UNAUDITED)

 

		For the three months ended
		September 30,				September 30,
		2018				2017
INVESTMENT INCOME — Interest income		$	2,553,472			$	1,075,657
EXPENSES:
Brokerage fees			456,391				386,487
Management fees			2,006,526				1,815,461
Selling commissions and platform fees			711,695				854,342
Administrative and operating expenses			293,583				264,296
Custody fees and other expenses			24,229				21,184
Total expenses			3,492,424				3,341,770
NET INVESTMENT LOSS			(938,952	)			(2,266,113	)
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			20,071,499				(1,747,412	)
Foreign exchange translation			(529,596	)			694,984
Net change in unrealized:
Futures and forward currency contracts			(3,162,136	)			20,864,904
Foreign exchange translation			315,283				(54,959	)
Net gains (losses) from U.S. Treasury notes
Realized			(33,130	)			—
Net change in unrealized			(16,199	)			110,333
Total net realized and unrealized gains			16,645,721				19,867,850
NET INCOME			15,706,769				17,601,737
LESS PROFIT SHARE TO GENERAL PARTNER			310,420				1,067,296
NET INCOME AFTER PROFIT SHARE TO GENERAL PARTNER		$	15,396,349			$	16,534,441

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED) 

 

		For the nine months ended
		September 30,				September 30,
		2018				2017
INVESTMENT INCOME — Interest income		$	6,476,398			$	2,275,095
EXPENSES:
Brokerage fees			1,384,921				871,023
Management fees			6,138,281				4,478,516
Selling commissions and platform fees			2,231,061				2,539,008
Administrative and operating expenses			867,162				728,341
Custody fees and other expenses			73,010				50,520
Total expenses			10,694,435				8,667,408
NET INVESTMENT LOSS			(4,218,037	)			(6,392,313	)
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			(24,655,924	)			21,107,114
Foreign exchange translation			546,932				657,370
Net change in unrealized:
Futures and forward currency contracts			25,318,306				(8,351,360	)
Foreign exchange translation			(738,143	)			699,626
Net gains (losses) from U.S. Treasury notes
Realized			(75,279	)			—
Net change in unrealized			233,534				(171,424	)
Total net realized and unrealized gains			629,426				13,941,326
NET INCOME (LOSS)			(3,588,611	)			7,549,013
LESS PROFIT SHARE TO GENERAL PARTNER			377,265				1,130,868
NET INCOME (LOSS) AFTER PROFIT SHARE TO GENERAL PARTNER		$	(3,965,876	)		$	6,418,145

 

(Concluded)

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P. 

Statements of Changes in Partners’ Capital (UNAUDITED) 

 

For the nine months ended September 30, 2018:

 

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS’ CAPITAL - January 1, 2018		$	507,755,056			$	—			$	872,493			$	508,627,549
Contributions			118,663,012				78,041				—				118,741,053
Withdrawals			(85,610,694	)			—				—				(85,610,694	)
Net income (loss) before profit share			(3,599,512	)			1,597				9,304				(3,588,611	)
General Partner’s allocation - profit share			(377,265	)			—				—				(377,265	)
PARTNERS’ CAPITAL- September 30, 2018		$	536,830,597			$	79,638			$	881,797			$	537,792,032

 

For the nine months ended September 30, 2017:

 

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS’ CAPITAL - January 1, 2017		$	229,993,162			$	—			$	806,883			$	230,800,045
Contributions			276,213,975				93,168				—				276,307,143
Withdrawals			(21,420,877	)			—				—				(21,420,877	)
Net income (loss) before profit share			7,514,367				(1,017	)			35,663				7,549,013
General Partner’s allocation - profit share			(1,130,868	)			—				—				(1,130,868	)
PARTNERS’ CAPITAL- September 30, 2017		$	491,169,759			$	92,151			$	842,546			$	492,104,456

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P. 

Statements of Financial Highlights (UNAUDITED)

 

The following information presents financial highlights of a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and an annual profit share of 20% of Trading Profits (as defined in the Limited Partnership Agreement).

 

		For the three months ended								For the nine months ended
		September 30,				September 30,				September 30,				September 30,
		2018				2017				2018				2017
Total return before General Partner profit share allocation (3)			2.87	%			3.74	%			(0.44	)%			2.86	%
Less: General Partner profit share allocation (3)			—				0.56				—				0.56
Total return after General Partner profit share allocation (3)			2.87	%			3.18	%			(0.44	)%			2.30	%
Ratios to average net asset value:
Expenses (1) (4)			2.44	%			2.44	%			2.46	%			2.44	%
General Partner profit share allocation (3)			—				0.56				—				0.56
Total expenses (1)			2.44	%			3.00	%			2.46	%			3.00	%
Net investment loss (1) (2) (4)			(0.60	)%			(1.56	)%			(0.91	)%			(1.71	)%

 

Total returns and the ratios to average net asset value are calculated for a Limited Partner. An individual Limited Partner’s total returns and ratios may vary from the above total returns and ratios based on different management fee and General Partner profit share allocation agreements and the timing of contributions and withdrawals.

 

(1)

Includes the Partnership’s proportionate share of expenses allocated from the Partnership’s operations.

(2)

Excludes General Partner profit share allocation and includes interest income.

(3)

Not Annualized.

(4)

Annualized.

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P. 

Statements of Financial Highlights (UNAUDITED)

 

The following information presents financial highlights for Limited Partners as a whole.

 

		For the three months ended								For the nine months ended
		September 30,				September 30,				September 30,				September 30,
		2018				2017				2018				2017
Total return before General Partner profit share allocation (3)			2.82	%			3.69	%			(0.54	)%			2.31	%
Less: General Partner profit share allocation (3)			0.06				0.22				0.07				0.29
Total return after General Partner profit share allocation (3)			2.76	%			3.47	%			(0.61	)%			2.02	%
Ratios to average net asset value:
Expenses (1) (4)			2.56	%			2.68	%			2.58	%			2.91	%
General Partner profit share allocation (3)			0.06				0.22				0.07				0.29
Total expenses (1)			2.62	%			2.90	%			2.65	%			3.20	%
Net investment loss (1) (2) (4)			(0.72	)%			(1.80	)%			(1.03	)%			(2.14	)%

 

Total returns and the ratios to average net asset value are calculated for a Limited Partner. An individual Limited Partner’s total returns and ratios may vary from the above total returns and ratios based on different management fee and General Partner profit share allocation agreements and the timing of contributions and withdrawals.

 

(1)

Includes the proportionate share of expenses of the Partnership and the Cayman Feeder for the period   ending September 30, 2018 and September 30, 2017.

(2)

Excludes General Partner profit share allocation and includes interest income.

(3)

Not Annualized.

(4)

Annualized.

 

See notes to financial statements (Unaudited)

 

 

 

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Master Fund engages in the speculative trading of futures and forward currency contracts and also acts as a master fund for the Partnership and Millburn Multi-Markets Ltd., a Cayman Islands exempted company (the “Cayman Feeder”).

 

The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Master Fund’s financial condition at September 30, 2018 (unaudited) and December 31, 2017 and the results of its operations for the three and nine months ended September 30, 2018 and 2017 (unaudited).

 

These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Master Fund’s annual report for the year ended December 31, 2017 included in the Partnership’s annual report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2017 information has been derived from the audited financial statements as of December 31, 2017.

 

The preparation of financial statements in conformity with accounting principles generally accepted (“U.S. GAAP”) in the United States of America (the “U.S.”), as detailed in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”), requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.

 

The Master Fund enters into contracts with various financial institutions that contain a variety of indemnification provisions. The Master Fund’s maximum exposure under these arrangements is unknown. However, the Master Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

 

The Income Taxes topic of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2015 to 2017, the General Partner has determined that no reserves for uncertain tax positions were required. 

 

2. INVESTORS IN MILLBURN MULTI-MARKETS TRADING L.P.

 

The Partnership and the Cayman Feeder invest substantially all of their assets in the Master Fund. At September 30, 2018 and December 31, 2017, the respective ownership percentages of the Master Fund are detailed below. The remaining interests are held by direct investors in the Master Fund. 

 

		September 30, 2018				December 31, 2017
Partnership			28.97	%			35.47	%
Cayman Feeder			61.97	%			55.14	%
Total			90.94	%			90.61	%

 

The capital withdrawals payable at September 30, 2018 and December 31, 2017 were $7,005,059 and $67,862,636, respectively, as detailed below.

 

		September 30, 2018				December 31, 2017
Direct investors (1)		$	—			$	3,934,700
Partnership			1,267,515				1,565,482
Cayman Feeder			5,737,544				62,362,454
Total		$	7,005,059			$	67,862,636

 

⁽¹⁾ Includes General Partner’s profit share of $3,734,700 at December 31, 2017.

 

The Master Fund bears expenses, including, but not limited to, periodic legal, accounting and filing fees, up to an amount equal to 1/4 of 1% per annum of average net assets of the Master Fund (the “Expense Cap”). Amounts subject to the Expense Cap include expenses incurred at the Master Fund and Cayman Feeder level. The General Partner bears any excess over such amounts.

 

 

3. FAIR VALUE

 

The Fair Value Measurements and Disclosures topic of the Codification defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The three levels of the fair value hierarchy are described below:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

 

Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

In determining fair value, the Master Fund separates its investments into two categories: cash instruments and derivative contracts.

 

Cash Instruments. The Master Fund’s cash instruments are generally classified within Level 1 of the fair value hierarchy because they are typically valued using quoted market prices. The types of instruments valued based on quoted market prices in active markets include U.S. government obligations. The General Partner does not adjust the quoted price for such instruments, even in situations where the Master Fund holds a large position and a sale could reasonably impact the quoted price.

 

Derivative Contracts. Derivative contracts can be exchange-traded or over-the-counter (“OTC”). Exchange-traded futures contracts are valued based on quoted closing settlement prices and typically fall within Level 1 of the fair value hierarchy.

 

Spot currency contracts are valued based on current market prices (“Spot Price”). Forward currency contracts are valued based on pricing models that consider the Spot Price plus the financing cost or benefit (“Forward Point”). Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Master Fund may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of months from the date the forward currency contract is being valued to its maturity date (“Months to Maturity”), then identifying the forward currency contracts for the two forward months that are closest to the Months to Maturity (“Forward Month Contracts”). Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. Model inputs can generally be verified and model selection does not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy.

 

The Partnership is for U.S. GAAP purposes an investment company in accordance with FASB Codification 946 Financial Services – Investment Companies. 

 

During the three and nine months ended September 30, 2018 and 2017, there were no transfers of assets or liabilities between Level 1 and Level 2. The following tables represent the Master Fund’s investments by hierarchical level as of September 30, 2018 and December 31, 2017 in valuing the Master Fund’s investments at fair value. At September 30, 2018 and December 31, 2017, the Master Fund had no assets or liabilities in Level 3.

 

 

Financial assets and liabilities at fair value as of September 30, 2018

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	453,966,973			$	—			$	453,966,973
Short-Term Money Market Fund*			42,410,386				—				42,410,386
Exchange-traded futures contracts
Energies			6,173,253				—				6,173,253
Grains			1,694,673				—				1,694,673
Interest rates			1,968,753				—				1,968,753
Livestock			20,430				—				20,430
Metals			(347,403	)			—				(347,403	)
Softs			(74,382	)			—				(74,382	)
Stock indices			8,680,002				—				8,680,002
Total exchange-traded futures contracts			18,115,326				—				18,115,326
Over-the-counter forward currency contracts			—				(2,365,098	)			(2,365,098	)
Total futures and forward currency contracts (2)			18,115,326				(2,365,098	)			15,750,228
Total financial assets and liabilities at fair value		$	514,492,685			$	(2,365,098	)		$	512,127,587
Per line item in Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral										$	93,491,981
Investments in U.S. Treasury notes held in custody											360,474,992
Total investments in U.S. Treasury notes										$	453,966,973
(2)
Net unrealized appreciation on open futures and forward currency contracts										$	18,656,168
Net unrealized depreciation on open futures and forward currency contracts											(2,905,940	)
Total net unrealized appreciation on open futures and forward currency contracts										$	15,750,228

 

* The short-term money market fund is included in Cash and Cash Equivalents on the Statements of Financial Condition.

 

Financial assets and liabilities at fair value as of December 31, 2017

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	486,200,555			$	—			$	486,200,555
Short-Term Money Market Fund*			75,655,244				—				75,655,244
Exchange-traded futures contracts
Energies			6,169,670				—				6,169,670
Grains			83,621				—				83,621
Interest rates			(5,562,191	)			—				(5,562,191	)
Livestock			(66,920	)			—				(66,920	)
Metals			(286,225	)			—				(286,225	)
Softs			754,846				—				754,846
Stock indices			1,052,656				—				1,052,656
Total exchange-traded futures contracts			2,145,457				—				2,145,457
Over-the-counter forward currency contracts			—				(11,713,535	)			(11,713,535	)
Total futures and forward currency contracts (2)			2,145,457				(11,713,535	)			(9,568,078	)
Total financial assets and liabilities at fair value		$	564,001,256			$	(11,713,535	)		$	552,287,721
Per line item in Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral										$	127,971,156
Investments in U.S. Treasury notes held in custody											358,229,399
Total investments in U.S. Treasury notes										$	486,200,555
(2)
Net unrealized appreciation on open futures and forward currency contracts										$	2,145,457
Net unrealized depreciation on open futures and forward currency contracts											(11,713,535	)
Total unrealized depreciation on open futures and forward currency contracts										$	(9,568,078	)

 

* The short-term money market fund is included in Cash and Cash Equivalents on the Statements of Financial Condition.

 

 

4. DERIVATIVE INSTRUMENTS

 

The Derivatives and Hedging topic of the Codification requires qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.

 

The Master Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Master Fund’s open positions and the liquidity of the markets in which it trades.

 

The Master Fund engages in the speculative trading of futures and forward contracts on interest rates, grains, softs, currencies, metals, energies, livestock and stock indices. The following were the primary trading risk exposures of the Master Fund at September 30, 2018 by market sector:

 

Agricultural (grains, livestock and softs) – The Master Fund’s primary exposure is to agricultural price movements, which are often directly affected by severe or unexpected weather conditions, as well as supply and demand factors.

 

Currencies – Exchange rate risk is a principal market exposure of the Master Fund. The Master Fund’s currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. The fluctuations are influenced by interest rate changes, as well as political and general economic conditions. The Master Fund trades in a large number of currencies, including cross-rates—e.g., positions between two currencies other than the U.S. dollar.

 

Energies – The Master Fund’s primary energy market exposure is to gas and oil price movements often resulting from political developments in the oil producing countries and economic conditions worldwide. Energy prices are volatile and substantial profits and losses have been and are expected to continue to be experienced in this sector.

 

Interest rates – Interest rate movements directly affect the price of the sovereign bond futures positions held by the Master Fund and indirectly the value of its stock index and currency positions. Interest rate movements in one country, as well as relative interest rate movements between countries may materially impact the Master Fund’s profitability. The Master Fund’s primary interest rate exposure is to interest rate fluctuations in countries or regions including Australia, Canada, Japan, Switzerland, the United Kingdom, the U.S. and the Eurozone. However, the Master Fund also may take positions in futures contracts on the government debt of other nations. The General Partner anticipates that interest rates in these industrialized countries or areas, both long-term and short-term, will remain the primary interest rate market exposure of the Master Fund for the foreseeable future.

 

Metals – The Master Fund’s metals market exposure is to fluctuations in the price of aluminum, copper, gold, lead, nickel, platinum, silver, tin and zinc.

 

Stock indices – The Master Fund’s equity exposure, through stock index futures, is to equity price risk in the major industrialized countries, as well as other countries.

 

The Derivatives and Hedging topic of the Codification requires entities to recognize in the Statements of Financial Condition all derivative contracts as assets or liabilities. Fair values of futures and forward currency contracts in an asset position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized appreciation on open futures and forward currency contracts.” Fair values of futures and forward currency contracts in a liability position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized depreciation on open futures and forward currency contracts.” The Master Fund’s policy regarding fair value measurement is discussed in the Fair Value and Disclosures note, contained herein.

 

Since the derivatives held or sold by the Master Fund are for speculative trading purposes, the derivative instruments are not designated as hedging instruments under the provisions of the Derivatives and Hedging guidance. Accordingly, all realized gains and losses, as well as any change in net unrealized gains or losses on open positions from the preceding period, are recognized as part of the Master Fund’s trading gains and losses in the Statements of Operations.

 

The following tables present the fair value of open futures and forward currency contracts, held long or sold short, at September 30, 2018 and December 31, 2017. Fair value is presented on a gross basis even though the contracts are subject to master netting agreements and qualify for net presentation in the Master Fund’s Statements of Financial Condition.

 

 

Fair value of futures and forward currency contracts at September 30, 2018  

 

																		Net
																		Unrealized
																		Gain (Loss)
		Fair Value - Long Positions								Fair Value - Short Positions								on Open
Sector		Gains				Losses				Gains				Losses				Positions
Futures contracts:
Energies		$	6,342,999			$	(38,110	)		$	3,320			$	(134,956	)		$	6,173,253
Grains			—				—				1,737,033				(42,360	)			1,694,673
Interest rates			1,180,967				(1,848,242	)			3,330,273				(694,245	)			1,968,753
Livestock			24,780				(3,870	)			—				(480	)			20,430
Metals			1,912,311				(1,579,170	)			1,364,778				(2,045,322	)			(347,403	)
Softs			—				(230,705	)			274,460				(118,137	)			(74,382	)
Stock indices			8,687,396				(406,214	)			587,862				(189,042	)			8,680,002
Total futures contracts			18,148,453				(4,106,311	)			7,297,726				(3,224,542	)			18,115,326
Forward currency contracts			5,284,785				(3,522,734	)			6,917,297				(11,044,446	)			(2,365,098	)
Total futures and forward currency contracts		$	23,433,238			$	(7,629,045	)		$	14,215,023			$	(14,268,988	)		$	15,750,228

 

Fair value of futures and forward currency contracts at December 31, 2017

 

																		Net
																		Unrealized
																		Gain (Loss)
		Fair Value - Long Positions								Fair Value - Short Positions								on Open
Sector		Gains				Losses				Gains				Losses				Positions
Futures contracts:
Energies		$	7,084,104			$	(17,454	)		$	115,340			$	(1,012,320	)		$	6,169,670
Grains			100				(20,490	)			274,100				(170,089	)			83,621
Interest rates			1,344,904				(7,671,980	)			829,470				(64,585	)			(5,562,191	)
Livestock			—				—				6,260				(73,180	)			(66,920	)
Metals			8,558,331				(66,580	)			22,964				(8,800,940	)			(286,225	)
Softs			357,125				(6,705	)			679,252				(274,826	)			754,846
Stock indices			4,844,811				(3,197,432	)			858,712				(1,453,435	)			1,052,656
Total futures contracts			22,189,375				(10,980,641	)			2,786,098				(11,849,375	)			2,145,457
Forward currency contracts			5,225,346				(3,608,419	)			2,226,484				(15,556,946	)			(11,713,535	)
Total futures and forward currency contracts		$	27,414,721			$	(14,589,060	)		$	5,012,582			$	(27,406,321	)		$	(9,568,078	)

 

 

The effect of trading futures and forward currency contracts is represented on the Master Fund’s Statements of Operations for the three and nine months ended September 30, 2018 and 2017 as “Net realized gains (losses) on closed positions: Futures and forward currency contracts” and “Net change in unrealized: Futures and forward currency contracts.” These trading gains and losses are detailed below.

 

Trading gains (losses) of futures and forward currency contracts for the three and nine months ended September 30, 2018 and 2017

 

Sector		Three months ended: September 30, 2018				Three months ended: September 30, 2017				Nine months ended: September 30, 2018				Nine months ended: September 30, 2017
Futures contracts:
Energies		$	5,935,334			$	(1,344,515	)		$	26,988,138			$	(10,087,547	)
Grains			1,247,401				581,715				4,481,005				(4,689,545	)
Interest rates			(14,060,689	)			(610,263	)			(4,422,982	)			(8,238,107	)
Livestock			256,550				259,720				77,530				(273,000	)
Metals			(110,525	)			(788,041	)			(5,726,421	)			(516,224	)
Softs			644,689				(325,826	)			1,546,268				2,093,443
Stock indices			18,874,584				22,123,955				(24,356,955	)			46,818,237
Total futures contracts			12,787,344				19,896,745				(1,413,417	)			25,107,257
Forward currency contracts			4,122,019				(779,253	)			2,075,799				(12,351,503	)
Total futures and forward currency contracts		$	16,909,363			$	19,117,492			$	662,382			$	12,755,754

  

For the three months ended September 30, 2018 and 2017, the monthly average number of future contracts bought and sold and the monthly average notional value of forward currency contracts traded are detailed below:

 

			2018				2017
Average bought				47,551				39,823
Average sold				56,884				40,637
Average notional			$	4,891,000,000			$	4,043,000,000

 

The customer agreements between the Master Fund, the futures clearing brokers including, Deutsche Bank Securities Inc. (a wholly owned subsidiary of Deutsche Bank AG), SG Americas Securities, LLC, and Merrill Lynch Pierce, Fenner & Smith Inc. as well as the FX prime brokers, Deutsche Bank AG and Bank of America, N.A., and the swap dealer, Morgan Stanley & Co., LLC, give the Master Fund the legal right to net unrealized gains and losses on open futures and forward currency contracts. The Master Fund netted, for financial reporting purposes, the unrealized gains and losses on open futures and forward currency contracts on the Statements of Financial Condition as the criteria under ASC 210-20, “Balance Sheet,” were met.

 

 

The following tables represent gross amounts of assets or liabilities which qualify for offset as presented in the Statements of Financial Condition as of September 30, 2018 and December 31, 2017.

 

Offsetting of derivative assets and liabilities at September 30, 2018 

 

Assets		Gross amounts of recognized assets				Gross amounts offset in the Statement of Financial Condition				Net amounts of assets presented in the Statement of Financial Condition
Futures contracts
Counterparty C		$	7,172,498			$	(1,591,464	)		$	5,581,034
Counterparty I			15,965,107				(5,562,215	)			10,402,892
Counterparty J			2,308,574				(177,174	)			2,131,400
Total futures contracts			25,446,179				(7,330,853	)			18,115,326
Forward currency contracts
Counterparty K			6,831,705				(6,290,863	)			540,842
Total forward currency contracts			6,831,705				(6,290,863	)			540,842
Total assets		$	32,277,884			$	(13,621,716	)		$	18,656,168

 

Liabilities		Gross amounts of recognized liabilities				Gross amounts offset in the Statement of Financial Condition				Net amounts of liabilities presented in the Statement of Financial Condition
Forward currency contracts
Counterparty G			5,951,193				(3,524,677	)			2,426,516
Counterparty H			2,325,124				(1,845,700	)			479,424
Total forward currency contracts			8,276,317				(5,370,377	)			2,905,940
Total liabilities		$	8,276,317			$	(5,370,377	)		$	2,905,940

 

Amounts Not Offset in the Statement
of Financial Condition

 

Counterparty		Net amounts of Assets presented in the Statement of Financial Condition				Financial Instruments				Collateral Received(1)(2)				Net Amount(3)
Counterparty C		$	5,581,034			$	—			$	(5,581,034	)		$	—
Counterparty I			10,402,892				—				(10,402,892	)			—
Counterparty J			2,131,400				—				(2,131,400	)			—
Counterparty K			540,842				—				—				540,842
Total		$	18,656,168			$	—			$	(18,115,326	)		$	540,842

 

Amounts Not Offset in the Statement
of Financial Condition

 

Counterparty		Net amounts of Liabilities presented in the Statement of Financial Condition				Financial Instruments				Collateral Pledged(1)(2)				Net Amount(4)
Counterparty G		$	2,426,516			$	—			$	(2,426,516	)		$	—
Counterparty H			479,424				—				(479,424	)			—
Total		$	2,905,940			$	—			$	(2,905,940	)		$	—

 

(1)

Collateral received includes trades made on exchanges. These trades are subject to central counterparty clearing where settlement is guaranteed by the exchange. Collateral pledged includes both cash and U.S. Treasury notes held at each respective counterparty.

 

(2)

Collateral disclosed is limited to an amount not to exceed 100% of the net amount of assets and liabilities presented in the Statement of Financial Condition, for each respective counterparty.

 

(3)

Net amount represents the amount that is subject to loss in the event of a counterparty failure as of September 30, 2018.

 

(4)

Net amount represents the amounts owed by the Partnership to each counterparty as of September 30, 2018.

 

 

Offsetting of derivative assets and liabilities at December 31, 2017

 

Assets		Gross amounts of recognized assets				Gross amounts offset in the Statement of Financial Condition				Net amounts of assets presented in the Statement of Financial Condition
Futures contracts
Counterparty C		$	8,020,778			$	(7,204,167	)		$	816,611
Counterparty I			16,954,695				(15,625,849	)			1,328,846
Total futures contracts			24,975,473				(22,830,016	)			2,145,457
Total assets		$	24,975,473			$	(22,830,016	)		$	2,145,457

 

Liabilities		Gross amounts of recognized liabilities				Gross amounts offset in the Statement of Financial Condition				Net amounts of liabilities presented in the Statement of Financial Condition
Forward currency contracts
Counterparty G		$	7,086,206			$	(2,515,193	)		$	4,571,013
Counterparty H			12,079,159				(4,936,637	)			7,142,522
Total forward currency contracts			19,165,365				(7,451,830	)			11,713,535
Total liabilities		$	19,165,365			$	(7,451,830	)		$	11,713,535

 

Amounts Not Offset in the Statement
of Financial Condition

 

Counterparty		Net amounts of Assets presented in the Statement of Financial Condition				Financial Instruments				Collateral Received(1)(2)				Net Amount(3)
Counterparty C		$	816,611			$	—			$	(816,611	)		$	—
Counterparty I			1,328,846				—				(1,328,846	)			—
Total		$	2,145,457			$	—			$	(2,145,457	)		$	—

 

Amounts Not Offset in the Statement
of Financial Condition

 

Counterparty		Net amounts of Liabilities presented in the Statement of Financial Condition				Financial Instruments				Collateral Pledged(1)(2)				Net Amount(4)
Counterparty G		$	4,571,013			$	—			$	4,571,013			$	—
Counterparty H			7,142,522				—				7,142,522				—
Total		$	11,713,535			$	—			$	11,713,535			$	—

 

(1)

Collateral received includes trades made on exchanges. These trades are subject to central counterparty clearing where settlement is guaranteed by the exchange. Collateral pledged includes both cash and U.S. Treasury notes held at each respective counterparty.

 

(2)

Collateral disclosed is limited to an amount not to exceed 100% of the net amount of liabilities presented in the Statement of Financial Condition, for each respective counterparty.

 

(3)

Net amount represents the amount that is subject to loss in the event of a counterparty failure as of December 31, 2017.

 

(4)

Net amount represents the amounts owed by the Partnership to each counterparty as of December 31, 2017.

 

 

CONCENTRATION OF CREDIT RISK

 

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. Credit risk is normally reduced to the extent that an exchange or clearing organization acts as a counterparty to futures transactions since typically the collective credit of the members of the exchange is pledged to support the financial integrity of the exchange.