Attached files
| file | filename |
|---|---|
| EX-32.02 - EXHIBIT 32.02 - CAMPBELL FUND TRUST | cftex32_02.htm |
| EX-32.01 - EXHIBIT 32.01 - CAMPBELL FUND TRUST | cftex32_01.htm |
| EX-31.02 - EXHIBIT 31.02 - CAMPBELL FUND TRUST | cftex31_02.htm |
| EX-31.01 - EXHIBIT 31.01 - CAMPBELL FUND TRUST | cftex31_01.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year ended December 31, 2019
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________ to __________
or
Commission File number: 000-50264
THE CAMPBELL FUND TRUST
(Exact name of Registrant as specified in charter)
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Delaware
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94-6260018
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(State of Organization)
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(IRS Employer Identification Number)
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2850 Quarry Lake Drive
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Baltimore, Maryland 21209
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(Address of principal executive offices, including zip code)
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(410) 413-2600
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(Registrant’s telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Not applicable.
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Not applicable.
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Not applicable.
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Securities registered pursuant to Section 12 (g) of the Act:
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Units of Limited Partnership Interest
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(Title of Class)
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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. (Check one):
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☑
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Smaller reporting company ☐
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Emerging growth company ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transitions period for complying with any new or revised financial accounting standards
provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The Registrant has no voting stock. As of February 29, 2020, there were 94,177.524 Series A Units, 12,907.624 Series B Units, 3,831.481 Series D Units and 8,482.732 Series W Units of Beneficial
Interest issued and outstanding.
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Page
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PART I
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Item 1.
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1-6 | |
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Item 1A.
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7-23
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Item 1B.
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23 | |
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Item 2.
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23 | |
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Item 3.
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23 | |
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Item 4.
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23 | |
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PART II
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Item 5.
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24 | |
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Item 6.
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24-25 | |
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Item 7.
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26-41
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Item 7A.
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41-46
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Item 8.
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46
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Item 9.
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46
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Item 9A.
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46-47
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Item 9B.
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47
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PART III
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Item 10.
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48-49
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Item 11.
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49
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Item 12.
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50 | |
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Item 13.
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50 | |
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Item 14.
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50 | |
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PART IV
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Item 15.
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51
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Item 16.
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52 | |
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PART I
General development of business
The Campbell Fund Trust (the “Registrant” or the “Trust”) is a business trust organized on January 2, 1996 under the Delaware Business Trust Act, which was replaced by the Delaware Statutory Trust Act
as of September 1, 2002. The Trust is a successor to the Campbell Fund Limited Partnership (formerly known as the Commodity Trend Fund) and began trading operations in January 1972. The Trust currently trades in the U.S. and international futures
and forward markets under the sole direction of Campbell & Company, LP (“Campbell & Company” or the “managing operator”). Specifically, the Trust trades in a diverse array of global assets, including global interest rates, stock indices,
currencies and commodities. The Trust is an actively managed account with speculative trading profits as its objective.
Effective December 2, 2014, Campbell & Company, Inc. changed its name and form of entity to Campbell & Company, LP. Campbell & Company refers to either Campbell & Company, Inc. or
Campbell & Company, LP depending on the applicable period discussed.
As a registrant with the Securities and Exchange Commission (the “SEC”), the Trust is subject to the regulatory requirements under the Securities Act of 1934. As a commodity investment pool, the Trust
is subject to the provisions of the Commodity Exchange Act, regulations of the Commodity Futures Trading Commission (the “CFTC”), an agency of the United States government which regulates most aspects of the commodity futures industry; rules of the
National Futures Association (the “NFA”), an industry self-regulatory organization; and the requirements of the various commodity exchanges where the Trust executes transactions. Additionally, the Trust is subject to the requirements of futures
commission merchants and interbank market makers through which the Trust trades.
U.S. Bank National Association, a national banking corporation, (the “Trustee”), is the sole trustee of the Trust. The Trustee is unaffiliated with the managing operator and the Trust’s selling
agents, and its duties and liabilities with respect to the offering of the Units of Beneficial Interest (the “Units”) are limited to its express obligations under the Declaration of Trust and Trust Agreement.
Under the Amended and Restated Declaration of Trust and Trust Agreement, the Trustee has delegated the exclusive management of all aspects of the business and administration of the Trust to Campbell
& Company. Campbell & Company is registered with the CFTC as a commodity pool operator and a commodity trading advisor, and is a member of the NFA in such capacities. In addition to managing all aspects of business and administration,
Campbell & Company makes all trading decisions for the Trust. Campbell & Company uses a systematic trading approach combined with quantitative portfolio management analysis and seeks to identify and profit from price movements in the
futures and forward markets. Multiple trading models are utilized across most markets traded. Each model analyzes market movements and internal market and price configurations in order to generate signals to be executed through a variety of
execution platforms.
The Trust invests pursuant to Campbell & Company’s trading program Campbell Managed Futures Portfolio (“CMF Portfolio”) formerly known as the Global Diversified Large Portfolio. Since August 2009,
the Trust’s Global Diversified Large Portfolio trading program has traded identically to Campbell & Company’s Managed Futures Portfolio. As a result, Campbell & Company has consolidated the Global Diversified Large Portfolio with the
Campbell Managed Futures Portfolio. The trading program seeks to generate attractive risk-adjusted returns across a broad range of market conditions through systematic investments in a diversified portfolio that may include swaps, futures and
forward contracts in a diverse array of global investments, including global interest rates, stock indices, currencies and commodities. The program consists of underlying investment strategies, both trend following and non-trend following in
nature, that aim for low correlation and are diversified by investment style, information source, investment holding period and instrument.
The Registrant will be terminated and dissolved promptly thereafter upon the happening of the earlier of: (a) the expiration of the Trust’s stated term on December 3l, 2025; (b) an election to
terminate the Trust at any time by Unitholders owning more than 50% of the Units then outstanding; (c) the trading in commodity futures is terminated, suspended or for any reason becomes impossible or economically unfeasible in the sole judgment of
the managing operator; or (d) the date upon which the Trust is dissolved by operation of law or judicial decree.
Effective August 31, 2008, the Trust began offering Series A, Series B, and Series W Units. The units in the Trust prior to that date became Series B Units. Series B Units are only available for
additional investment by existing holders of Series B Units. Effective August 1, 2017, the Trust began offering Series D Units.
As of December 31, 2019, the aggregate capitalization of the Trust was $309,506,621 with Series A, Series B, Series D and Series W comprising $243,974,281, $36,551,654, $3,507,300 and $25,473,386,
respectively, of the total. The Net Asset Value per Unit was $2,568.01 for Series A, $2,810.51 for Series B, $1,041.87 for Series D and $3,036.20 for Series W.
Financial information about segments
The Trust’s business constitutes only one segment for financial reporting purposes, i.e., a speculative “commodity pool.” The Trust does not engage in the sale of goods or services.
Narrative description of business
General
The purpose of the Trust is to engage in the speculative trading, buying, selling, or otherwise acquiring, holding or disposing of commodities, including futures contracts, forward contracts and any
other rights pertaining thereto, and for such other purposes as may be incidental or related thereto. The Trust has no employees.
The Trust trades pursuant to the CMF Portfolio, formerly known as the Financial, Metals and Energy Large Portfolio. The CMF Portfolio seeks to generate attractive risk-adjusted returns across a broad
range of market conditions through systematic investments in a diversified portfolio of futures and forward contracts in a diverse array of global assets, including global interest rates, stock indices, currencies and commodities. The CMF Portfolio
consists of underlying investment strategies, both trend following and non-trend following in nature, which aims for low correlation and are diversified by investment style, investment holding period and instrument. Trend following strategies apply
traditional and alternative trend following methods to systematically exploit futures market moves through the use of price information. Some trend following strategies trade all markets while others are specific to certain sectors or factors.
Non-trend following strategies develop relative value and fundamental themes to systematically exploit asset mispricings using carry, spread, and directional methods. Non-trend following strategies tend to be specific to certain sectors and employ
global tactical asset allocation methodologies. Other technical strategies, based on statistical indicators, use varying lookback and holding periods to identify mispricings, complimentary to trend following. Additional models, markets and/or
over-the-counter (“OTC”) contracts may also be included or eliminated from time to time at Campbell & Company’s sole discretion without notice to unitholders.
The average sector allocation for each sector as of the previous six month ends through December 31, 2019 is as follows: 24% to interest rates, 35% to foreign exchange, 19% to commodities, and 22% to
equity indices. Sector allocation for each sector is calculated using the dollar value of margin posted as collateral to support trading in each sector as a percentage of the total dollar value of margin posted to support trading in all sectors.
Use of Proceeds
Subscription Proceeds and Available Assets
The entire offering proceeds, without deductions, will be credited to the Trust’s bank, brokerage and/or cash management accounts to engage in trading activities and as reserves for that trading. The
Trust meets its margin requirements by depositing cash and U.S. government securities with the futures broker and the over-the-counter counterparty. In this way, substantially all (i.e., 95% or more) of the Trust’s assets, whether used as margin
for trading purposes or as reserves for such trading, may be invested in U.S. government securities and time deposits with U.S. banks. Investors should note that maintenance of the Trust’s assets in U.S. government securities and banks does not
reduce the risk of loss from trading futures and forward contracts. The Trust receives all interest earned on its assets. No other person shall receive any interest or other economic benefits from the deposit of Trust assets.
Approximately 10% to 30% of the Trust’s assets normally are committed as required margin for futures contracts and held by the futures brokers, although the amount committed may vary significantly.
Such assets are maintained in the form of cash or U.S. Treasury Bills in segregated accounts with the futures brokers pursuant to the Commodity Exchange Act and regulations thereunder. Approximately 5% to 15% of the Trust’s assets are deposited
with the over-the-counter counterparty in order to initiate and maintain currency forward contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is
registered as a futures commission merchant. These assets are held either in cash, U.S. government securities or short-term time deposits with U.S. regulated bank affiliates of the over-the-counter counterparty.
The Trust occasionally receives margin calls (requests to post more collateral) from its futures brokers or over-the-counter counterparty, which are met by moving the required portion of the assets
held in the custody accounts at Northern Trust Company to the margin accounts. In the past three years, the Trust has not needed to liquidate any position as a result of a margin call.
The managing operator deposits the majority of those assets of the Trust that are not required to be deposited as margin with the futures brokers and over-the-counter counterparties in a custodial
account with Northern Trust Company. The assets deposited in the custodial account with Northern Trust Company are segregated. Such custodial account constitutes approximately 60% to 75% of the Trust’s assets and are invested directly by PNC
Capital Advisors, LLC (“PNC”). PNC is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. PNC does not guarantee any interest or profits will accrue on the Trust’s assets in the custodial account. PNC invests
the assets according to agreed upon investment guidelines that first preserve capital, second allow for sufficient liquidity, and third provide a yield beyond the risk-free rate. Investments can include, but are not limited to, (i) U.S. Government
Securities, Government Agency Securities, Municipal Securities, banker acceptances and certificates of deposits; (ii) commercial paper; (iii) short-term investment grade corporate debt; and (iv) Asset Backed Securities.
The Trust’s assets are not and will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested with or loaned to Campbell & Company or any
affiliated entities. Funds may be deposited and held in the Trust’s account at PNC Financial Services Group, Inc., Baltimore, Maryland, U.S.A., prior to the transfer to the Trust’s trading accounts.
In the event net asset value per unit as of the end of any business day declines by 50% or more from either the prior year-end or the prior month-end unit value, Campbell & Company will suspend
trading activities, notify all unitholders of the relevant facts within seven business days and declare a special redemption period.
Cash Manager and Custodian
PNC serves as the cash manager under the Investment Advisory Agreement to manage and control the liquid assets of the Trust. PNC is registered as an investment adviser with the SEC of the United
States under the Investment Advisers Act of 1940.
The Trust opened a custodial account at The Northern Trust Company (the “Custodian”), and has granted the Cash Manager a limited power of attorney over such accounts. Such power of attorney gives the
Cash Manager authority to make certain investments on behalf of the Trust provided such investments are consistent with agreed upon investment guidelines. Such investments include, but are not limited to, U.S. government agency or municipal
securities, banker acceptances, certificates of deposits, commercial paper, money market securities, short term investment-grade corporate debt securities or investment-grade asset-backed securities. All securities purchased by the Cash Manager on
behalf of the Trust or other liquid funds of the Trust will be held in its custody account at the Custodian. The Cash Manager will have no beneficial or other interest in the securities and cash in such custody account.
Market Sectors
Campbell & Company’s CMF Portfolio trades in a fully diversified portfolio of futures and forward markets, including energy products, precious and base metals, stock market indices, interest rates
and foreign currencies detailed out below.
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Commodities
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Interest Rates
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Equity Indices
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Foreign Exchange (1)
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Aluminum
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London Brent Crude
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Australian 90-Day Bill
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Long Gilt
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Amsterdam Exchange Index
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OMX Stock Index
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Australian Dollar (2)
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Mexican Peso
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Coffee
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London Gas Oil
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Australian 3-Year Bond
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Short Sterling
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CAC 40 Stock Index
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Russell 2000 Index
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Brazilian Real (3)
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New Zealand Dollar
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Copper
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NY Gasoline RBOB
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Australian 10-Year Bond
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Treasury Notes/2-Year
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DAX
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S&P 400 Index
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British Pound (2)
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Norwegian Krone
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Corn
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Natural Gas
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Canadian 10-Year Bond
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Treasury Notes/5-Year
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DJ Euro Stoxx 50
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S&P 500 Index
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Canadian Dollar (2)
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Philippine Peso (3)
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Cocoa
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Nickel
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Canadian 90-Day Bill
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Treasury Notes/10-Year
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DJ Index
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S&P 500 Volatility Index
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Chilean Peso (3)
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Polish Zloty
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Cotton
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Palladium
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Euro-BTP Italian Gov Bond
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Treasury Notes/30-Year
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FTSE 100 Index
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S&P Canada 60 Index
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Chinese Yuan (3)
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Russian Ruble (3)
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Crude Oil
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Platinum
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Euro-BUND
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Treasury Ultra Long Bond
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FTSE China A50
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SPI 200 Index
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Colombian Peso
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Singapore Dollar
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Feeder Cattle
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Silver
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Euro-BOBL
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FTSE JSE Top 40
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SGX CNX Nifty
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Czech Koruna
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South African Rand
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Gold
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Soybean Meal
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Euro-Buxl 30-Year Bond
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FTSE MIB
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TOPIX
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Euro (2)
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South Korean Won (3)
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Heating Oil
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Soybean Oil
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Euro-OAT French 10-Year Bond
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Hang Seng Index
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Hungarian Forint
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Swedish Krona
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High Grade Copper
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Soybeans
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Euro-Schatz
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IBEX35 Stock Index
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Indian Rupee (3)
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Swiss Franc (2)
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KC Hard Red-Winter Wheat
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Sugar #11 (World)
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Eurodollar
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MSCI Singapore
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Indonesian Rupiah
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Taiwan Dollar (3)
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Lead
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Wheat
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Euribor
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MSCI Taiwan
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Israeli Shekel
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Turkish Lira
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Lean Hogs
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Zinc
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Japanese 10-Year Bond
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NASDAQ 100 Index
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Japanese Yen (2)
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Live Cattle
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Nikkei
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Traded as forward contracts, not futures
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Also may be traded as cross rates
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Traded as non-deliverable forward
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Market Types
The Trust trades on a variety of United States and foreign futures exchanges, and in the off-exchange highly liquid, institutionally-based currency forward markets. As in the case of its market sector
allocations, the Trust’s 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, and may change at any time if Campbell & Company determines such
change to be in the best interests of the Trust.
Charges
The following is a description of current charges to the Trust.
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RECIPIENT
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NATURE OF PAYMENT
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AMOUNT OF PAYMENT
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Campbell & Company
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Management Fee
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A monthly management fee of 1/12 of 4% of the month-end net assets of the Series A Units and Series B Units, totaling approximately 4% of the average month-end net assets per year of the
Series A Units and Series B Units; a monthly management fee of 1/12 of 2.75% of the month-end net assets of the Series D Units, totaling approximately 2.75% of average month-end net assets per year of the Series D Units; a monthly
management fee of 1/12 of 2% of the month-end net assets of the Series W Units, totaling approximately 2% of average month-end net assets per year of the Series W Units. The managing operator may pay a portion or all of its monthly
management fee either upfront (with respect to Series A Units) or on an ongoing basis with respect to Series B Units and Series D Units (commencing with the 13th month with respect to Series A Units) to selected selling agents who have sold
the Series A Units, the Series B Units and/or the Series D Units, in return for their provision of ongoing services to the Series A and/or the Series B Unitholders. It is intended that, in most cases, the ongoing payment paid to selling
agents will be 2% per annum, paid monthly, on the then current net asset value of Units sold by the selling agents, net of redemptions.
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Campbell & Company
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Performance Fee
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A quarterly performance fee of 20% of the aggregate cumulative appreciation (if any) in the net asset value per Unit of the Series A Units, Series B Units, Series D Units and Series W
Units at the end of each quarter, exclusive of appreciation attributable to interest income or gains or losses derived from the Trust’s fixed income securities.
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Campbell & Company
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Offering Costs
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The Series A Units, Series D Units and Series W Units each bear offering costs incurred in relation to the offering of the Series A Units, Series D Units and Series W Units, respectively,
up to an amount equal to approximately 1/12 of 0.50% of the month-end net assets of each of the Series A Units, Series D Units and Series W Units, totaling a maximum of 0.50% of average month-end net assets per year each of the Series A
Units, Series D Units and Series W Units. Such offering costs of the Trust include all fees and expenses in connection with the distribution of the Units, including legal, accounting, printing, mailing, filing fees, escrow fees, salaries
and bonuses of employees while engaged in sales activities, and marketing expenses of Campbell & Company and the selling agents which are paid by the Trust.
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Selling Agents
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Service Fee
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Prior to March 1, 2017, the selling agents (the firm and not the individual representatives) who sell Series W Units received a monthly administrative fee of 1/12 of 0.25% of the
month-end net assets of the Series W Units, totaling approximately 0.25% of average month-end net assets per year of the Series W Units. Effective March 1, 2017, a monthly service fee is no longer paid by the Series W Units.
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UBS Securities, LLC and Goldman Sachs & Co. LLC
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Brokerage Commissions
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Brokerage commissions are paid at a rate of approximately $4 for each round-turn trade executed for the Trust, or approximately 0.55% of average month-end net assets per year of each
Series of Units, although there is no limit on the amount of such commissions.
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NatWest Markets plc
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Over-the-Counter Counterparty Execution and Clearing Costs
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The over-the-counter counterparty’s execution costs are included in the price of each forward or option contract purchased or sold, and, accordingly, such costs cannot be determined but
are charged. In addition, NatWest charges approximately $3 per $1 million, plus any additional electronic platform charges, for forward or option contracts it facilitates on behalf of the Trust with third party banks. These prime brokerage
fees, combined with the futures broker’s charges, usually equal approximately 0.60% of the Trust’s net assets.
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Cash Manager and Custodian
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Cash Management and Custody fees
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The Trust pays a combined annualized fee of approximately 0.10% per annum of the funds managed by the Cash Manager for cash management services, custodian fees, and fees associated with
monitoring the Trust’s cash management portfolio. Prior to December 1, 2018, the Trust paid a combined annualized fee of approximately 0.075% per annum.
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Other
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Operating Expenses
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The Trust pays operating expenses (other than the cost of the Units), including, but not limited to, administrative, legal and accounting fees and any taxes or extraordinary expenses
payable by the Trust. These expenses are estimated at approximately 0.25% of the Trust’s net assets annually, although there is no limit on the amount of such expenses.
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Regulation
The U.S. futures markets are regulated under the Commodity Exchange Act, which is administered by the CFTC, a federal agency created in 1974. The CFTC licenses and regulates commodity exchanges,
commodity pool operators, commodity trading advisors and clearing firms which are referred to in the futures industry as “futures commission merchants.” Campbell & Company is licensed by the CFTC as a commodity pool operator and commodity
trading advisor. Futures professionals are also regulated by the NFA, a self-regulatory organization for the futures industry that supervises the dealings between futures professionals and their customers. If its pertinent CFTC licenses or NFA
memberships were to lapse, be suspended or be revoked, Campbell & Company would be unable to act as the Trust’s commodity pool operator and/or commodity trading advisor, as applicable.
CFTC and NFA guidance has clarified that the foreign exchange forward contracts that Campbell & Company trades on behalf of its clients with the client’s over-the-counter counterparty may be
characterized as swap transactions. A swap transaction is an individually negotiated, non-standardized agreement between two parties to exchange cash flows measured by different interest rates, exchange rates or prices, with payments calculated by
reference to a principal (“notional”) amount or quantity. The Dodd Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) includes provisions that comprehensively regulate swap transactions for the first time, such as mandatory
central clearing, and many foreign governmental authorities are in the process of implementing similar regulatory intervention in the swap markets. It is expected that the implementation of Dodd-Frank will ultimately result in a substantial portion
of OTC swaps being executed in regulated markets and being submitted for clearing to regulated clearinghouses. With respect to swaps cleared through a central counterparty, the Trust will be subject to daily “variation” and “initial” margin
requirements set by the central clearing counterparty and the Trust’s clearing member. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of a clearinghouse with the clearinghouse serving as a central
counterparty similar to transactions in futures contracts. The Trust posts initial and variation margin by posting collateral with its clearing member FCMs. The SEC, which regulates the security-based derivatives markets, has the authority under
the Reform Act to require that certain security- based swaps transactions that previously were executed on a bi-lateral basis in the OTC markets be subject to mandatory clearing and be executed through a regulated futures exchange or swap execution
facility. The SEC has not yet, however, finalized any such requirements, and it is not clear when it will. When such requirements are finalized and implemented, it is anticipated that they may increase market transparency and liquidity but may
require certain of the Trust’s Segregated Portfolios to incur increased expenses to access the same types of security-based swaps. Rules adopted by the SEC in 2015 also require centralized reporting of detailed information about many types of
cleared and uncleared security-based swaps. This information is available to regulators and, to a more limited extent and on an anonymous basis, to the public. Reporting of swap data may result in greater market transparency, which may be
beneficial to funds that use swaps to implement trading strategies. However, these rules place potential additional administrative obligations on the Trust, and the safeguards established to protect anonymity may not function as expected.
Central clearing is expected to decrease counterparty risk and increase liquidity compared to bilateral swaps because central clearing interposes the central clearinghouse as the counterparty to each
participant’s swap. However, central clearing does not eliminate counterparty risk or illiquidity risk entirely. In addition, depending on the size of the Trust and other factors, the margin required by a clearing member from the Trust may be in
excess of the amounts required to be posted by the Trust pursuant to the rules of the central clearinghouse and in excess of the collateral required to be posted by the Trust to support its obligations under a similar non-cleared bilateral swap.
However, regulators do have the authority to promulgate rules that impose margin requirements, including minimums, on uncleared swaps, which, if adopted, could affect this comparison.
The SEC and the CFTC under Dodd-Frank also have the authority to require most liquid swaps, under their respective jurisdiction, to be traded and executed on trading facilities. The CFTC has already
subjected certain kinds of swaps to this platform execution requirement and it is expected that additional swaps will become subject to this requirement in the future. Moving trading to an exchange-type system may increase market transparency and
liquidity but may require the Trust to incur increased expenses to access the same types of swaps. Rules adopted by the CFTC in 2012 also require centralized reporting of detailed information about many types of cleared and uncleared swaps. This
information is available to regulators and, to a more limited extent and on an anonymous basis, to the public. Reporting of swap data may result in greater market transparency, which may be beneficial to funds that use swaps to implement trading
strategies. However, these rules place potential additional administrative obligations on the Trust, and the safeguards established to protect anonymity may not function as expected.
Available Information
The Trust files quarterly, annual and current reports with the SEC. These reports are available to read and copy at the SEC’s Public Reference Facilities in Washington, D.C. at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC’s toll free number, 1-800-SEC-0330, for further information. The Trust does not maintain a website where these reports are posted. However, the Trust’s filings are posted on the SEC’s website at http://www.sec.gov.
General Investment Related Risks
There are certain general market conditions in which any given investment strategy is unlikely to be profitable. Campbell & Company does not have any ability to control or predict such market
conditions. The Trust is subject to certain general risks relating to its investment strategies, including, but not limited to, the following:
Potential Loss of Investment
There is a risk that an investment in the Trust will be lost entirely or in part. The Trust is not a complete investment program and should represent only a portion of an investor’s portfolio
management strategy.
Short Sales May Lead to Potentially Unlimited Losses
The Trust may establish short positions in a number of investment instruments. A futures trader that is obligated to make delivery is “short” the contract or has “sold” the contract. A futures trader
who establishes a short position in a futures contract would initially sell an interest at the current price and then would buy an interest at market price in order to offset such obligation. The short futures trader hopes to sell high and buy low.
Short selling allows the short seller to profit from declines in market prices to the extent such declines exceed the transaction and any other related costs. A short sale creates the risk of an unlimited loss, in that the price of the underlying
commodity could theoretically increase without limit, thus increasing the cost of buying those futures to offset the short position. There can be no assurance that the futures necessary to cover a short position will be available for “purchase”.
Establishing a long position in futures contracts to close out the short position can itself cause the price of the futures to rise further, thereby exacerbating the loss. The use of leverage combined with short selling may increase the amount of
losses that the Trust experiences.
Investing Globally Subjects the Trust to International Risks
Issuers are generally subject to different accounting, auditing and financial reporting standards in different countries throughout the world. The volume of trading, the volatility of prices and the
liquidity of issuers may vary in the markets of different countries. Hours of business, customs and access to these markets by outside investors may also vary. In addition, the level of government supervision and regulation of the financial
markets, securities and futures exchanges, securities dealers, futures commission merchants and listed and unlisted companies is different throughout the world. There may also be a lack of adequate legal recourse for the redress of disputes and, in
some countries, the pursuit of such disputes may be subject to a highly prejudiced legal system.
Different markets also have different clearance and settlement procedures. Delays in settlement could result in temporary periods when a portion of the assets of the Trust are uninvested and no return
is earned thereon. The inability of the Trust to make intended investments due to settlement problems could cause the Trust to miss attractive investment opportunities. The inability to dispose of portfolio instruments due to settlement problems
could result either in losses due to subsequent declines in value of the portfolio instruments or, if the Trust has entered into a contract to sell the instrument, could result in possible liability to the purchaser.
The price of any foreign investment instrument and, therefore, the potential profit and loss thereon, may be affected by any variance in the foreign exchange rate between the time a position is
established and the time it is liquidated, offset or exercised.
Certain foreign exchanges may also be in a more or less developmental stage so that prior price histories may not be indicative of current price dynamics. In addition, the Trust may not have the same
access to certain financial investment instruments on foreign exchanges as do local traders, and the historical market data on which Campbell & Company bases its strategies may not be as reliable or accessible as it is in the United States. The
rights of clients (such as the Trust) in the event of the insolvency or bankruptcy of a non-U.S. market or broker are also likely to be more limited than in the case of U.S. markets or brokers.
With respect to different countries, there is a possibility of expropriation or confiscatory taxation, imposition of withholding taxes on dividend or interest payments, limitations on the removal of
funds or other assets, managed or manipulated exchange rates and other issues affecting currency conversion, political or social instability or diplomatic developments that could adversely affect investments in those countries. The Trust may invest
in instruments that may be domiciled in a country other than the country in whose currency the instrument is denominated. The values and relative yields of such investments in the financial markets of different countries, and their associated
risks, are expected to change independently of each other. These risks may be greater in emerging markets.
Exchange-Rate Risk
The Trust may invest in international financial instruments such as securities of non-U.S. issuers or non-U.S. futures contracts, which are denominated in currencies other than the U.S. dollar.
Consequently, the Trust is subject to the exchange-rate risk of the dollar increasing or decreasing in value against the functional currency of such investments.
Changes in Financing Policies or the Imposition of Other Credit Limitations or Restrictions Could Compel the Trust to Liquidate Positions at Disadvantageous
Prices
The Trust may utilize leverage and may depend on the availability of credit in order to finance its portfolio. There can be no assurance that the Trust will be able to maintain adequate financing
arrangements under all market circumstances. As a general matter, the dealers that provide financing to the Trust can apply essentially discretionary margin, haircut, financing, security and collateral valuation policies. Changes by dealers in such
financing policies, or the imposition of other credit limitations or restrictions, whether due to market circumstances disruptions or governmental, regulatory or judicial action, may result in large margin calls, loss of financing, forced
liquidation of positions at disadvantageous prices, termination of swap and repurchase agreements and cross-defaults to agreements with other dealers. Any such adverse effects may be exacerbated in the event that such limitations or restrictions
are imposed suddenly and/or by multiple market participants at or about the same time. The imposition of such limitations or restrictions could compel the Trust to liquidate all or part of its portfolio at disadvantageous prices. From time to time,
banks and dealers have substantially curtailed financing activities and increased collateral requirements, forcing many hedge funds to liquidate.
The Trust’s Investments Could be Illiquid
Futures and forward positions cannot always be liquidated at the desired price; this can occur when the market is thinly traded (i.e., a relatively small volume of buy and sell orders) or in the event
of disrupted markets and other extraordinary events in which historical pricing relationships become materially distorted. The Trust may incur material losses and the risk of loss from pricing distortions is compounded by the fact that in disrupted
markets many positions become illiquid making it difficult or impossible to close out positions against which the markets are moving. The financing available to the Trust from banks, dealers and other counterparties is likely to be restricted in
disrupted markets. For example, in 1994, 1998 and again from 2007-2009, there was a sudden restriction of credit by the dealer community that resulted in forced liquidations and major losses for a number of private investment funds. It is possible
that in the future, in such situations, Campbell & Company may be unable for some time to liquidate certain unprofitable positions, thereby increasing the loss of the Trust from the trade. Additionally, foreign governments may take or be
subject to political actions which disrupt the markets in their currency or major exports, such as energy products or metals. Market disruptions caused by unexpected political, military and terrorist events may from time to time cause dramatic
losses for the Trust, and such events can result in otherwise historically low-risk strategies performing with unprecedented volatility and risk. Any of these actions could also result in losses to the Trust. Units should be owned only by persons
financially able to maintain their investment and who can afford the loss of all or substantially all of such investment.
Your Investment in the Trust Could Be Illiquid; Suspension of Trading
There is no secondary market for the Units and none is expected to develop. While the Units have redemption rights, there are restrictions. For example, redemptions can occur only at the end of a
month. If a large number of redemption requests were to be received at one time, the Trust might have to liquidate positions to satisfy the requests. Such a forced liquidation could adversely affect the Trust and consequently your investment.
Transfers of interest in the Units are subject to limitations, such as 30 days’ advance notice of any intent to transfer. Also, Campbell & Company may deny a request to transfer if it determines
that the transfer may result in adverse legal or tax consequences for the Trust.
Reduced Market Exposure in Times of High Volatility May Limit Profit Potential
During periods of high volatility in the markets, the Trust may reduce its market exposure. While the purpose of such reductions is to attempt to limit potential losses to the Trust, such reductions
may also have the effect of limiting potential profits for such time as the Trust’s market exposure remains in a reduced state.
An Investment in the Trust May Not Diversify an Overall Portfolio
Historically, alternative investments such as managed futures funds have been generally lowly correlated to the performance of other asset classes such as stocks and bonds. Low correlation means that
there is no statistically valid relationship between the past performance of futures and forward contracts, on the one hand, and stocks or bonds, on the other hand. Low correlation should not be confused with negative correlation, where the
performance of two asset classes would be exactly opposite.
Because of low correlation, the Trust cannot be expected to be automatically profitable during unfavorable periods for the stock market or vice versa. The futures and forward markets are fundamentally
different from the securities markets in that for every gain made in futures and forward trading, there is an equal and offsetting loss.
Low correlation also does not mean that the Trust will not always move in the same direction as stocks and bonds. There may be times when the Trust gains during the same periods when stock and bonds
gain and there also may be times when the Trust loses during periods when stock and bonds lose. If the Trust performs in a manner that is correlated with the general financial markets or does not perform successfully, you will obtain no
diversification benefits by investing in the Units and the Trust may have no gains to offset your losses from other investments.
The Current Markets are Subject to Market Disruptions That May be Detrimental to Your Investment
The Trust may incur major losses in the event of disrupted markets and other extraordinary events in which historical pricing relationships become materially distorted. The risk of loss from pricing
distortions is potentially compounded by the fact that in disrupted markets many positions become illiquid, making it difficult or impossible to close out positions against which the markets are moving. The financing available to the Trust from its
banks, dealers and other counterparties is typically reduced in disrupted markets and may result in substantial losses to the Trust. Market disruptions may from time to time cause dramatic losses for the Trust, and such events can result in
otherwise historically low-risk strategies performing with unprecedented volatility and risk.
Market disruptions during the past decade have led to increased governmental as well as self-regulatory scrutiny of the private funds and financial services industry in general. U.S. regulatory
agencies are continuing to implement rulemaking as a result of the passage of Dodd-Frank in 2010. Further legislation proposing additional regulation of the industry is considered periodically by the U.S. Congress, as well as the governing bodies
of non-U.S. jurisdictions. It is impossible to predict what, if any, changes in the regulations applicable to the Trust, Campbell & Company, the markets in which they trade and invest or the counterparties with which they do business may be
instituted in the future. Any such laws or regulations could have a material adverse impact on the profit potential of the Trust, as well as require increased transparency as to the identity of Unitholders.
Fixed-Income Investments Risks
The value of fixed-income securities in which the Trust may invest will change in response to fluctuations in interest rates. Except to the extent that values are independently affected by currency
exchange rate fluctuations, when interest rates decline, the value of fixed-income securities generally can be expected to rise. Conversely, when interest rates rise, the value of fixed-income securities generally can be expected to decline.
In addition, the fixed-income securities in which the Trust may invest may be subject to income risk, call risk, prepayment risk, extension risk, and/or credit risk, each of which could affect the
fixed-income securities’ value. Investments in lower rated or unrated fixed-income securities, while generally providing greater opportunity for gain and income than investments in higher rated securities, usually entail greater risk (including the
possibility of default or bankruptcy of the issuers of such securities).
Trading Risks
There are Disadvantages to Making Trading Decisions Based Primarily on Technical Market Data
The trading systems used by Campbell & Company for the Trust are primarily technical. The profitability of trading under these systems depends on, among other things, the occurrence of significant
price movements, up or down, in futures and forward prices. Such price movements may not develop; there have been periods in the past without such price movements.
The likelihood of the Units being profitable could be materially diminished during periods when events external to the markets themselves have an important impact on prices. During such periods,
Campbell & Company’s historic price analysis could establish positions on the wrong side of the price movements caused by such events.
Increased Competition in Alternative Asset Investments
There has been a marked increase in the number of, and flow of capital into, investment vehicles established in order to implement alternative asset investment strategies, including the strategies to
be implemented by the Trust. While the precise effect cannot be determined, such an increase may result in greater competition for investment opportunities, or may result under certain circumstances in increased price volatility or decreased
liquidity with respect to certain positions. Prospective investors should understand that the Trust may compete with other investment vehicles, as well as investment and commercial banking firms, which may have substantially greater resources, in
terms of financial resources and research staffs, than may be available to the Trust.
Increase in Assets Under Management May Make Profitable Trading More Difficult
Campbell & Company believes that it is virtually impossible to define or quantify the capacity of a portfolio with any degree of certainty. Campbell & Company has continued to introduce new
strategies designed to deliver returns which have low correlation to returns from existing strategies. Campbell & Company and its affiliates have not agreed to limit the amount of additional assets they may manage, and are actively engaged in
raising assets for existing and new accounts, including the Trust. However, Campbell & Company acknowledges that there may come a time when the combination of available markets and new strategies may not be sufficient for it to add new assets
without detriment to diversification. If this were to occur, Campbell & Company would expect its risk-adjusted returns to begin to degrade. Should Campbell & Company ever conclude that its ability to deliver attractive risk-adjusted returns
has been unduly compromised by its growth in assets, it would not hesitate to restrict or halt the flow of new assets, and, if necessary, begin to repatriate market gains.
Should the amount of assets that Campbell & Company and its affiliates manage increase, it may be more difficult for them to trade profitably because of the difficulty of trading larger positions
without adversely affecting prices and performance. Accordingly, such increases in equity under management may require Campbell & Company to modify its trading decisions for the Trust, which could have a detrimental effect on your investment.
Such considerations may also cause Campbell & Company to eliminate smaller markets from consideration for inclusion in certain trading program, reducing the range of markets in which trading opportunities may be pursued. Campbell & Company
reserves the right to make distributions of profits to Members in an effort to control asset growth. In addition, Campbell & Company may have an incentive to favor other accounts because the compensation received from some other accounts
exceeds the compensation it receives from managing the Trust’s account. Because records with respect to other accounts are not accessible to Investors, the Investors will not be able to determine if Campbell & Company is favoring other
accounts.
Investors Will Not be Able to Review the Trust’s Holdings on a Daily Basis
Campbell & Company makes the Trust’s trading decisions. While the Campbell & Company receives daily trade confirmations from the futures broker and over-the-counter counterparty, the Trust’s
trading results are reported to Investors monthly. Accordingly, an investment in the Trust does not offer Investors the same transparency, i.e., an ability to review all investment positions daily, that a personal trading account offers.
Portfolio Turnover
The Trust may dispose of its investment instruments without regard to the length of time they have been held when such actions appear advisable based on the models included in its portfolio. Since
Campbell & Company trades the Trust’s investment instruments based on the models included in the portfolio, it is impossible to predict, with any degree of certainty, the portfolio turnover rate for the Trust. A high portfolio turnover rate
bears certain tax consequences and results in greater transaction costs, which are borne directly by the Trust.
Inadequate Models Could Negatively Affect the Trust’s Investment Portfolio
Campbell & Company’s trading is highly model driven, and is subject to possibly material flaws in the models. As market dynamics (for example, due to changed market conditions and participants)
shift over time, a previously highly successful model may become outdated or inaccurate, possibly without Campbell & Company recognizing that fact before losses are incurred. In particular, the Trust may incur losses in the event of disrupted
markets and other extraordinary events that cause Campbell & Company’s pricing models to generate prices which deviate from the market. The risk of loss to the Trust in the case of disrupted markets is compounded by the number of different
investment models of pricing, each of which may independently become wholly unpredictable during market disruptions. In addition, in disrupted derivatives markets, many positions may become illiquid, making it difficult or impossible to close out
positions against which the markets are moving.
Even if the basic concepts of our models are sound, Campbell & Company may make errors in developing algorithms for integrating the numerous factors and variables into them or in programming the
algorithms. Those errors may cause the model to generate results different from those intended. They may be difficult to detect in many market conditions, possibly influencing outcomes only in periods of stress or change in market conditions.
Campbell & Company anticipates the continued modification, enhancement and development of models. Each new generation of models (including incremental improvements to current models) exposes the
Trust to the possibility of unforeseen losses from a variety of factors, including conceptual failures and implementation failures. There can be no assurance that the models used by Campbell & Company will be effective or that they will be
effectively utilized by Campbell & Company. Moreover, there can be no assurance that Campbell & Company will be able to continue to develop, maintain and update the models so as to effectively implement its trading strategy.
Investors Must Not Rely on the Past Performance of Campbell & Company or the Trust in Deciding Whether to Buy Units
The future performance of the Trust is not predictable, and no assurance can be given that the Trust and Campbell & Company will perform successfully in the future in as much as past performance
is not necessarily indicative of future results. Campbell & Company’s trading systems are continually evolving and the fact that the Trust and the trading manager may have traded successfully in the past does not mean that they will do so in
the future. Additionally, the markets in which the Trust operates have been recently severely disrupted (for periods of one year or more), so results observed in periods prior to these disruptions may have little relevance to the results observable
during and after these disruptions.
Reliance on the Campbell & Company’s Discretion and Trading Models
The Trust’s success depends on the ability of Campbell & Company to develop and employ proprietary models across debt instruments, futures-related interests and/or derivative instruments.
Campbell & Company can provide no assurance that its efforts or the proprietary trading models that it employs will be successful, that it will always recognize each situation in which the models’
signals should or should not be used, or that such use or non-use of such signals will increase the Trust’s profits or minimize its losses. The discretionary authority of Campbell & Company may have a significant actual effect on the Trust’s
performance (positive or negative).
Use of the models is unlikely to be successful unless the algorithms underlying the models are correct and remain correct in the future. Because the algorithms are based on perceived relationships
between changes in technical and quantitative variables and prices or other fundamental factors, they will likely be unsuccessful in generating profitable trading signals to the extent that such perceptions are inaccurate.
To the extent that the algorithms do not reflect certain factors that may influence prices of the underlying instruments, major losses may result. For example (one of many possible examples, a number
of which are unknown), a pending political event not accounted for in the algorithms of the models may be very likely to cause a major and adverse price movement, but the Trust might well continue to maintain positions that would incur major losses
as a result of such movement because the models failed to reflect the pending political event.
The models may be more effective with certain underlying instruments than with others, or may not work at all with respect to certain instruments. To the extent that the models generate signals for
instruments for which it does not provide optimal analysis, diminished returns or increased losses may result.
The data used in developing the models may not reflect the changing dynamics of the markets. An influx of new market participants, changes in market regulation, international political developments,
demographic changes and numerous other factors can contribute to once successful strategies becoming outdated. Not all of these factors can be identified, much less quantified.
In the past, there have been periods without discernible trends in the markets in which the Trust trades and, presumably, such periods will continue to occur in the future. Any factor which would
lessen the prospect of major trends occurring in the future (such as increased governmental control of, or participation in, the markets) may reduce the prospect that certain models utilized by Campbell & Company will be profitable in the
future.
Moreover, any factor which would make it more difficult to execute trades at desired prices in accordance with the signals of the models (such as a significant lessening of liquidity in a particular
market) would also be detrimental to profitability. Further, many advisers’ trading methods utilize similar analyses in making trading decisions. Therefore, bunching of buy and sell orders can occur, which makes it more difficult for a position to
be taken or liquidated. No assurance can be given that the strategies utilized by Campbell & Company will be successful under all or any market conditions.
Campbell & Company continues to test and evaluate the models, as a result of which the models may be modified from time to time. As a result of such periodic modifications, it is possible that the
trading strategies used by Campbell & Company in the future may be different from the strategies presently in use, or that which were used in the past. Any modification of the models will not be subject to any requirement that Members receive
notice of the change or consent to it. There can be no assurance as to the effects (positive or negative) of any modification on the Trust’s performance. No assurance can be given that the trading strategy used or to be used by Campbell &
Company will be successful under all or any market conditions.
Market Factors May Adversely Influence the Models
Often, the most unprofitable market conditions for the Trust are those in which prices “whipsaw,” moving quickly upward, then reversing, then moving upward again, then reversing again. In such
conditions, Campbell & Company may, on the basis of its models, establish positions based on incorrectly identifying both the brief upward or downward price movements as trends, whereas in fact no trends sufficient to generate profits develop.
Overall market, industry or economic conditions, which neither the Trust nor Campbell & Company can predict or control, will have a material effect on performance.
Availability of Investment Opportunities
The business of identifying and structuring investments of the types contemplated by the Trust is specialized, and involves a high degree of uncertainty. The availability of investment opportunities
generally is subject to market conditions as well as, in some cases, the prevailing regulatory or political climate. No assurance can be given that the Trust will be able to identify and complete attractive investments in the future or that it will
be able to invest fully its subscriptions. Similarly, identification of attractive investment opportunities by Campbell & Company is difficult and involves a high degree of uncertainty. Even if attractive investment opportunities are identified
by Campbell & Company, it may not be permitted to take advantage of the opportunity to the fullest extent desired. Investment funds sponsored, managed or advised by Campbell & Company or its affiliates may seek investment opportunities
similar to those the Trust may be seeking, and none of these parties has an obligation to offer any opportunities it may identify to the Trust.
Holding Period of Investment Positions
Campbell & Company typically does not know the maximum – or, often, even the expected (as opposed to optimal) – duration of any particular position at the time of initiation (except in the case of
certain options or derivatives positions, which have pre-established expiration dates). The length of time for which a position is maintained varies significantly, based on Campbell & Company’s subjective judgement of the appropriate point at
which to liquidate a position so as to augment gains of reduce losses. There can be no assurance that the Trust will be able to maintain any particular position, or group of related positions, for the duration required to realize the expected
gains, or avoid losses, from such positions.
Futures, Forwards and Swaps
Futures, Forwards and Swaps Trading Can be Highly Volatile
Futures, forwards and other derivative prices are highly volatile and increase the amount of volatility in contrast to a direct investment in the underlying physical commodities or financial products.
Price movements of futures, forwards and other derivative contracts are influenced by such factors as: changes in overall market movements due to fluctuating supply and demand relationships; weather; government agricultural, trade, fiscal, monetary
and exchange control programs and policies; and national and international political and economic events. In addition, governments from time to time intervene in certain markets, particularly the currency and interest-rate markets.
Futures and Forwards Trading is Highly Speculative and Volatile
Futures and forwards trading is speculative, and is not intended to be a complete investment program. Futures and forwards have a high degree of price variability and are subject to occasional rapid and substantial
changes. Thus, significant amounts can be lost in a brief period of time. Futures and forwards trading is designed only for sophisticated investors who are able to bear the risk of capital loss. There can be no assurance that your account will
achieve its investment objectives. Prospective investors are cautioned that they could loss all or substantially all of their investment. Prospective investors should understand that their account’s performance can be volatile.
Futures and Forwards Trading Involves Substantial Leverage
The low margin deposits normally required in futures and forward contracts trading permit an extremely high degree of leverage; margin requirements for futures and forward contracts trading being in
some cases as little as 2% of the face value of the contracts traded. Accordingly, the Trust is able to hold positions with face values equal to several times its net assets; therefore, a relatively small price movement in a futures or forward
contract may result in immediate and substantial losses to the investor. For example, if at the time of purchase, 10% of the price of the futures or forward contract is deposited as margin, a 10% decrease in the price of the futures or forward
contract would, if the contract were then closed out, result in a total loss of the margin deposit before any deduction for brokerage commissions. The Trust’s ratio of margin to equity is typically 10% to 30%. As a result of this leveraging, even a
small movement in the price of a contract can cause major losses.
Futures and Forwards Trading May Be Illiquid
Most United States commodity exchanges limit fluctuations in futures contract prices during a single day by regulations referred to as “daily limits.” During a single trading day no trades may be
executed at prices beyond the daily limit. Once the price of a futures contract has increased or decreased to the limit point, positions can be neither taken nor liquidated. Futures interest prices have occasionally moved the daily limit for
several consecutive days with little or no trading. Similar occurrences could prevent the Trust from promptly liquidating unfavorable positions and subject the Trust to substantial losses. Also, the CFTC or exchanges may suspend or limit trading.
While daily limits reduce liquidity, they do not reduce ultimate losses, and may in fact substantially increase losses because they may prevent the liquidation of unfavorable positions. There is no limitation on daily price moves in trading
currency forward contracts.
In addition, the Trust may not be able to execute trades at favorable prices if little trading in the futures, forwards, swaps or other derivatives involved is taking place. It also is possible that
an exchange or the CFTC might suspend trading in a particular contract, order immediate liquidation and settlement of a particular futures interest, or order that trading in a particular futures interest be conducted for liquidation only. During
periods in October 1987, for example, trading in certain stock index futures was too illiquid for markets to function efficiently and was at one point actually suspended.
Forwards Trading and its Counterparty, Regulatory and Related Risks
The Trust may, but is not limited to, trading forward contracts in currencies. A forward contract is a contractual obligation to purchase or sell a specified quantity of a commodity or currency at a
specified date in the future at a specified price and, therefore, is similar to a futures contract.
Forward contracts are not traded on exchanges; rather, banks (e.g., major money center investment banks) and dealers act as principals in these over-the-counter markets. Foreign exchange swaps and
foreign exchange forwards, as well as bona fide spot foreign exchange transactions, are not subject to full regulation by the CFTC (including the clearing and platform execution mandates). Therefore, the Trust will not receive any benefit of CFTC
regulation of its trading activities in excluded foreign exchange swaps and forward transactions. The Trust faces the risk of non-performance by its counterparties to forward contracts and such non-performance may cause some or all of its gains to
remain unrealized.
Certain markets in which the Trust effects transactions may be in over-the-counter or “interdealer” markets, and also include unregulated private markets. Unlike futures contracts, the counterparty to
forward contracts is generally a single bank or other financial institution, rather than a clearing organization backed by a group of financial institutions. Furthermore, the participants in such markets are typically not subject to the same level
of credit evaluation and regulatory oversight as are members of the “exchange based” markets. This exposes investors to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over
the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the Trust to suffer a loss. Such “counterparty risk” is accentuated for contracts with longer maturities where events may intervene to
prevent settlement, or where Campbell & Company has concentrated the Trust’s transactions with a single or small group of counterparties. Campbell & Company is not restricted from dealing with any particular counterparty or from
concentrating any or all transactions with one counterparty. However, Campbell & Company seeks to minimize credit risk primarily by dealing with counterparties that it believes are creditworthy. The ability of Campbell & Company and the
Trust to transact business with any one or number of counterparties, the lack of any meaningful and independent evaluation of such counterparties’ financial capabilities and the absence of a regulated market to facilitate settlement may increase
the potential for losses by the Trust.
The Trust may trade deliverable forward contracts in the inter-bank currency market. Such deliverable forward contracts are not currently traded on exchanges; rather, banks and dealers act as
principals in these markets. As a result of Dodd-Frank, the CFTC now regulates non-deliverable forwards (including deliverable forwards where the parties do not take delivery). Changes in the forward markets may entail increased costs and result in
burdensome reporting requirements. There is currently no limitation on the daily price movements of forward contracts. Principals in the forward markets have no obligation to continue to make markets in the forward contracts traded. The imposition
of credit controls by governmental authorities or the implementation of regulations pursuant to Dodd-Frank might limit such forward trading to less than that which Campbell & Company would otherwise recommend, to the possible detriment of the
Trust.
In addition, there is no limitation on the daily price movements of forward contracts. Principals in the forward markets have no obligation to continue to make markets in the forward contracts traded.
There have been periods during which certain banks or dealers have refused to quote prices for forward contracts or have quoted prices with an unusually wide spread between the price at which they are prepared to buy and that at which they are
prepared to sell. The imposition of credit controls by governmental authorities might limit such forward trading to less than that which Campbell & Company and its affiliates would otherwise recommend, to the possible detriment of the Trust.
The Trust is a Party to Financial Instruments with Elements of Off-Balance Sheet Risk, Which May Cause the Trust to Lose All of Its Assets
The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Trust trades in
futures, forward, swaps and other derivatives and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Trust, market risk, that such
contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Trust at the same
time, and if the Trust’s trading advisor was unable to offset futures interests positions of the Trust, the Trust could lose all of its assets and the limited partners would realize a 100% loss. Campbell & Company attempts to minimize potential
market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio; however, these precautions may not be effective in limiting the risk of loss.
Foreign Exchange / Cross Rates Trading
The Trust may trade currencies through foreign exchange (“Forex” or “FX”) trading, which is the off-exchange trading of the exchange rate between two retail currency pairs. This may include cross
rates trading, which is off-exchange trading of the exchange rate between two currency pairs other than the U.S. Dollar. The risk of loss in Forex trading can be substantial. Investors should be aware that Forex transactions are not traded on an
exchange, and those funds deposited with the counterparty for Forex transactions may not receive the same protections as funds used to margin or guarantee exchange-traded futures contracts.
Swap Agreements
The Trust may enter into swap agreements. Swap agreements are privately negotiated over-the-counter derivative products in which two parties agree to exchange actual or contingent payment streams that
may be calculated in relation to a rate, index, instrument, or certain securities, and a particular “notional amount.” Swaps may be subject to various types of risk, including market risk, liquidity risk, structuring risk, tax risk, and the risk of
non-performance by the counterparty, including risks relating to the financial soundness and creditworthiness of the counterparty. Swaps can be individually negotiated and structured to include exposure to a variety of difference types of
investments or market factors. Depending on their structure, swaps may increase or decrease the Trust’s exposure to commodity prices, equity or debt securities, long-term or short-term interest rates (in the United States or abroad), non-U.S.
currency values, mortgage-backed securities, corporate borrowing rates, or other factors such as security prices, baskets of securities, or inflation rates and may increase or decrease the overall volatility of the Trust’s portfolio. Swap
agreements can take many different forms and are known by a variety of names. The Trust is not limited to any particular form of swap agreement if it determines that other forms are consistent with the Trust’s investment objective and policies. A
significant factor in the performance of swaps is the change in individual commodity values, specific interest rates, currency values, or other factors that determine the amounts of payments due to and from the counterparties. If a swap calls for
payments by the Trust, then the Trust must have sufficient cash availability to make such payments when due. In addition, if a counterparty’s creditworthiness declines, the value of a swap agreement would be likely to decline, potentially resulting
in losses to the Trust. Dodd-Frank will mandate that a substantial portion of swap transactions must be executed in regulated markets and submitted for clearing to regulated clearinghouses. While these provisions are intended in part to reduce
counterparty credit risk related to swap transactions, Dodd-Frank’s success in this regard will depend on the implementation of many rules and regulations, a process that may take several years.
These hedging techniques using swaps involve one or more of the following risks: (i) imperfect correlation between the performance and value of the instrument and the value of the Trust securities or
other objective of Campbell & Company ; (ii) possible lack of a secondary market for closing out a position in such instrument; (iii) losses resulting from interest rate, spread or other market movements not anticipated by Campbell &
Company ; (iv) the possible obligation to meet additional margin or other payment requirements, all of which could worsen the Trust’s position; and (v) default or refusal to perform on the part of the counterparty with which the Trust trades.
Furthermore, to the extent that any hedging strategy involves the use of over-the-counter swap transactions, such a strategy would be affected by implementation of the various regulations adopted pursuant to Dodd-Frank.
Credit Default Swaps
The Trust may invest in credit default swaps (“CDS”). CDS can be used to implement a trader’s view that a particular credit, or group of credits, will experience credit improvement or deterioration.
The typical CDS requires the seller to pay to the buyer, in the event that a particular reference entity experiences specified credit events, the difference between the notional amount of the contract and the value of a portfolio of securities
issued by the reference entity that the buyer delivers to the seller. In return, the buyer agrees to make periodic and/or upfront payments equal to a fixed percentage of the notional amount of the contract. The Trust may also purchase or sell CDS
on a basket of reference entities or an index. In circumstances in which the Trust is the credit default swap buyer and does not own the debt securities that are deliverable under a credit default swap, the Trust is exposed to the risk that
deliverable securities will not be available in the market, or will be available only at unfavorable prices, as would be the case in a so-called “short squeeze.” While the credit default swap market auction protocols reduce this risk, it is still
possible that an auction will not be organized or will not be successful. In certain instances of issuer defaults or restructurings (for those CDS for which restructuring is specified as a credit event), it has been unclear under the standard
industry documentation for CDS whether or not a “credit event” triggering the seller’s payment obligation had occurred. The creation of the CDS Determinations Committee in April 2009 was intended to reduce this uncertainty and create uniformity
across the market, although it is possible that the efforts of the CDS Determinations Committee will not fully meet these goals. In either of these cases, the Trust would not be able to realize the full value of the credit default swap upon a
default by the reference entity. As a seller of CDS, the Trust incurs leveraged exposure to the credit of the reference entity and is subject to many of the same risks it would incur if it were holding debt securities issued by the reference
entity. However, the Trust will not have any legal recourse against the reference entity and will not benefit from any collateral securing the reference entity’s debt obligations. In addition, in the event the CDS Determinations Committee does
not establish a cash settlement auction and identify the relevant deliverable securities, the credit default swap buyer will have broad discretion to select which of the reference entity’s debt obligations to deliver to the Trust following a credit
event and will likely choose the obligations with the lowest market value in order to maximize the payment obligations of the Trust. Given the recent sharp increases in volume of CDS trading in the market, settlement of CDS may also be delayed
beyond the time frame originally anticipated by counterparties. Such delays may adversely impact the Trust’s ability to otherwise productively deploy any capital that is committed with respect to such contracts.
Regulatory
The Current Markets are Subject to Governmental Intervention That May Be a Detriment to Your Investment; The
Dodd Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)
In response to the financial crises of 2008-2009, Dodd-Frank was enacted in July 2010. Dodd-Frank seeks to regulate markets, market participants and financial instruments that previously had been
unregulated and substantially alters the regulation of many other markets, market participants and financial instruments. Because many provisions of Dodd-Frank require rulemaking by applicable regulators before becoming fully effective, not all of
which have been finalized, and Dodd-Frank mandates multiple agency reports and studies (which could result in additional legislative or regulatory action), it is difficult to predict the ultimate impact of Dodd-Frank on the Trust, Campbell &
Company, and the markets in which they trade and invest. Dodd-Frank could result in certain investment strategies in which the Trust engages or may have otherwise engaged becoming non-viable or non-economic to implement. Dodd-Frank and regulations
adopted pursuant to the Reform Act could have a material adverse impact on the profit potential of the Trust.
The “Volcker Rule” component of Dodd-Frank materially restricts proprietary speculative trading by banks, “bank holding companies” and other regulated entities. As a result, there has been a
significant influx of new portfolio managers into private investment funds who had previously traded institutional proprietary accounts. Such influx can only increase the competition for the Trust from other talented portfolio managers trading in
the Trust’s investment sector.
Speculative Position Limits
The CFTC and the United States commodities exchanges impose 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 United States commodities exchanges. Dodd-Frank significantly expands the CFTC’s authority to impose position limits with respect to futures contracts and options on futures
contracts, swaps that are economically equivalent to futures or options on futures, and certain swaps that perform a significant price discovery function. In response to this expansion of its authority, in 2013, the CFTC proposed (a) a series of
new speculative position limits with respect to futures, options on futures and swaps on 28 so-called “exempt commodities” (which includes most energy and metals contracts) and agricultural commodities and (b) aggregation requirements with respect
to positions across accounts with common ownership or control. The CFTC’s proposals are not yet finalized (or effective). If the CFTC is successful in these proposals, the counterparties with which the Trust deals may further limit the size or
duration of positions available to the Trust. All accounts owned or managed by Campbell & Company are likely to be combined for speculative position limit purposes. The Trust could be required to liquidate positions it holds in order to comply
with such limits, 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 Trust.
Over-the-Counter Derivatives Markets
Dodd-Frank includes provisions that comprehensively regulate the OTC derivatives markets for the first time. Dodd-Frank mandates that a substantial portion of OTC derivatives must be executed in
regulated markets and be submitted for clearing to regulated clearinghouses. The CFTC has now implemented mandatory clearing rules for 4 classes of interest rate swaps and 2 classes of index credit default swaps. The CFTC will also consider
whether to propose mandatory clearing requirements for agricultural swaps, energy swaps, broad-based equity swaps, and foreign exchange non-deliverable forwards. OTC trades submitted for clearing will be subject to minimum initial and variation
margin requirements set by the relevant clearinghouse, as well as possible SEC or CFTC mandated margin requirements. OTC derivatives dealers typically demand the unilateral ability to increase the Trust’s collateral requirements for cleared OTC
trades beyond any regulatory and clearinghouse minimums. The bank regulators and the CFTC have imposed margin requirements on non-cleared OTC derivatives and new requirements that apply to the holding of customer collateral by OTC derivatives
dealers. These requirements may increase the amount of collateral the Trust is required to provide and the costs associated with providing it. OTC derivative dealers also are required to post margin to the clearinghouses through which they clear
their customers’ trades instead of using such margin in their operations, as was widely permitted before Dodd-Frank. This has and will continue to increase the OTC derivative dealers’ costs, which costs are generally passed through to other market
participants in the form of higher upfront and mark-to-market margin, less favorable trading pricing, and the imposition of new or increased fees, including clearing account maintenance fees.
With respect to cleared OTC derivatives, the Trust will not face a clearinghouse directly but rather through an OTC derivatives dealer that is registered with the CFTC or SEC to act as a clearing
member. The Trust may face the indirect risk of the failure of another clearing member customer to meet its obligations to its clearing member. Such scenario could arise due to a default by the clearing member on its obligations to the
clearinghouse, triggered by a customer’s failure to meet its obligations to the clearing member.
The CFTC now also requires certain derivative transactions that were previously executed on a bi-lateral basis in the OTC markets to be executed through a regulated futures or swap exchange or
execution facility. The SEC is also expected to impose similar requirements on certain security-based derivatives in the near future, though it is not yet clear when the parallel SEC requirements will go into effect. Such requirements may make it
more difficult and costly for investment funds, including the Trust, to enter into highly tailored or customized transactions. They may also render certain strategies in which the Trust might otherwise engage impossible or so costly that they will
no longer be economical to implement. If the Trust decides to become a direct member of one or more of these exchanges or execution facilities, the Trust would be subject to all of the rules of the exchange or execution facility, which could bring
additional risks and liabilities, and potential additional regulatory requirements.
OTC derivatives dealers are now required to register with the CFTC and will ultimately be required to register with the SEC. Dealers are subject to new minimum capital and margin requirements,
business conduct standards, disclosure requirements, reporting and recordkeeping requirements, transparency requirements, position limits, limitations on conflicts of interest, and other regulatory burdens. These requirements further increase the
overall costs for OTC derivative dealers, which costs may be passed along to market participants as market changes continue to be implemented. The overall impact of Dodd-Frank on the Trust remains highly uncertain and it is unclear how the OTC
derivatives markets will adapt to this new regulatory regime, along with additional, sometimes overlapping, regulatory requirements imposed by non-U.S. regulators.
Major OTC derivatives market participants are now also required to register with the CFTC and will ultimately be required to register with the SEC. Campbell & Company is registered as a Forex
Firm and Swap Firm with the National Futures Association and could be required to register as a major swap participant for trading in the OTC derivatives markets. Major Swap participants are also subject to new minimum capital and margin
requirements, business conduct standards, disclosure requirements, reporting and recordkeeping requirements, transparency requirements, position limits, limitations on conflicts of interest, and other regulatory burdens. These requirements may
further increase the overall costs for major swap participants. The overall impact of Dodd-Frank on Campbell & Company remains highly uncertain and it is unclear how the OTC derivatives markets will adapt to this new regulatory regime along
with additional, sometimes overlapping, regulatory requirements imposed by non-U.S. regulators.
Although Dodd-Frank requires many OTC derivative transactions previously entered into on a principal-to-principal basis to be submitted for clearing by a regulated clearinghouse, certain derivatives
that may be traded by the Trust may remain principal-to-principal or OTC contracts between the Trust and third parties entered into privately. The risk of counterparty nonperformance can be significant in the case of these over-the-counter
instruments, and “bid-ask” spreads may be unusually wide in these heretofore substantially unregulated markets. While Dodd-Frank is intended in part to reduce these risks, its success in this respect may not be evident for some time after
Dodd-Frank is fully implemented, a process that may take several more years. To the extent not mitigated by implementation of Dodd-Frank, if at all, the risks posed by such instruments and techniques, which can be extremely complex, include: (1)
credit risks (the exposure to the possibility of loss resulting from a counterparty’s failure to meet its financial obligations); (2) market risk (adverse movements in the price of a financial asset or commodity); (3) legal risks (the
characterization of a transaction or a party’s legal capacity to enter into it could render the financial contract unenforceable, and the insolvency or bankruptcy of a counterparty could preempt otherwise enforceable contract rights); (4)
operational risk (inadequate controls, deficient procedures, human error, system failure or fraud); (5) documentation risk (exposure to losses resulting from inadequate documentation); (6) liquidity risk (exposure to losses created by inability to
prematurely terminate the derivative); (7) system risk (the risk that financial difficulties in one institution or a major market disruption will cause uncontrollable financial harm to the financial system); (8) concentration risk (exposure to
losses from the concentration of closely related risks such as exposure to a particular industry or exposure linked to a particular entity); and (9) settlement risk (the risk faced when one party to a transaction has performed its obligations under
a contract but has not yet received value from its counterparty).
Institutions, such as brokerage firms, banks and broker-dealers, generally have custody of the Trust’s portfolio assets and may hold such assets in “street name.” The Trust is subject to the risk that
these firms and other brokers, counterparties, clearinghouses or exchanges with which the Trust deals may default on their obligations to the Trust. Any default by any of such parties could result in material losses to the Trust. Bankruptcy or
fraud at one of these institutions could also impair the operational capabilities or the capital position of the Trust. In addition, securities and other assets deposited with custodians or brokers may not be clearly identified as being assets of
the Trust, causing the Trust to be exposed to a credit risk with regard to such parties. The Trust generally will only be an unsecured creditor of its trading counterparties in the event of bankruptcy or administration of such counterparties. In
some jurisdictions, the Trust may also only be an unsecured creditor of its brokers in the event of bankruptcy or administration of such brokers. The Trust attempts to limit its brokerage and custody transactions to well capitalized and established
banks and brokerage firms in an effort to mitigate such risks, but the collapse in 2008 of the seemingly well capitalized and established Bear Stearns and Lehman Brothers demonstrates the limits on the effectiveness of this approach in avoiding
counterparty losses.
The Trust may effect transactions in “over-the-counter” or “interdealer” markets. The participants in such markets are typically not subject to the same level of credit evaluation and regulatory
oversight as are members of “exchange-based” markets. This exposes the Trust to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or
not bona fide) or because of a credit or liquidity problem, thus causing the Trust to suffer a loss. Such “counterparty risk” is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the Trust
has concentrated its transactions with a single or small group of counterparties. The Trust is not restricted from dealing with any particular counterparty or in the size of the exposure which the Trust may provide to a given counterparty. The
inability to make complete and “foolproof” evaluations of the financial capabilities of the Trust’s counterparties and the absence of a regulated market to facilitate settlement increases the risk to the Trust.
While Dodd-Frank is intended to bring more stability and lower counterparty risk to derivatives market by requiring exchange clearing of derivatives trades, not all of the Trust’s trades will be
subject to the clearing requirements once they generally become effective, either because the trades are grandfathered or because they are bespoke. Furthermore, it is yet to be seen whether Dodd-Frank will be effective in reducing counterparty risk
or if such risk may actually increase as a result of market uncertainty, mutuality of loss to clearinghouse members, or other reasons.
Regulatory Changes or Additional Government or Market Regulation or Actions May Alter the Operations and Profitability of the Trust
The global financial markets have in the past few years undergone pervasive and fundamental disruptions that have led to extensive and unprecedented governmental intervention. Such intervention has in
certain cases been implemented on an “emergency” basis, suddenly and substantially eliminating market participants’ ability to continue to implement certain strategies or manage the risk of their outstanding positions. In addition, as one would
expect given the complexities of the financial markets and the limited time frame within which governments have felt compelled to take action, these interventions have typically been unclear in scope and application, resulting in confusion and
uncertainty which in itself has been materially detrimental to the efficient functioning of the markets as well as previously successful investment strategies.
Considerable regulatory attention has been focused on non-traditional investment pools. Market disruptions and the dramatic increase in the capital allocated to alternative investment strategies have
led to increased governmental as well as self-regulatory scrutiny of the “hedge fund” industry in general. Certain legislation proposing greater regulation of the industry periodically is considered by Congress, the SEC, the CFTC and the governing
bodies of non-U.S. jurisdictions. It is impossible to predict what, if any, changes in the regulations applicable to the Trust, Campbell & Company, 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 Trust or the ability of the Trust to continue to implement its investment strategies, as well as require increased transparency as
to the identity of the Members.
The Trust, in particular, is dependent upon the use of leverage in implementing its investment strategy across the markets and instruments described herein. Any
regulatory limitations may have a materially adverse impact on the Trust
The futures markets are subject to comprehensive statutes, regulations and margin requirements. In addition, 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 swaps and futures
transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action. The effect of any future regulatory change on the Trust is impossible to predict, but could be substantial and
adverse.
Daily Price Fluctuation Limits Imposed by Futures Exchanges May Alter Trading Decisions for the Trust
Most U.S. futures exchanges have established “daily price fluctuation limits” which preclude the execution of trades at prices outside of the limit. Contract prices have occasionally moved the daily
limit for several consecutive days with little or no trading. If prices were to approach the level of the daily limits, these limits could cause a modification of Campbell & Company’s trading decisions for the Trust or force the liquidation of
certain futures positions. Either of these actions may not be in the best interest of the investors. From time to time, the CFTC or the exchanges may suspend trading in market disruption circumstances. In these cases, it is possible that Campbell
& Company, as trading manager, could be required to maintain a losing position that it otherwise would exit and incur significant losses or be unable to establish a position and miss a profit opportunity.
The Trust is Subject to Foreign Market Credit and Regulatory Risk
A substantial portion of Campbell & Company’s trades takes place on markets or exchanges outside the United States. From time to time, over 50% of the Trust’s overall market exposure could involve
positions taken on foreign markets. The risk of loss in trading foreign futures contracts can be substantial. Participation in foreign futures contracts transactions involves the execution and clearing of trades on, or subject to the rules of, a
foreign board of trade. Non-U.S. markets may not be subject to the same degree of regulation as their U.S. counterparts. None of the CFTC, NFA or any domestic exchange regulates activities of any foreign boards of trade, including the execution,
delivery and clearing of transactions, nor do they have the power to compel enforcement of the rules of a foreign board of trade or any applicable foreign laws. Trading on foreign exchanges also presents the risks of exchange controls,
expropriation, taxation and government disruptions.
Membership in a Swap Execution Facility
In an effort to facilitate the investment strategies employed by the Campbell & Company on behalf of the Trust, the Trust and/or Campbell & Company may become members of exchanges and/or swap
execution facilities (“SEFs”). Such membership may subject the Trust and/or Campbell & Company to a wide range of regulation and other obligations, together with associated costs. Like any other self-regulatory organization, SEFs are expected
to regularly revise and interpret their rules, and such revisions and interpretations could adversely impact the Trust. Even if the Trust opts not to trade on a SEF directly but instead through a broker, such trading may nevertheless require the
Trust to consent to the SEF’s jurisdiction as a self-regulatory organization and to be subject to the SEF’s rulebook, which could adversely impact the Trust.
The Trust is Not a Regulated Investment Company and is Therefore Subject to Different Protections Than a Regulated Investment Company
Although the Trust and Campbell & Company are subject to regulation by the CFTC, the Trust is not an investment company subject to the Investment Company Act of 1940 and Campbell & Company is
not registered as an investment adviser under the Investment Advisers Act of 1940. Accordingly, you do not have the protections afforded by those statutes which, for example, requires investment companies to have a majority of disinterested
directors and regulates the relationship between the adviser and the investment company.
Tax Risks
Investors are Taxed Based on Their Share of Trust Income and Gain
Investors are taxed each year on their share of the Trust’s income and gain, if any, irrespective of whether they redeem any Units or receive any cash distribution from the Trust. Campbell &
Company has the authority to make such distributions at any time in its sole discretion.
All performance information included in this Form 10-K is presented on a pre-tax basis; the investors (other than tax-exempt investors) who experienced such performance had to pay the related taxes
from other sources.
Tax Could be Due from Investors on Their Share of the Trust’s Ordinary Income Despite Overall Losses
Investors may be required to pay tax on their allocable share of the Trust’s ordinary income, which in the case of the Trust is the Trust’s interest income, gain on some foreign futures contracts, and
certain other investment assets, even though the Trust incurs overall losses. Capital losses of individual taxpayers can be used only to offset capital gains and, in the case of non-corporate investors, $3,000 of ordinary income each year.
Consequently, if an individual investor were allocated $5,000 of ordinary income and $10,000 of capital losses, the investor would owe tax on $2,000 of ordinary income even though the investor would have a $5,000 economic loss for the year. The
remaining $7,000 capital loss could be used in subsequent years to offset capital gain and ordinary income, but subject to the same annual limitation on its deductibility against ordinary income.
There Could be a Limit on the Deductibility of Management and Performance Fees
Although the Trust treats the management and performance fees paid to Campbell & Company as ordinary and necessary business expenses, upon an IRS audit, the Trust may be required to treat such
fees as “investment advisory fees” if the Trust’s trading activities did not constitute a trade or business for tax purposes. If the Investor’s share of expenses were deemed to be investment advisory fees, an Investor’s tax liability would likely
increase because of statutory limitations applicable to miscellaneous itemized deductions, including investment advisory fees, of individual taxpayers. In addition, upon audit, a portion of the management fees might be treated as a non-deductible
syndication cost or might be treated as a reduction in the Trust’s capital gain or as an increase in the Trust’s capital loss. If the management fees were so treated, an Investor’s tax liability would likely increase.
New Partnership Audit Rules
The recently enacted Bipartisan Budget Act of 2015 changes the rules applicable to U.S. federal income tax audits of partnerships. Under the new rules (which are generally effective for taxable years
beginning after December 31, 2017), among other changes and subject to certain exceptions, any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and any partner’s distributive share thereof) is determined, and
taxes, interest, or penalties attributable thereto are assessed and collected, at the partnership level. Consult with your tax advisor with respect to these changes and their potential impact on your investment in the Trust.
Other Risks
Terrorist Attacks, Acts of War, Natural Disasters or an Epidemic or Pandemic May Affect the Markets for the Trust’s Investment
The effects of terrorist attacks, acts of war, natural disasters or an epidemic or pandemic may materially and adversely impact the
value and performance of the Trust, the Trust’s ability to source, manage and divest investments at the most recent valuations and the Trust’s ability to achieve its investment objectives. For example, there has been a global outbreak of a
coronavirus disease (“COVID-19”), which the World Health Organization has declared a “Public Health Emergency of International Concern.” The extent of the impact to the financial performance of the Trust will depend on future developments,
including (i) the duration and spread of the outbreak, (ii) the restrictions and advisories, (iii) the effects on the financial markets, and (iv) the effects on the economy overall, all of which are highly uncertain and cannot be predicted. In
addition, the operations of the Trust may be significantly impacted, or even temporarily or permanently halted, as a result of the required office closures, government quarantine measures, voluntary and precautionary restrictions on travel or
meetings and other factors related to a public health emergency, including COVID-19’s potential adverse impact on the health of the managing operator’s personnel. If the financial performance of the Trust is impacted because of these things for
an extended period, the Trust’s investment results may be materially adversely affected.
Fees and Commissions are Charged Regardless of Profitability and are Subject to Change
The Trust is subject to substantial charges payable irrespective of profitability, in addition to performance fees which are payable based on the Trust’s profitability. Included in these charges are
brokerage fees and operating expenses. On the Trust’s forward trading, “bid-ask” spreads are incorporated into the pricing of forward contracts by the counterparties in addition to the brokerage fees paid by the Trust. It is not possible to
quantify the “bid-ask” spreads paid by the Trust because the Trust cannot determine the profit its counterparty is making on the forward transactions. Such spreads can at times be significant.
The Trust’s Service Providers Could Fail
The institutions with which the Trust trades or invests may encounter financial difficulties that impair the operational capabilities or the capital position of the Trust. A futures broker is
generally required by U.S. law to segregate all funds received from such broker’s customers from such broker’s proprietary assets. If the futures broker did not do so to the full extent required by law, the assets of the Trust might not be fully
protected in the event of the bankruptcy of the futures broker. Furthermore, in the event of the futures broker’s bankruptcies, the Trust could be limited to recovering only a pro rata share of all
available funds segregated on behalf of the futures broker’s combined customer accounts, even though certain property specifically traceable to the Trust (for example, Treasury bills deposited by the Trust with the futures brokers as margin) was
held by the futures brokers. The futures broker has been the subject of regulatory and private causes of action, as described under “The Futures Broker” section of the Private Placement Offering Memorandum.
Although the Campbell & Company regularly monitors the financial condition of the counterparties it uses, if the Trust’s counterparties were to become insolvent or the subject of liquidation
proceedings in the United States (either under the Securities Investor Protection Act of the United States Bankruptcy Code), there exists the risk that the recovery of the Trust’s assets from such counterparty will be delayed or be a value less
than the value of the assets originally entrusted to such counterparty.
Risks due to Redemption or Credit Restriction
The Trust is subject to the risk that its major institutional investors may be compelled to redeem or that the Trust’s counterparties or brokers will be required to restrict the amount of credit
previously granted to the Trust due to their own financial difficulties, resulting in forced liquidation of substantial portions of the Trust’s trading program.
There are No Independent Experts Representing Investors
Campbell & Company has consulted with counsel, accountants and other experts regarding the formation and operation of the Trust. No counsel has been appointed to represent the Investors in
connection with the offering of the Units. Accordingly, each prospective investor should consult his own legal, tax and financial advisers regarding the desirability of an investment in the Trust.
The Trust Places Significant Reliance on Campbell & Company and the Incapacity of its Principals Could Adversely Affect the Trust
Investors are not entitled to participate in the management of the Trust or the conduct of its business. Rather, the Trust is wholly dependent upon the services of the managing operator. There can be
no assurance that such services will be available for any length of time following the term of the Advisory Agreement. Furthermore, the incapacity of the managing operator’s principals could have a material and adverse effect on the managing
operator’s ability to discharge its obligations under the Advisory Agreement. However, there is no individual principal at Campbell & Company whose absence would result in a material adverse effect on Campbell & Company’s ability to
adequately carry out its advisory responsibilities.
The Trust Could Terminate Before You Achieve Your Investment Objective Causing Potential Loss of Your Investment or Disruption of Your Investment Portfolio
Campbell & Company may withdraw from the Trust upon 90 days’ notice, which would cause the Trust to terminate. Other events, such as a long-term substantial loss suffered by the Trust, could also
cause the Trust to terminate before the expiration of its stated term. This could cause you to liquidate your investments and disrupt the overall maturity and timing of your investment portfolio. If the registrations with the CFTC or memberships in
the National Futures Association of Campbell & Company or the futures broker were revoked or suspended, such entity would no longer be able to provide services to the Trust.
Transfers Could Be Restricted
Investors may transfer or assign Units only upon 30 days’ prior written notice to Campbell & Company and only if Campbell & Company is satisfied that the transfer complies with applicable laws
and would not result in adverse legal or tax consequences for the Trust. A transferee shall not become a substituted Investors without the written consent of the managing operator. See “Appendix A – Amended and Restated Declaration of Trust and
Trust Agreement.”
Restrictions on Investment by ERISA Plans, Employee Retirement Income Security Act of 1974
Campbell & Company anticipates that the underlying assets of the Trust may be considered for purposes of Title I of the Employee Retirement Income Security Act, as amended (“ERISA”), and Section
4975 of the Internal Revenue Code of 1986, as amended (the “Code”), to be assets of certain employee benefit plans and other Plans that purchase Units. Under such circumstances, the investments of the Trust and the activities of Campbell &
Company will be subject to and, in certain cases, limited by, ERISA and the Code. Accordingly, all investors should carefully read “Investment by Employee Benefit Plans” in Part Two of this Memorandum.
When considering an investment in the Trust of the assets of an employment benefit plan subject to Title I of ERISA, a fiduciary with respect to such plan should consider, among other things: (i) the
definition of “Plan assets” under section 3(42) of ERISA and the regulations issued by the Department of Labor (“DOL”) regarding the definition of Plan assets; (ii) whether the investment satisfies the diversification requirements of Section
404(a)(1) of ERISA; (iii) whether the investment satisfies the prudence requirements of Section 404(a)(1) of ERISA; and (iv) that there will be no secondary market in which such fiduciary can sell or otherwise dispose of the Units.
A Single-Advisor Trust May be More Volatile Than a Multi-Advisor Trust
The Trust is a single-advisor managed futures fund. Potential investors should understand that many managed futures funds are structured as multi-advisor funds in order to attempt to control risk and
reduce volatility through combining advisors whose historical performance records have exhibited a significant degree of non-correlation with each other. As a single-advisor managed futures fund, the Trust may have increased performance volatility
and a higher risk of loss than investment vehicles employing multiple advisors.
The Performance Fee Could Be an Incentive to Make Riskier Investments
Campbell & Company employs a speculative strategy for the Trust, and receives performance fees based on the trading profits earned by it for the Trust. Campbell & Company would not agree to
manage the Trust’s account in the absence of such a performance fee arrangement. Accordingly, Campbell & Company may make investments that are riskier than might be made if the Trust’s assets were managed by Campbell & Company that did not
require performance-based compensation.
The Trust May Distribute Profits to Investors at Inopportune Times
Campbell & Company reserves the right to make distributions of profits of the Trust to the Investors at any time in its sole discretion in order to control the growth of the assets under Campbell
& Company’s management. Investors will have no choice in receiving these distributions as income, and may receive little notice that these distributions are being made. Distributions may be made at an inopportune time for the Investors.
Potential Inability to Trade or Report Due to Systems Failure Could Adversely Affect the Trust
Campbell & Company’s strategies are dependent to a significant degree on the proper functioning of its internal computer systems. Accordingly, systems failures, whether due to third party failures
upon which such systems are dependent or the failure of Campbell & Company’s hardware or software, could disrupt trading or make trading impossible until such failure is remedied. Any such failure, and consequential inability to trade (even for
a short time), could, in certain market conditions, cause the Trust to experience significant trading losses or to miss opportunities for profitable trading. Additionally, any such failures could cause a temporary delay in reports to investors.
Failure to Receive Timely and Accurate Market Data from Third Party Vendors Could Cause Disruptions or the Inability to Trade
Campbell & Company’s strategies are dependent to a significant degree on the receipt of timely and accurate market data from third party vendors. Accordingly, the failure to receive such data in a
timely manner or the receipt of inaccurate data, whether due to the acts or omissions of such third party vendors or otherwise, could disrupt trading to the detriment of the Trust or make trading impossible until such failure or inaccuracy is
remedied. Any such failure or inaccuracy could, in certain market conditions, cause the Trust to experience significant trading losses, effect trades in a manner which it otherwise would not have done, or miss opportunities for profitable trading.
For example, the receipt of inaccurate market data may cause Campbell & Company to establish (or exit) a position which it otherwise would not have established (or exited), or fail to establish (or exit) a position which it otherwise would have
established (or exited), and any subsequent correction of such inaccurate data may cause Campbell & Company to reverse such action or inaction, all of which may ultimately be to the detriment of the Trust.
Cyber Security Issues
With the increased use of technologies such as the Internet to conduct business, Campbell & Company is susceptible to operational, information security and related risks. In general, cyber
incidents can result from deliberate attacks or unintentional events. Cyber-attacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through “hacking” or malicious software coding) for purposes of
misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on
websites (i.e., efforts to make network services unavailable to intended users). Cyber security failures or breaches by Campbell & Company, and other service providers (including, but not limited to custodians), and the issuers of securities in
which Campbell & Company invests, have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with Campbell & Company ability to calculate its net asset value, impediments to
trading, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. In addition, substantial costs may be incurred in order to
prevent any cyber incidents in the future. While Campbell & Company has established business continuity plans in the event of, and risk management systems to prevent, such cyber attacks, there are inherent limitations in such plans and systems
including the possibility that certain risks have not been identified. Furthermore, Campbell & Company cannot control the cyber security plans and systems put in place by service providers to Campbell & Company and issuers in which Campbell
& Company invests. Campbell & Company and its clients could be negatively impacted as a result.
Conflicts of Interest Exist in the Structure and Operation of the Trust
Campbell & Company has not established any formal procedures to resolve the following conflicts of interest. Consequently, there is no independent control over how Campbell & Company resolves
these conflicts which can be relied upon by investors as ensuring that the Trust is treated equitably with other Campbell & Company clients.
Campbell & Company has a conflict of interest because it acts as managing operator and sole trading advisor for the Trust. Since Campbell & Company acts as both trading advisor and managing
operator for the Trust, it is very unlikely that its advisory contract will be terminated by the Trust. The fees payable to Campbell & Company were established by it and were not the subject of arm’s-length negotiation. These fees consist of a
management fee of up to 4% (of which 2% is retained) and a 20% performance fee. Campbell & Company, as managing operator, determines whether or not distributions are made and it receives increased fees to the extent distributions are not made.
Campbell & Company has the authority to make such distributions at any time in its sole discretion.
Selling agents will be entitled to ongoing compensation as a result of their clients remaining in the Trust, so a conflict exists between the selling agent’s interest in maximizing compensation and in
advising its clients to make investment decisions in the client’s best interests.
The Value Of The Shares Will Be Adversely Affected If The Trust is Required To Make Indemnification Payments
Under the Trust’s constituent document and pursuant to the service contracts, Campbell & Company and the service providers have the right to be indemnified for any liability or expense they incur,
assuming that they have satisfied their standard of care and have not materially breached the applicable agreement(s). That means an indemnitee may require the assets of the Trust to be sold in order to cover losses or liability suffered by it with
respect to the Trust. Any sale of that kind would reduce the value of the Shares of the Trust.
Reliance on Corporate Management and Financial Reporting
Certain of the strategies which may be implemented on behalf of the Trust rely on the financial information made available by the issuers in which the Trust invests. Campbell & Company has no
ability to independently verify the financial information disseminated by the thousands of issuers in which the Trust may invest and is dependent upon the integrity of both the management of these issuers and the financial reporting process in
general. Recent events have demonstrated the material losses which investors such as the Trust can incur as a result of corporate mismanagement, fraud and accounting irregularities.
The Trust’s Fees and Expenses
The Trust is required to make substantial profits in order to avoid depletion or exhaustion of its assets from fees and expenses. In addition, the Performance Fee paid to Campbell & Company by
each Series of the Trust is based on both realized and unrealized gains and losses as of the end of the applicable period. Consequently, Performance Fees could be paid on unrealized gains that may never be realized by any of the Trust’s Series of
Units.
Compulsory Redemption of Units
Campbell & Company has the right to redeem all or any portion of the Units of any Investor, for any reason or no reason, upon not less than ten (10) days’ prior written notice to the Investor; provided, however, that the Trust may require a redemption of all or any portion of any Investor’s Units as of any date without providing any prior notice to avoid causing the assets of the Trust to be “plan
assets” within the meaning of ERISA or Section 4975 of the Code. Amounts so redeemed will be calculated and paid as provided above for voluntary redemptions.
None.
The Registrant does not use any physical properties in the conduct of its business. Its assets currently consist of futures and other contracts, cash, short-term time deposits and other fixed income
securities.
Campbell & Company is not aware of any material legal proceedings to which the Registrant or Campbell & Company is a party or to which any of their assets are subject.
Not Applicable.
PART II
Units of Beneficial Interest are not publicly traded. Units may be transferred or redeemed subject to the conditions imposed by the Amended and Restated
Declaration of Trust and Trust Agreement. As of December 31, 2019, there were 2,270 Unitholders and 95,005.038 Units of Beneficial Interest outstanding in Series A, 154 Unitholders and 13,005.349
Units of Beneficial Interest outstanding in Series B, 40 Unitholders and 3,366.350 Units of Beneficial Interest outstanding in Series D, and 268 Unitholders and 8,389.889 Units of Beneficial Interest outstanding in Series W of the Registrant.
Campbell & Company has sole discretion in determining what distributions, if any, the Registrant will make to its Unitholders. Campbell & Company has not made any distributions as of the
date hereof.
The Registrant has no securities authorized for issuance under equity compensation plans.
Dollars in thousands, except per Unit amounts
The following summarized financial information is for the years ended December 31, 2019, 2018, 2017, 2016 and 2015.
|
For the Year Ended December 31,
|
||||||||||||||||||||
|
2019
|
2018
|
2017
|
2016
|
2015
|
||||||||||||||||
|
Total Assets
|
$
|
316,236
|
$
|
345,838
|
$
|
557,246
|
$
|
774,793
|
$
|
939,508
|
||||||||||
|
Total Unitholders’ Capital
|
309,507
|
333,892
|
545,823
|
740,734
|
928,081
|
|||||||||||||||
|
Total Net Trading Gain (Loss) (includes brokerage commissions)
|
32,228
|
(33,681
|
)
|
34,258
|
(82,812
|
)
|
(18,089
|
)
|
||||||||||||
|
Net Income (Loss)
|
26,868
|
(42,882
|
)
|
16,053
|
(111,115
|
)
|
(64,565
|
)
|
||||||||||||
|
Net Income (Loss) Per Managing Operator and Other Unitholders’ Unit*
|
||||||||||||||||||||
|
Series A
|
206.88
|
(241.12
|
)
|
55.84
|
(356.40
|
)
|
(238.56
|
)
|
||||||||||||
|
Series B
|
229.60
|
(268.63
|
)
|
64.98
|
(377.21
|
)
|
(206.02
|
)
|
||||||||||||
|
Series D**
|
7.56
|
(55.90
|
)
|
38.87
|
-
|
-
|
||||||||||||||
|
Series W
|
296.97
|
(226.75
|
)
|
147.87
|
(336.84
|
)
|
(163.31
|
)
|
||||||||||||
|
Increase (Decrease) in Net Asset Value per Managing Operator and Other Unitholders’ Unit
|
||||||||||||||||||||
|
Series A
|
184.67
|
(236.45
|
)
|
65.85
|
(366.47
|
)
|
(209.95
|
)
|
||||||||||||
|
Series B
|
215.16
|
(246.07
|
)
|
85.28
|
(379.71
|
)
|
(207.47
|
)
|
||||||||||||
|
Series D**
|
75.33
|
(85.71
|
)
|
52.25
|
-
|
-
|
||||||||||||||
|
Series W
|
274.29
|
(216.72
|
)
|
131.44
|
(351.30
|
)
|
(171.60
|
)
|
||||||||||||
|
Weighted Average Number of Units Outstanding
|
||||||||||||||||||||
|
Series A
|
101,873.281
|
136,862.599
|
190,971.399
|
244,644.947
|
214,825.352
|
|||||||||||||||
|
Series B
|
13,936.620
|
20,850.911
|
30,486.440
|
40,919.198
|
45,553.446
|
|||||||||||||||
|
Series D**
|
1,923.132
|
1,054.474
|
164.537
|
-
|
-
|
|||||||||||||||
|
Series W
|
8,679.578
|
18,617.272
|
22,999.170
|
25,201.596
|
24,073.255
|
|||||||||||||||
| * |
Based on weighted average number of units outstanding during the year.
|
|
**
|
Series D Units commenced trading on October 1, 2017.
|
The following summarized quarterly financial information (unaudited) presents the results of operations for the three-month periods ended March 31, June 30, September 30 and December 31, 2019 and
2018.
|
1st Qtr.
2019
|
2nd Qtr.
2019
|
3rd Qtr.
2019
|
4th Qtr.
2019
|
|||||||||||||
|
Total Net Trading Gain (Loss) (includes brokerage commissions)
|
$
|
14,838
|
$
|
20,125
|
$
|
24,395
|
$
|
(27,130
|
)
|
|||||||
|
Net Income (Loss)
|
13,898
|
18,976
|
22,754
|
(28,760
|
)
|
|||||||||||
|
Net Income (Loss) per Managing Operator and Other Unitholders’ Unit *
|
||||||||||||||||
|
Series A
|
100.68
|
146.37
|
182.38
|
(235.82
|
)
|
|||||||||||
|
Series B
|
106.90
|
161.66
|
201.33
|
(258.23
|
)
|
|||||||||||
|
Series D
|
45.29
|
64.01
|
54.96
|
(87.20
|
)
|
|||||||||||
|
Series W
|
133.18
|
185.61
|
230.00
|
(262.10
|
)
|
|||||||||||
|
Increase (Decrease) in Net Asset Value per Managing Operator and Other Unitholders’ Unit
|
||||||||||||||||
|
Series A
|
100.41
|
145.76
|
178.01
|
(239.51
|
)
|
|||||||||||
|
Series B
|
113.23
|
162.02
|
198.18
|
(258.27
|
)
|
|||||||||||
|
Series D
|
44.07
|
62.47
|
62.39
|
(93.60
|
)
|
|||||||||||
|
Series W
|
131.35
|
184.62
|
224.89
|
(266.57
|
)
|
|||||||||||
|
Net Asset Value per Managing Operator and Other Unitholder Unit at the End of the Period
|
||||||||||||||||
|
Series A
|
2,483.75
|
2,629.51
|
2,807.52
|
2,568.01
|
||||||||||||
|
Series B
|
2,708.58
|
2,870.60
|
3,068.78
|
2,810.51
|
||||||||||||
|
Series D
|
1,010.61
|
1,073.08
|
1,135.47
|
1,041.87
|
||||||||||||
|
Series W
|
2,893.26
|
3,077.88
|
3,302.77
|
3,036.20
|
||||||||||||
|
Weighted Average Number of Units Per Period
|
||||||||||||||||
|
Series A
|
108,849.717
|
102,508.562
|
98,909.779
|
97,225.066
|
||||||||||||
|
Series B
|
15,312.285
|
14,007.921
|
13,322.219
|
13,104.057
|
||||||||||||
|
Series D
|
1,569.589
|
1,535.419
|
1,724.770
|
2,862.750
|
||||||||||||
|
Series W
|
9,241.854
|
8,665.237
|
8,422.307
|
8,388.917
|
||||||||||||
|
1st Qtr.
2018
|
2nd Qtr.
2018
|
3rd Qtr.
2018
|
4th Qtr.
2018
|
|||||||||||||
|
Total Net Trading Gain (Loss) (includes brokerage commissions)
|
$
|
(17,465
|
)
|
$
|
(7,003
|
)
|
$
|
(1,532
|
)
|
$
|
(7,681
|
)
|
||||
|
Net Income (Loss)
|
(21,009
|
)
|
(9,144
|
)
|
(3,232
|
)
|
(9,497
|
)
|
||||||||
|
Net Income (Loss) per Managing Operator and Other Unitholders’ Unit *
|
||||||||||||||||
|
Series A
|
(103.07
|
)
|
(48.51
|
)
|
(19.89
|
)
|
(63.13
|
)
|
||||||||
|
Series B
|
(112.70
|
)
|
(51.01
|
)
|
(27.76
|
)
|
(69.40
|
)
|
||||||||
|
Series D
|
(53.66
|
)
|
(11.52
|
)
|
(5.09
|
)
|
(14.62
|
)
|
||||||||
|
Series W
|
(103.67
|
)
|
(40.67
|
)
|
(5.64
|
)
|
(78.04
|
)
|
||||||||
|
Increase (Decrease) in Net Asset Value per Managing Operator and Other Unitholders’ Unit
|
||||||||||||||||
|
Series A
|
(107.58
|
)
|
(47.75
|
)
|
(20.08
|
)
|
(61.04
|
)
|
||||||||
|
Series B
|
(113.26
|
)
|
(50.45
|
)
|
(19.08
|
)
|
(63.28
|
)
|
||||||||
|
Series D
|
(41.96
|
)
|
(16.82
|
)
|
(5.22
|
)
|
(21.71
|
)
|
||||||||
|
Series W
|
(107.95
|
)
|
(42.47
|
)
|
(9.58
|
)
|
(56.72
|
)
|
||||||||
|
Net Asset Value per Managing Operator and Other Unitholders’ Unit at the End of the Period
|
||||||||||||||||
|
Series A
|
2,512.21
|
2,464.46
|
2,444.38
|
2,383.34
|
||||||||||||
|
Series B
|
2,728.16
|
2,677.71
|
2,658.63
|
2,595.35
|
||||||||||||
|
Series D
|
1,010.29
|
993.47
|
988.25
|
966.54
|
||||||||||||
|
Series W
|
2,870.68
|
2,828.21
|
2,818.63
|
2,761.91
|
||||||||||||
|
Weighted Average Number of Units Per Period
|
||||||||||||||||
|
Series A
|
154,223.168
|
145,474.670
|
129,372.124
|
118,380.433
|
||||||||||||
|
Series B
|
24,352.679
|
22,878.199
|
19,710.876
|
16,461.891
|
||||||||||||
|
Series D
|
336.849
|
1,084.928
|
1,311.521
|
1,484.598
|
||||||||||||
|
Series W
|
22,677.194
|
22,297.407
|
18,480.544
|
11,013.942
|
||||||||||||
| * |
Based on weighted average number of units outstanding during the period.
|
Introduction
The Campbell Fund Trust (the “Trust”) is a business trust organized on January 2, 1996 under the Delaware Business Trust Act, which was replaced by the Delaware Statutory Trust Act as of September
1, 2002. The Trust is a successor to the Campbell Fund Limited Partnership (formerly known as the Commodity Trend Fund) which began trading operations in January 1972. The Trust currently trades in the U.S. and international futures and forward
markets under the sole direction of Campbell & Company, LP, the managing operator of the Trust. Specifically, the Trust trades in a diverse array of global assets, including global interest rates, stock indices, currencies and commodities.
The Trust is an actively managed account with speculative trading profits as its objective.
Effective August 31, 2008, the Trust began offering Series A, Series B, and Series W Units. The units in the Trust prior to that date became Series B Units. Series B Units are only available for
additional investment by existing holders of Series B Units. Effective August 1, 2017, the Trust began offering Series D units.
As of December 31, 2019, the aggregate capitalization of the Trust was $309,506,621 with Series A, Series B, Series D and Series W comprising $243,974,281, $36,551,654, $3,507,300 and $25,473,386,
respectively, of the total. The Net Asset Value per Unit was $2,568.01 for Series A, $2,810.51 for Series B, $1,041.87 for Series D and $3,036.20 for Series W.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the
estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Trust’s significant accounting policies are described in detail in Note 1 of the Financial
Statements.
The Trust records all investments at fair value in its financial statements, with changes in fair value reported as a component of realized and change in unrealized trading gain (loss) in the
Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, estimates are involved in determining fair value in the absence of an active market closing price (i.e., forward contracts which are
traded in the inter-bank market).
Capital Resources
The Trust will raise additional capital only through the sale of Units offered pursuant to the continuing offering, and does not intend to raise any capital through borrowing. Due to the nature of
the Trust’s business, it will make no capital expenditures and will have no capital assets which are not operating capital or assets.
The Trust generally maintains 60% to 75% of its net asset value in cash, cash equivalents or other liquid positions in its cash management program over and above that needed to post as collateral
for trading. These funds are available to meet redemptions each month. After redemptions and additions are taken into account each month, the trade levels of the Trust are adjusted and positions in the instruments the Trust trades are added or
liquidated on a pro-rata basis to meet those increases or decreases in trade levels.
Liquidity
Most United States futures exchanges limit fluctuations in futures contracts prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” During a
single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Futures prices have
occasionally moved to the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Trust from promptly liquidating unfavorable positions and subject the Trust to substantial losses which could
exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the Trust may not be able to execute futures trades at favorable prices, if little trading in such contracts is taking
place. Other than these limitations on liquidity, which are inherent in the Trust’s futures trading operations, the Trust’s assets are expected to be highly liquid.
The entire offering proceeds, without deductions, will be credited to the Trust’s bank, custodial and/or cash management accounts. The Trust meets margin requirements for its trading
activities by depositing cash and U.S. government securities with the futures broker and the over-the-counter counterparty. This does not reduce the risk of loss from trading activities. The Trust receives all interest earned on its assets. No
other person shall receive any interest or other economic benefits from the deposit of Trust assets.
Approximately 10% to 30% of the Trust’s assets normally are committed as required margin for futures contracts and held by the futures brokers, although the amount committed may vary
significantly. Such assets are maintained in the form of cash or U.S. Treasury Bills in segregated accounts with the futures brokers pursuant to the Commodity Exchange Act and regulations thereunder. Approximately 5% to 15% of the Trust’s
assets are deposited with the over-the-counter counterparty in order to initiate and maintain forward contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter
counterparty is registered as a futures commission merchant. These assets are held either in U.S. government securities or short-term time deposits with U.S.-regulated bank affiliates of the over-the-counter counterparty.
The managing operator deposits the majority of those assets of the Trust that are not required to be deposited as margin with the futures brokers and over-the-counter counterparties in a custodial
account with Northern Trust Company. The assets deposited in the custodial account with Northern Trust Company are segregated. Such custodial account constitutes approximately 60% to 75% of the Trust’s assets and are invested directly by PNC
Capital Advisors, LLC (“PNC”). PNC is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. PNC does not guarantee any interest or profits will accrue on the Trust’s assets in the custodial account. PNC
invest the assets according to agreed upon investment guidelines that first preserve capital, second allow for sufficient liquidity, and third provide a yield beyond the risk-free rate. Investments can include, but are not limited to, (i) U.S.
Government Securities, Government Agency Securities, Municipal Securities, banker acceptances and certificates of deposits; (ii) commercial paper; (iii) short-term investment grade corporate debt; and (iv) Asset Backed Securities.
The Trust occasionally receives margin calls (requests to post more collateral) from its futures brokers or over-the-counter counterparty, which are met by moving the required portion of the
assets held in the custody account at Northern Trust Company to the margin accounts. In the past three years, the Trust has not needed to liquidate any position as a result of a margin call.
The Trust’s assets are not and will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested in or loaned to Campbell & Company or any
affiliated entities.
Off-Balance Sheet Risk
The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Trust trades
in futures and forward contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Trust, market risk, that such contracts
may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Trust at the same time,
and if the Trust’s trading advisor was unable to offset futures interests positions of the Trust, the Trust could lose all of its assets and the Unitholders would realize a 100% loss. Campbell & Company, the managing operator (who also acts
as trading advisor), minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30% however, these precautions may not be effective in
limiting the risk of loss.
In addition to market risk, in entering into futures and forward contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Trust. The counterparty for
futures contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any
financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is
normally backed by a consortium of banks or other financial institutions.
In the case of forward contracts, which are traded on the interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group
of financial institutions; thus there may be a greater counterparty credit risk. Campbell & Company trades for the Trust only with those counterparties which it believes to be creditworthy. All positions of the Trust are valued each day at
fair value. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Trust.
Disclosures About Certain Trading Activities that Include Non-Exchange Traded Contracts Accounted for at Fair Value
The Trust invests in futures and forward currency contracts. The market value of futures (exchange-traded) contracts is determined by the various futures exchanges, and reflects the settlement
price for each contract as of the close of the last business day of the reporting period. The fair value of forward (non-exchange traded) contracts is extrapolated on a forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) of the
last business day of the reporting period.
Results of Operations
The returns for the years ended December 31, 2019, 2018 and 2017 for Series A were 7.75%, (9.03)% and 2.58%, Series B were 8.29%, (8.66)% and 3.09%, Series D (commenced trading on October 1, 2017)
were 7.79%, (8.15)% and 5.23% and Series W were 9.93%, (7.28)% and 4.62%, respectively.
During the years ended December 31, 2019, 2018 and 2017, the Trust accrued management fees in the amounts of $12,792,990, $16,863,539, and $24,073,819, respectively, and paid management fees in
the amounts of $12,901,756, $17,499,643, and $24,786,294, respectively. During the years ended December 31, 2019, 2018 and 2017, the Trust accrued performance fees in the amounts of $21,165, $0, and $3,207, respectively, and paid performance
fees in the amounts of $21,165, $3,207, and $0.
2019 (For the Year Ended December 31)
Of the 7.75% return for the year ended December 31, 2019 for Series A, approximately 10.78% was due to trading gains (before commissions) and approximately 2.59% due to investment income, offset
by approximately (5.62)% due to brokerage fees, management fees, offering costs and operating costs borne by Series A.
Of the 8.29% return for year ended December 31, 2019 for Series B, approximately 10.78% was due to trading gains (before commissions) and approximately 2.59% due to investment income, offset by
approximately (5.08)% due to brokerage fees, management fees and operating costs borne by Series B.
Of the 7.79% return for the year ended December 31, 2019 for Series D, approximately 10.78% was due to trading gains (before commissions) and approximately 2.59% due to investment income, offset
by approximately (5.58)% due to brokerage fees, management fees, performance fees, offering costs and operating costs borne by Series D.
Of the 9.93% return for the year ended December 31, 2019 for Series W, approximately 10.78% was due to trading gains (before commissions) and approximately 2.59% due to investment income, offset
by approximately (3.44)% due to brokerage fees, management fees, offering costs and operating costs borne by Series W.
An analysis of the 10.78% gross trading gains for the Trust for the year by sector is as follows:
|
Sector
|
% Gain (Loss)
|
|||
|
Commodities
|
(8.12
|
)%
|
||
|
Currencies
|
(3.76
|
)%
|
||
|
Interest Rates
|
12.88
|
%
|
||
|
Stock Indices
|
9.78
|
%
|
||
|
10.78
|
%
|
|||
The Trust, which consists of trend following, systematic macro, and short-term strategies, was lower in January. Losses came from commodity and foreign exchange positions, while fixed income and stock holdings
produced partially offsetting gains for the Trust. Commodity trading generated losses for the Trust in January. Short energy positions suffered as the complex rebounded from multi-year lows on back of bullish fundamental developments and a
general increase in risk sentiment. Short grain positioning also detracted as the sector traded higher amid adverse weather conditions in key growing regions, and some optimism surrounding the latest round of trade talks between the US and
China. Foreign exchange positioning produced additional losses, with gains in long emerging market currencies (versus the USD) being overshadowed by losses in the developed markets, where we were net short against the greenback. The USD was
broadly weaker on the month with the notable themes being the US government shutdown and a less hawkish FOMC. Short positioning on several of the commodity currencies produced the largest losses as those currencies rallied on back of the
increase in prices across the petroleum complex during the month. Interest rate positions from long-dated instruments provided offsetting profits during the month. Long positioning on bonds issued by Australia, Canada, and France generated
the largest gains. The shift in central bank rhetoric to a more dovish tone caused global fixed income markets to rise to start the year. Stock index positions also produced some offsetting gains during the month. Despite a myriad of global
headwinds, stock markets recovered from their December sell-off, encouraged by a resumption of trade talks, dovish Fed takeaways, and the start of US Q4 earnings that mostly met expectations. Shorter term strategies moved from short to long,
flipping net Trust positioning in time to capitalize on rallying equity markets, especially in the Hang Seng index.
The Trust showed a profit in February with gains coming from commodity and stock index positions, while interest rate holdings produced some partially offsetting losses. Foreign Exchange (FX) had little P&L
impact on the Trust during the month. Commodity trading generated profits for the Trust in February. Short positioning across the grain subsector produced some of the best sector gains. Wheat extended a sell-off to a ten-month low following
a year-over-year improvement in winter crop conditions. A long position on palladium led gains in the precious metals subsector. Palladium rose to a record high amid tight supplies and steadily rising demand for the rare metal. Some
partially offsetting losses came from the industrial metal subsector. Short positioning on copper and nickel suffered as prices rose, driven by signs of progress on US / Chinese trade talks and amid tight supplies. Stock index positions
produced additional gains. Long positioning on European, US, and Asia-Pacific indices produced the best profits within the sector. European stock indices benefitted from signs of progress for a successful Brexit (the UK divorce from the
European Union) with the Euro Stoxx 50 and the French CAC 40 producing some of the greatest sector returns. Asia-Pacific stocks rallied amid signs that a US / Chinese trade deal was also making positive progress. President Trump delayed a
March 1st tariff increase on China as he cited “significant progress” on the trade talks. Some of the biggest gains within the region came from Australia and Hong
Kong. Interest rate positions from both long-dated and short-dated instruments provided some partially offsetting losses during the month. Long positioning on the United Kingdom (UK) gilt (10-year note) contributed the largest losses to the
sector. Signs of positive progress on Brexit and hawkish comments from the UK central bank head Mark Carney conspired to send gilt prices down sharply from near-term highs. In the foreign exchange sector, gains in developed market currencies
were almost equally offset by losses in the emerging market currencies, leading to negligible P&L for currencies overall. Long US dollar positioning was profitable against developed market currencies but losses in the emerging markets,
especially from the Brazilian real and the South African rand, mostly negated any FX sector gains.
The Trust showed a profit in March with gains coming from interest rate and stock index holdings. Foreign exchange positions produced some partially offsetting losses while commodities had little impact on the
Trust. Interest rate positions in long- and short-dated instruments spearheaded Trust gains in March. More dovish than expected commentary from central bankers, growing global growth concerns, and persistently weak economic data ignited a
sharp rally in bonds worldwide. Long positioning on the UK gilt provided the biggest gain as investors sought safe havens amidst Brexit gridlock. Net long positioning in US bonds generated additional gains after the FOMC scaled back projected
interest-rate increases this year to zero and said they would end the drawdown of the central bank bond holdings in September. One of the most discussed bond headlines this month was the inversion of the US yield curve (3-month bills and
10-year note) for the first time since the global financial crisis. Long positioning on a variety of global stock indices also added to the positive monthly result. Stock index returns ebbed and flowed on the various themes of stalling global
economy growth, dovish central bank rhetoric, US-China trade talks, and Brexit. Some of the best monthly stock index gains were found in Europe and the United States. Foreign exchange positioning on developed FX markets drove the sector’s
losses during the month. The Trust started the month long the Canadian dollar (versus the USD) which ultimately weakened after a worse than expected Canadian GDP release. Small gains in the emerging market currencies helped offset some of the
losses. Commodity holdings produced mixed results in March. Long energy positions detracted as upside momentum in the complex stalled alongside a pause in global risk sentiment. Precious metals also registered a negative contribution to the
Trust, primarily from a long palladium position. After hitting new all-time highs, palladium prices plummeted in the waning days of the month as slowing global economic growth sparked demand worries. Short grains holdings provided offsetting
gains as the complex sold-off into month-end following a bearish USDA grain report.
The Trust showed a profit in April, with gains coming from stock index and commodity positions, while interest rate and foreign exchange holdings produced some partially offsetting losses during the month. Stock
index positions produced the best Trust gains. Long positioning on European and Asia-Pacific indexes generated the largest profits within the sector. Global stock indexes generally produced strong gains during April. Those gains were driven
by dovish statements from several major central banks, signs of improving economic growth from China, some better-than-expected economic releases from the United States, and amid mostly robust Q1 corporate earnings reports. Commodity trading
also generated profits for the Trust in April. Short positioning across the grain subsector produced some of the best sector gains driven by a stronger US dollar and ample global supply expectations. Soybeans traded to a 6-month low while
wheat fell to a 6-week low during the month. Long positioning on the energy subsector also added to gains. The subsector benefited from a combination of broad demand for global risk assets and increasing concerns over an undersupplied
market. Some partially offsetting losses came from the industrial metals subsector. Long positioning in zinc and copper led losses as the complex suffered its biggest monthly decline on a year-to-date basis. Base metals faced headwinds from
a stronger US dollar and climbing inventory stockpiles. Interest rate positions from both long-dated and short-dated instruments provided some partially offsetting losses during the month. Long positioning on the United Kingdom gilt (10-year
note) and short sterling (90-day bill) contributed the largest losses to the sector. A 6-month Brexit extension sent UK fixed income prices lower as traders liquidated safe-haven positions as the threat of a “hard” UK separation from the
European Union (EU) diminished. In the foreign exchange sector, losses were generated in the emerging market (EM) currencies. The trading strategy failed to successfully navigate some choppy price action in the South African rand (against the
US dollar) which contributed more than half of the monthly losses within the EM FX sector.
The Trust showed a loss in May, with losses coming from stock index and commodity positions, while interest rate and foreign exchange holdings produced some partially offsetting gains during the month. Stock
index positions produced the largest Trust losses. Global stock indexes generally saw steep sell-offs during the month and long positioning on global indexes generated losses within the sector, particularly across Europe and in the United
States. Those losses were driven by a sharp escalation of trade tension between the US and both China and Mexico, signs that global growth is decelerating, and as the inverted US Treasury yield curve signaled a higher-than-normal recession
risk. Commodity trading also generated losses for the Trust in May. Short positioning across the grain subsector produced the worst sector losses as heavy rains across the Midwest prevented a considerable amount of crop planting in the US.
Weekly USDA crop progress reports painted a bullish outlook for prices, especially for corn, which rose sharply to a near three-year high. Long holdings on the energy subsector also added to losses. The energy complex suffered amid weakening
demand and as US inventory levels rose to a 22-month high. Interest rate positions from both long-dated and short-dated instruments provided some partially offsetting gains during the month. Long positioning on 10-year notes from Australia and
the United Kingdom were two of the best performing holdings. Australia’s central bank indicated that interest rate cuts were likely in the coming months sending their notes sharply higher (interest rates fell). In the UK, the Brexit impasse
became more uncertain as Prime Minister May stepped down and the future leadership of Britain became less clear. Flight to safety flows benefitted the UK gilt. In the foreign exchange sector, gains were generated in the developed market and
emerging market currencies. A short position on the Australian dollar drove gains in the developed FX subsector as that currency sold-off amid some weaker than expected economic data releases and dovish comments from the Governor of the
Reserve Bank of Australia. A short position on the Chilean peso proved profitable in the EM subsector as that currency weakened on trade angst and weaker copper prices.
The Trust showed a profit in June with gains coming from stock index and interest rate positions, while foreign exchange and commodity holdings produced some partially offsetting losses during the month. Stock
index positions produced the largest Trust profits. Global stock indices bounced back sharply from May’s steep sell-off. Long positioning across most global indexes benefited from signs that major central banks stand ready to provide new
stimulus to slowing global economies. Fed Chairman Powell at the June FOMC meeting strongly hinted that rate cuts are coming and ECB President Draghi stated that “in the absence of improvement” in inflation data, “additional stimulus will be
required.” Interest rate positions from both long-dated and short-dated instruments provided additional gains during the month. Long positioning in Australia, the United States, Japan, and Europe all benefited from the possibility of renewed
central bank easing. Early in the month, the Reserve Bank of Australia became one of the first G10 central banks to actually cut interest rates amid sluggish economic growth and a decline in real estate prices in the country, and then strongly
hinted that additional cuts might be warranted. In the foreign exchange sector, losses were generated in the developed market currencies. A short position on the Norwegian krone (versus the US dollar) led sector losses. The Norges Bank bucked
the dovish central bank trend and actually hiked interest rates during the month. The hike marked the third increase over the past nine months amid a surge in oil investments, low unemployment, and inflation running above the central bank’s
target. Commodity trading provided some small losses for the Trust in June. Industrial metals were the worst performing sub-sector. A short holding on nickel suffered on the back of US dollar weakness and mounting optimism over a Trump-Xi
trade meeting on the sidelines of the G-20 summit near month-end. Some partially offsetting gains were seen in long energy holdings. A long position on gasoline profited after a massive fire shut-down one of the East Coast’s largest
refineries, crimping supply and sending gas prices sharply higher.
The Trust showed a profit in July with interest rate positions from long-dated instruments providing the best gains during the month. Long positioning, especially in Europe and Australia, benefited from mounting
global growth concerns, escalating fears over a “hard” UK Brexit from the EU, and ongoing uncertainty over the US/Chinese trade war. This confluence of headwinds worked to keep major global central banks in accommodation mode which has been
supportive of most global bond markets (higher prices and lower interest rates). Most notably, the US FOMC cut interest rates on the last day of the month and the European Central Bank has given clear indications that it expects to provide new
stimulus in September. In the foreign exchange sector, gains were generated in the developed market currencies. Short positions on the euro, Swedish krona, British pound, and Norwegian krone (all long against the US dollar) provided some of the
best profits. US economic data has proven to be more resilient than many other regions of the globe to the benefit of the dollar. Concerns over a “hard” Brexit in the UK increased after hardliner Boris Johnson was elected as Prime Minister. The
pound was the worst performing G10 currency (against the US dollar) during the month. Stock index positions produced additional Trust profits. Long positions in the United Kingdom and Australia were two of the most profitable positions in the
sector during July. Stocks in both export-heavy countries rallied strongly as falling currency values in their respective countries fueled gains in companies linked to export activity. Commodity trading also provided some gains for the Trust in
July. Short positioning on the grains and softs sub-sectors benefitted from the stronger US dollar and some improving growing conditions. Long positioning on gold and silver profited from flight-to-safety flows amid heightened global
uncertainty. Some partially offsetting losses were experience in the industrial metals sub-sector as choppy price action during the month proved challenging.
The Trust showed a profit in August, with interest rate positions from long-dated and short-dated instruments provided the best gains during August. Long positioning, especially in Europe, Australia, Japan, and
the US benefited from an escalation of trade tensions between the US and China which heightened global growth concerns. Global bond yields sank sharply as safe-haven demand drove bond prices higher. In addition to the above-mentioned growth
concerns, markets had plenty to fret about including a growing likelihood of a no-date (aka “hard”) UK Brexit from the EU, civil unrest in Hong Kong, and an inverted US yield curve which could be signaling a looming US recession. Commodity
trading also provided some gains for the Trust during the month. Short holdings on grains and softs were two of the best performing sub-sectors. Corn futures sank in value after US government reports sparked concerns about oversupply. Cotton
prices fell amid the widening trade war which dampened demand expectations. Some partially offsetting losses were experienced in the energy sub-sector as choppy price action proved challenging for our trading systems to profitably navigate.
Stock index positions contributed losses to the portfolio during August. Long positions in the UK and Australia were two of the biggest losing positions within the sector. Global stocks mostly dropped during the month amid the expanding trade
war and generally weaker than expected economic data outside the US. A short position on the Hong Kong Hang Seng index provided some partially offsetting gains as civil unrest and threats of Chinese intervention unnerved investors which helped
our bearish position. In the foreign exchange sector, losses from the emerging markets (EM) overwhelmed gains from the developed markets. Long positioning on EM currencies, such as the Brazilian real and South
African rand, suffered after a landslide result from the Argentinian primary election. A possible return to left-wing populism sparked a sharp sell-off in the Argentine peso and the fear quickly spilled over into other EM currencies.
The Trust showed a loss in September, with losses coming from interest rate and commodity positions, while stock index holdings produced some partially offsetting gains for the portfolio. Foreign exchange
holdings had little impact on the portfolio during the month. Interest rate positions from both short-dated and long-dated instruments provided losses during September. Long positioning, especially in Australia and Europe, contributed the
largest losses to the sector as progress on the US-Chinese trade talks overshadowed the US political situation. European fixed income markets took an additional leg lower after the ECB’s hawkish rate cut and commentary which emphasized fiscal
policy over additional monetary stimulus. Partially offsetting those losses were gains from short positions on the US 10 year and 30 year Treasury bonds. Commodity trading produced additional losses for the portfolio during the month. Short
positioning in some energy markets suffered after the petroleum complex initially spiked higher following the September 14th rebel attacks on a Saudi Arabian oil
field and processing facility. In the softs, a short sugar holding incurred losses as the commodity was boosted by signs of tightening supplies. Additional losses were produced from our short grain holdings. The grain markets rose as
potential purchases of US agricultural goods by China were said to be in focus in discussions between the countries’ trade representatives. Foreign exchange positions had little net P&L impact to the portfolio during September. Gains in
our emerging market positions were overwhelmed by a short position on the Australian dollar. The Aussie currency moved higher on back of the improvements in US-Chinese trade talks and the Australian central bank pausing their monetary policy
easing measures. Long global stock positioning provided the portfolio with some partially offsetting gains. Stock indexes closed higher in September but ebbed and flowed throughout the month as the markets focused on better US-Chinese trade
headlines, improving US macro data, geopolitical concerns, and expectations for more central bank policy support. The best monthly stock index gains were found in Europe.
Losses in October were from foreign exchange, interest rate, commodity, and stock index positions as the Trust’s foreign exchange
holdings contributed the largest declines during the month. Losses were dominated by short positions in the developed market currencies (versus long the USD), specifically in the British pound, and Australian and New Zealand dollars. The
US dollar was broadly weaker during the month amid a US interest rate cut and as risk-on flows were fueled by improving sentiment around both US-China trade relations and the Brexit outlook. The British pound rallied throughout the month on
back of Brexit-related enthusiasm. The Australian and New Zealand dollars benefited from the generally positive progress on US-China trade negotiations. Interest rate positions from both short-dated and long-dated instruments contributed
additional losses. Long positioning in Japan, Australia, and Europe all suffered amid improving risk sentiment driven by signs that the US and China were making concrete advancements with “Phase One” of the trade deal. Progress towards an
orderly United Kingdom exit from the European Union also helped drive investors out of fixed income and into riskier assets which hurt the Trust’s rate positioning. Commodity trading also produced losses for the Trust during October. The
energy sub-sector was the main detractor as a short position on natural gas suffered amid cooler than expected temperatures in the US, which sent prices sharply higher. In addition, choppy price action within the petroleum complex proved
challenging for our trading systems to profitably navigate. Some partially offsetting gains were achieved in the precious metals, meats, and grains sub-sectors. Global stock index trading was also a drag on the Trust during the month.
Short-term strategies experienced losses in the United Kingdom’s FTSE 100 index as they were whipsawed by a sharp sell-off early in October, followed by a recovery later in the month. Some partially offsetting gains were seen from long
positioning on US and Japanese stock indices which rose driven by the risk-on tailwinds and better than expected earnings reports seen during the month. Losses in the UK overwhelmed any gains experienced in other regions of the world.
The Trust had a gain in November led by stock index, foreign exchange, and interest rate positions while commodity holdings created some partially
offsetting losses for the portfolio. Global stock index trading produced some of the best gains for the Trust during the month. Long positioning across most global stock indexes proved profitable as equities generally moved higher. Investors
were driven to deploy sidelined cash amid positive US-China “phase one” trade deal expectations, traction from the global monetary policy pivot, Fed and ECB balance sheet expansion, and some signs of global growth stabilization. In the
foreign exchange sector, gains were generated in the developed market and emerging market currencies. A short position on the Australian dollar drove gains in the developed FX subsector as that currency sold-off amid weaker than expected
employment data and expectations for easier monetary policy in the foreseeable future. A short position on the Chilean peso proved profitable in the emerging market subsector. What started as a “national strike” in Chile’s capital city
quickly developed into rioting and significant social unrest across the country, causing a sharp sell-off in their local currency. Interest rate positions contributed to profits with gains in long-dated bonds overwhelming losses in
short-dated notes. The UK parliament voted in favor of a December general election which calmed Brexit jitters and prompted UK 10-year bonds to sell off, creating profits for our short positioning. Partially offsetting losses came from long
US 2-year Treasury note holdings which slumped on the back of improving trade talks. Commodity holdings contributed the largest declines to the Trust during the month. Losses were dominated by the energy and industrial metal sub-sectors.
Choppy price action within the petroleum complex proved challenging for our trading systems to profitably navigate. The industrial metal sub-sector detracted as long nickel and zinc positions suffered losses. Nickel trended lower throughout
the month as concerns over tight supply eased, while zinc fell on increasingly bearish fundamentals.
The Trust generated losses in December with its interest rate, foreign exchange, and commodity positions, while stock index holdings created some partially offsetting gains for the Trust. The interest rate sector
generated some of the largest monthly losses. Long positioning on both long-dated and short-dated instruments suffered as prices fell (yields rose) as safe-haven assets were sold due to a resurgent risk-on environment driven by positive
progress on a US-China trade agreement. A long position on the Australian 10-year note generated the largest losses within the sector as that instrument sold-off throughout the month. Foreign exchange trading was also a major detractor to the
Trust during December. Short positions on the Norwegian krone and Australian dollar (both versus long US dollar) suffered amid an improvement in risk-on sentiment. A cooling of trade tensions between the US and China helped to fuel monthly
gains for both of these so-called “commodity currencies” which hurt the Trust’s short positioning. Some partially offsetting gains were found in the emerging FX sub-sector. A long position on the Brazilian real (versus short US dollar)
benefitted from the same risk-on dynamic. Commodity holdings contributed small additional losses during the month. Short positioning on the grain markets, most notably a short on soybeans, were hurt by progress on a new US-Chinese trade accord
where China agreed to purchase large quantities of US crops which sent prices higher. Mostly offsetting gains were generated by the energy sub-sector. Long positioning on Brent and crude produced some of the best profits as those products
benefitted from lower inventory levels, some rising geopolitical risks, and a weaker US dollar. Global stock index trading produced the only gains for the Trust during December. Long positioning across most global stock indexes proved
profitable as equities generally moved higher during the month. Diminished trade tensions, supportive central bank policies, and dampened risk related to Brexit all provided a tailwind for stocks to close out the decade.
2018 (For the Year Ended December 31)
Of the (9.03)% return for the year ended December 31, 2018 for Series A, approximately (5.87)% was due to trading losses (before commissions) and approximately (5.14)% due to brokerage fees,
management fees, offering costs and operating costs, offset by approximately 1.98% due to investment income earned by Series A.
Of the (8.66)% return for year ended December 31, 2018 for Series B, approximately (5.87)% was due to trading losses (before commissions) and approximately (4.77)% due to brokerage fees,
management fees and operating costs, offset by approximately 1.98% due to investment income earned by Series B.
Of the (8.15)% return for the year ended December 31, 2018 for Series D, approximately (5.87)% was due to trading losses (before commissions) and approximately (4.26)% due to brokerage fees,
management fees, offering costs and operating costs, offset by approximately 1.98% due to investment income earned by Series D.
Of the (7.28)% return for the year ended December 31, 2018 for Series W, approximately (5.87)% was due to trading losses (before commissions) and approximately (3.39)% due to brokerage fees,
management fees, offering costs and operating costs, offset by approximately 1.98% due to investment income earned by Series W.
An analysis of the (5.87)% gross trading losses for the Trust for the year by sector is as follows:
|
Sector
|
% Gain (Loss)
|
|||
|
Commodities
|
(2.00
|
)%
|
||
|
Currencies
|
3.47
|
%
|
||
|
Interest Rates
|
1.79
|
%
|
||
|
Stock Indices
|
(9.13
|
)%
|
||
|
(5.87
|
)%
|
|||
The Trust showed a profit in January as gains came from foreign exchange, stock index, and interest rate holdings. Commodity positions showed some losses. Foreign exchange positioning, in both
developed and emerging FX markets, generated gains during January. The Trust was predominately positioned short the US dollar against other traded currencies and benefitted from a weaker greenback during the month. The weakness can be
attributed to a few different themes, including expected hawkish central bank policy shifts outside the US as growth exceeds expectations, trade tensions, and US deficit concerns. The best gains came from long positioning on the British pound,
Norwegian krone, and euro all versus short the US dollar. Long positioning on global stock indices also drove profits for the Trust. Most global stock indices welcomed 2018 with robust gains driven by a variety of factors. A synchronized
upswing of global economic growth, stronger than expected corporate earnings results, and a major tailwind from the recently passed tax reform in the US all drove equities higher. The so-called “fear of missing out” dynamic only intensified
the demand for equity exposure. The best profits were generated in the United States and across Asia, specifically in Hong Kong and Taiwan. Interest rate positions, from long-dated and short-dated bond markets, created additional gains for the
Trust. Short positioning on US markets, specifically the 10-year and 5-year notes along with 90-day Eurodollar and 2-year notes, drove a bulk of the profits in the sector. US yields marched higher throughout the month as bond prices dropped
amid expectations that the US Federal Reserve will continue its gradual interest rate policy tightening, as US inflation expectations continue to firm against a positive economic backdrop. Commodity holdings produced losses during the month.
Profits from long positioning on precious and industrial metals and energy markets were overwhelmed by losses from short grain holdings. The weaker US dollar and stronger economic environment helped the metal and energy longs while strong
export sales data hurt the grain shorts.
The Trust declined in February due to losses from stock index, commodity, and foreign exchange holdings. Fixed income positions showed partially offsetting gains. Long positioning on global stock
indices drove losses for the Trust. After extending the long-term rally to start 2018, global equity markets spiked lower in the first half of the month. The sell-off was led by US stocks as markets experienced a sharp increase in
volatility. While crowded equity positions sold off on profit-taking, the VIX (a measure of volatility on the S&P 500) had its largest ever daily climb on February 5th. The largest Trust loss came out of the US, specifically on the short
VIX contract. Commodity holdings produced additional losses. The biggest commodity sub-sector losses were found within the energy markets as long positioning across the complex suffered on the back of increasing US supplies. Additionally,
short grain positions generated losses as those markets rallied on strong export sales activity and weather concerns in key growing regions. Long precious metal positions also produced losses amid the stronger US dollar, firmer inflation, and
quicker Fed tightening expectations. Foreign exchange positioning, in both developed and emerging FX markets, generated losses during February. After the recent trend of a weakening US dollar, the Trust was positioned short the USD against
all of our traded currencies and suffered from a broad correction in the greenback during the month. The reaction from the FX markets to the equity sell-off early in the month was relatively muted, and the market instead focused on higher US
yields and heightened inflation expectations. Interest rate positions created some offsetting gains for the Trust. Short positioning on US markets drove the bulk of the profits in the sector. After global fixed income markets rallied on the
risk-off trade early in February, Treasuries saw a greater correction than other government bond markets. US yields ultimately moved higher on the month amid expectations that the Federal Reserve will continue its path of tightening, while
inflation expectations continue to firm against a positive economic backdrop.
March for the Trust was comprised of gains from commodity holdings while stock index and foreign exchange positions showed partially offsetting losses. Interest rate positions had little impact
on the Trust during the month. Commodity holdings produced the best gains during March. Long positioning on the crude complex within the energy sub-sector generated profits. Geopolitical concerns around the US potentially pulling out of the
Iran nuclear deal, bullish inventory data, and speculation that the Organization of Petroleum Exporting Countries (“OPEC”) might extend existing production cuts all combined to push energy prices higher during the month. Mixed positioning
across the softs sub-sector proved profitable in March as well. A short sugar position gained amid ongoing global surplus concerns while a long cocoa holding also experienced profits as output worries from the Ivory Coast lifted prices. Long
positioning on global stock indices produced some losses for the Trust. Holdings in Australia, Singapore, Hong Kong, Japan, and the US contributed to some of the worst performance within the sector. Fear over a potential global trade war,
tightening financial conditions after the US Federal Reserve raised interest rates, and concern over additional turnover among senior members of President Trump’s inner circle all put pressure on global equity markets during the month. Foreign
exchange positioning on developed FX markets drove the sector’s losses during March. A late month rally in the US dollar produced losses from short dollar positions. The largest loss came from short US dollar versus a long euro holding.
Dampening of concerns around a global trade war and quarter-end flows into the greenback both helped to boost the currency in the waning days of the month. Positioning on emerging market currencies produced almost no P&L effect for the
Trust during March. Interest rate positions contributed a negligible P&L impact for the Trust. Gains from long-term markets were offset by losses in short-term markets leaving the sector nearly unchanged for the month.
The Trust had losses in April which came from foreign exchange and commodity positions while fixed income and stock index holdings produced some partially offsetting gains for the Trust. Foreign
exchange positioning, in both developed and emerging FX markets, generated losses in April. After the recent trend of a weakening US dollar, the Trust was positioned short the US dollar against most of our traded currencies and suffered from a
broad correction in the greenback. Early in the month, FX markets focused more on trade frictions and geopolitical tension but as those concerns eased, the market instead looked to higher US interest rates and heightened inflation
expectations, causing a US dollar rally. Commodity holdings produced additional losses during April. The biggest sub-sector detractor was found within the industrial metals complex. Short positioning on aluminum suffered when the commodity
pushed higher on supply worries following Russian sanctions by the White House. Energy and soft commodity holdings produced partially offsetting gains. Long positioning across the crude complex generated profits as the sub-sector rose to
multi-year highs on supply disruptions. Interest rate positions, from long-dated and short-dated bond markets, created gains for the Trust. Short positioning on US markets, specifically the 10-year and 5-year notes along with Eurodollar and
2-year notes, drove profits in the sector. US bond prices fell and yields trended higher with the 10-year note yield piercing the widely scrutinized 3% level intra-month. Firming inflation expectations and the rebound in the US dollar
provided support to yields. Long positioning on several stock indices produced additional gains as global stock markets rose in April. Reduced tariff tensions, strong US earnings, and eased geopolitical concerns on the Korean peninsula
provided a tailwind for equities during the month. Additionally, European stocks were supported after the European Central Bank (“ECB”) steered away from any surprises during their April meeting.
Losses in May came from all four asset classes traded by the Trust – Interest Rates, FX, Commodities, and Stock Indices. Interest rate positions generated some of the largest losses for the Trust
during May. Long positioning on the Italian 10-year note suffered amid a sharp sell-off due to political turmoil in the country which sparked speculation that Italy might leave the European Union. That same turmoil sent US interest rate
markets higher due to safe-haven buying which hurt the Trust as it was positioned short across the entire US interest rate curve in anticipation of further FOMC rate hikes later this year. Foreign exchange positioning, in both developed and
emerging FX markets, also generated losses during the month. A long position on the British pound (versus short US dollar) declined in value as the ongoing BREXIT impasse, weaker UK economic data, and fading Bank of England rate-hike
expectations all conspired to push the currency lower. A long position on the Turkish lira added to sector losses as economic and political woes in that country sent the EM currency to record lows against the dollar. Commodity holdings
produced additional losses as well. A short sugar position suffered as the soft commodity advanced as Brazilian supply concerns boosted prices amid a trucker strike in the country. Other sub-sector losses were experienced in the grains,
meats, and precious metals. The energy sub-sector, however, provided some partially offsetting gains. Long positioning across the crude complex benefitted as prices generally stayed in the uptrend that began almost one year ago. Long
positioning on a variety of global stock indices produced some good profits for the Trust early in the month as most world indices experienced gains. Unfortunately, later in May, the political concerns that flared in Italy and renewed trade
tensions between the US and China triggered a sharp reversal in prices, especially in Europe and Asia, which resulted in losses for some of the holdings. A long position on the Italian stock index was one of the worst performing markets for
the sector.
Gains in June came from all four asset classes traded by the Trust – FX, Interest Rates, Commodities, and Stock Indices. Foreign exchange positioning generated some of the strongest gains during
the month. While the positive returns were dominated by our short developed market positions (versus long the USD), we also saw gains across various emerging market currencies as well. The US dollar saw choppy trading early in June but
ultimately continued the uptrend from the first two months of the second quarter. The DXY dollar index hit fresh 2018 highs and the greenback finished the month stronger versus the majority of our tradeable currencies. The back and forth
headlines on a potential global trade war, coupled with dovish policies outside of the US, proved to be the major macro themes driving foreign exchange markets during the month. Interest rate positions generated additional gains for the Trust
during June. Short positioning in US markets, specifically the 90-day Eurodollar and 2-year notes, created the bulk of fixed income gains as yields rose (prices fell) on the back of a 25 basis point FOMC rate hike, hawkish US Fed commentary,
and a higher-than-expected projection for two additional US rate hikes this year. Policy divergence between the Fed and other central banks, such as the ECB and the Bank of Japan, benefitted our positioning. Commodity holdings produced small
additional profits as well. A short corn position experienced strong profits as the grain fell to multi-month lows amid above-average crop progress and on concerns that trade tensions between the US and China could hurt US exports. Long
energy positions produced profits after a larger-than-expected reduction in US oil inventories. Long positioning on a variety of global stock indices added slightly to the positive monthly result. Stock index returns ebbed and flowed on the
numerous headlines surrounding trade tensions between the US and her trading partners. Some of the best monthly stock index gains were found in Australia, Canada, and the United States.
Losses in July came from commodities, FX and interest rates, while stock indices provided some partially offsetting gains. Commodity holdings produced some of the largest monthly losses for the
Trust. Long energy positions declined as the complex fell from multi-year highs amid a myriad of bearish developments including global trade tensions and climbing output from OPEC. Short grain positions suffered as the agricultural complex
rallied sharply sparking a short squeeze amid supply concerns. Long positioning on the industrial metals also created losses due to a sell-off created by fears over a global trade war and related concerns about future demand from China.
Foreign exchange positioning generated additional losses during the month. Short commodity currency holdings (versus long US dollar) produced losses for the Trust as those markets rose as trade war fears dampened somewhat in the second half of
the month. Short European foreign exchange positioning (versus long US dollar) also experienced losses, most notably from the Swedish krona which rallied after the Riksbank (Sweden’s central bank) turned more hawkish amid stronger economic
data in that country during the month. Interest rate positions were also a drag on the Trust during July. Long positioning in Europe and the APAC region suffered as bond investors grew more concerned that global central banks are beginning to
slowly withdraw stimulus with an eye towards higher interest rates in the future. Short positioning across much of the US interest rate curve provided some partially offsetting gains as US fixed income prices fell with other global bond
markets. Long positioning on a variety of global stock indices added some partially offsetting gains to the Trust during the month. Most stock indices enjoyed a bullish tailwind from a stronger-than-expected second quarter earnings season
which eclipsed the uncertainty caused by on-again, off-again international trade tensions.
Profits in August came from commodities and FX while interest rates and stock indices provided some partially offsetting losses during the month. Commodity holdings produced some of the largest
monthly gains for the Trust. Short grain positions profited as the sub-sector sold off amid trade turmoil, beneficial weather, and higher yield estimates. Long energy holdings across the crude complex experienced gains as looming US sanctions
on Iran, which are expected to cripple the nation’s oil exports, as well as larger than expected US inventory draws, fueled prices higher. The soft commodity sub-sector also added gains to the bottom-line, led by a short coffee holding.
Coffee prices were pressured to a 12-year low amid a weaker Brazilian real and record harvest forecasts in Brazil. Foreign exchange positioning generated additional profits during the month. Long US dollar positions, against both developed and
emerging market currencies, generated the gains. A short New Zealand dollar holding (versus long US dollar) experienced some of the greatest gains as weaker economic data and a dovish central bank caused the kiwi to sell-off. In emerging
markets, a short holding on the South African rand (versus long US dollar) provided profits as expectations for further increases in US interest rates continued to put pressure on emerging market currencies. Interest rate positions were a drag
on the Trust during August. Short positioning on US and United Kingdom fixed income markets suffered amid flight-to-safety buying and short-covering. Mounting concerns over the stability of emerging markets, especially in countries such as
Argentina and Turkey, fueled demand for the relative safety of fixed income instruments as potential contagion fears spread. Long positioning on a variety of global stock indices also detracted from the monthly gains of the Trust. European and
Asia long holdings generated most of the losses. Ongoing global trade tensions linked with uncertainty over BREXIT negotiations in the UK, and weaker than expected tech earnings, in Asia pressured those regions lower.
The Trust declined in September due to losses from FX and stock index positions, while commodity and fixed income holdings produced offsetting gains for the Trust. Foreign exchange positioning, in
both developed and emerging markets, generated losses in September. After the recent trend of a strengthening US dollar and emerging market weakness, the Trust was positioned long the US dollar against most of our traded currencies and
suffered from a correction in the greenback. Early in the month, FX markets focused more on trade frictions and geopolitical tension but those concerns gradually eased and emerging market currencies saw their first monthly gain since March.
Stock index holdings produced additional losses for the Trust. Long positioning on a variety of indices suffered from choppy markets that were whipsawed by global trade concerns between the US and her major economic partners. Balancing losses
were gains seen from the Nikkei, which posted its best month in a year. Japanese shares were helped by a weaker yen which acted as a tailwind to exporters and a government which may be willing to make a trade deal. Interest rate positions from
short US fixed income markets created gains for the Trust during the month. US bond markets fell and yields rose due to firming inflation data, a hike by the US Federal Reserve, and the decreasing risk of emerging market contagion. Providing
smaller offsetting losses were our long positions on the long-dated European bond markets. Commodity holdings produced additional offsetting gains for the Trust during the month. The largest sub-sector gains were found in energies as long WTI
and Brent oil positions profited. Oil prices rose on the potential for refinery disruptions from tropical storms and fears of a supply crunch from looming US-lead sanctions on Iran, outweighing the bearish effects of escalating disputes over
global trade.
Stock index holdings generated steep losses for the Trust during October as long positioning on a variety of global indices suffered as most world stocks sold-off sharply. A myriad of negative headwinds for
global equities contributed to the sudden risk-off tone including peak earnings concerns, tighter financial conditions, trade-war fears, decelerating Chinese economic growth, the strong US dollar, waning benefits from US tax reform,
geopolitical tensions on several fronts, a slowdown in corporate buyback activity ahead of Q3 earnings reports, and a weakening US housing market. Commodity holdings caused additional losses for the Trust during October. The energy and softs
sub-sectors produced the worst results. Long positioning on the petroleum complex sold-off in sympathy with global stocks. In the softs, a short position on coffee produced losses as that commodity rose about 10% during the month, fueled by
Brazilian real strength that triggered a bout of short covering. The grains sub-sector provided some offsetting gains as short holdings profited as the complex traded lower during the month amid the stronger US dollar. Foreign exchange
positioning, in both developed and emerging markets, generated some partially offsetting gains in October. Long positioning on the US dollar, the highest yielding G10 currency, profited as key European currencies stumbled following renewed
BREXIT-related concerns and some disappointing economic data in the region. In the G10 basket of currencies, only the Japanese yen outperformed the US dollar as safe-haven buying benefitted the yen over the dollar. Interest rate positions from
long German and Japanese markets created additional partially offsetting gains. Safe-haven demand pushed fixed income prices up (yields fell) which boosted the Trust’s long holdings, leading to a positive sector outcome during October.
In November, losses came from foreign exchange, fixed income, and stock index positions, while commodity holdings produced some partially offsetting gains for the Trust. Foreign exchange positioning, in both
developed and emerging markets, generated the largest losses in November. Long positioning on the US dollar against most of our traded currencies proved to be a headwind for the Trust. After having one of its best months in two years in
October, the US dollar saw choppy trading throughout the month of November. A potential shift in US FOMC interest rate policy, trade war headlines, and a softening US inflation outlook helped prevent the dollar from a continuation of its
broader move higher. Interest rate positions from short US 2-year notes and short US 90-day Eurodollars led to sector losses. Short-dated fixed income markets rallied in the US (yields fell) as several dovish speeches by US FOMC members,
including Chairman Powell, indicated that the Fed might be closer to pausing US interest rate hikes than the market previously expected. Stock index positions also detracted during the month. The Trust held a mix of long and short positioning
across the traded universe of global indices. Most global indices experienced a choppy month as traders weighed a mix of news related to trade wars, US Fed policy, global economic growth, and BREXIT. Some small gains were found in North
America, but more than offsetting losses were realized in Europe and Asia. Commodity holdings produced some partially offsetting gains for the Trust during November, with the energy sub-sector realizing the best results. Long positioning on
natural gas proved profitable as colder than expected temperatures in the US set-off a rally that led to a massive short-squeeze, sending prices higher by almost 40% during the month. A short on gasoline was also profitable as the petroleum
complex continued its recent sell-off. Some partially offsetting losses were seen in a short soybean position as hopes for a truce in the US-Chinese trade war sent prices higher.
Profits in December were seen across all major asset classes traded - foreign exchange, commodities, interest rates, and stock indices. Foreign exchange positioning, mostly from developed markets, generated some
robust gains in December. Short positioning on several of the so-called commodity currencies, primarily the Australian dollar and Canadian dollar (all versus long the US dollar), produced the best gains. The Canadian dollar sold off in
sympathy with the meltdown in prices across the petroleum complex during the month. The Aussie dollar fell in value as China, a major export market for Australian commodities, reported weaker than expected economic data, generating concern
about future demand. Commodity holdings also produced solid gains for the Trust during December, with the softs, grains, and industrial metals sub-sectors realizing the best results. Short positioning on cotton profited as prices fell due to
concerns surrounding a recent slowdown in export sales activity. A short holding on soybeans proved profitable as prices fell amid a slowdown in US exports due to the ongoing US trade dispute with China. Short positioning on aluminum also
produced profits from falling prices fueled by a barrage of weaker than expected economic data out of China. Interest rate positions from short-dated instruments provided additional profits during the month. Long positioning on short-term
notes issued by the US, Europe, Canada, and the United Kingdom all generated gains. These positions benefitted from flight-to-safety flows seen during December as investors aggressively sold stocks and sought the relative safety that fixed
income instruments provide. Stock index positions also added to gains during December. Short positioning on several global indices generated profits as most global stocks experienced a steep sell-off. A myriad of headwinds sent stocks reeling
including higher US interest rates, signs of a global economic slowdown, ongoing tensions between the US and China over trade policies, and a partial US government shutdown fueled by bipartisan tensions.
2017 (For the Year Ended December 31)
Of the 2.58% return for the year ended December 31, 2017 for Series A, approximately 6.70% was due to trading gains (before commissions) and approximately 1.15% due to investment income, offset by
approximately (5.27)% due to brokerage fees, management fees, offering costs and operating costs borne by Series A.
Of the 3.09% return for the year ended December 31, 2017 for Series B, approximately 6.70% was due to trading gains (before commissions) and approximately 1.15% due to investment income, offset by
approximately (4.76)% due to brokerage fees, management fees and operating costs borne by Series B.
Of the 5.23% return for the year ended December 31, 2017 for Series D, which commenced trading on October 1, 2017, approximately 6.92% was due to trading gains (before commissions) and
approximately 0.19% due to investment income, offset by approximately (1.88)% due to brokerage fees, management fees, performance fees, offering costs and operating costs borne by Series D.
Of the 4.62% return for the year ended December 31, 2017 for Series W, approximately 6.70% was due to trading gains (before commissions) and approximately 1.15% due to investment income, offset by
approximately (3.23)% due to brokerage fees, management fees, service fees, offering costs and operating costs borne by Series W.
An analysis of the 6.70% gross trading gains for the Trust for the year by sector is as follows:
|
Sector
|
% Gain (Loss)
|
|||
|
Commodities
|
(5.04
|
)%
|
||
|
Currencies
|
(5.05
|
)%
|
||
|
Interest Rates
|
(4.29
|
)%
|
||
|
Stock Indices
|
21.08
|
%
|
||
|
6.70
|
%
|
|||
FX and commodity losses offset gains in stock indices and led to a down January as losses came from foreign exchange, commodity, and interest rate positions while stock index holdings produced some partially
offsetting gains. Foreign exchange (FX) produced some of the largest losses during the month. Positioning within FX was broadly long the US dollar versus most other major currencies. Following the election of Donald Trump, the US dollar
strengthened and our trading systems generally aligned positioning with that momentum. However, January saw a reversal of this trend as investors pared back their bullish bets on the greenback amid worries that President Trump was focusing
more on protectionism than on pro-growth economic policies. Our FX holdings suffered as a result of this broad reversal in the US dollar. Commodity holdings added to the January losses. Within the energy sub-sector, long positioning on
gasoline produced losses amid bearish inventory data. Short soybean holdings, part of the grains sub-sector, experienced losses due to a weakening US dollar and flood conditions in Argentina. In the softs sub-sector, a short on coffee saw
losses due to a stronger Brazilian real and a downgrade to Brazil’s output forecast. Some partially offsetting gains came from the industrial metals sub-sector. Long positioning on zinc, copper, and aluminum all saw gains amid a combination
of bullish fundamentals, especially from China, and some supply disruptions. Interest rate holdings also produced losses. Long holdings on the German 10-year note saw declines as bond prices fell amid rising inflation in the Eurozone.
Inflation reached a 4-year high and approached the ECB’s stated 2% target. Stock index holdings contributed some offsetting gains. Long holdings across our universe of global stock indices benefited from a continuation of the rally that
started with the election of Trump and his expected reflationary policies. Concerns over President Trump’s Executive Order limiting some immigration into the US capped gains late in the month as some investors became unnerved by the action.
Gains in stock indices, FX, and interest rates led to a profitable February as profits came from stock indices, foreign exchange, and interest rate positions while commodity holdings produced some partially
offsetting losses for the Trust. Stock index holdings contributed some of the strongest gains to the Trust. Long holdings across the Trust’s universe of global stock indices benefited from generally better than expected economic data. The
Bloomberg US indicator of economic surprises reached its strongest level since 2012. Solid fourth quarter 2016 corporate earnings reports also helped to fuel the rally, along with a steadily improving US labor market. Stock markets continued
to look past the new Trump administration’s lack of policy implementation details and focused more on the potential benefits that tax reform, deregulation, and infrastructure spending might provide to global economies. Foreign exchange (FX)
produced some additional gains as the Trust’s models took advantage of the mixed performance among the developed and emerging FX markets. Long positioning on higher-yielding currencies, such as the South African rand which rallied over 3% in
February, proved profitable. A short position on the euro also showed a gain when it weakened on the back of French election concerns in the EU. Interest rate holdings also produced profits. Long positioning on longer-dated instruments within
Germany provided some of the best gains. German 5-year and 10-year notes both rallied on a flight to quality move as investors grew more concerned about the spring French Presidential election. Marine Le Pen, the head of the far-right French
Front National Party who has threatened to try to pull France out of the EU if elected, rose in the polls during the month. Commodity holdings modestly detracted from the February gains for the Trust. Profits from precious metals (mostly from
silver) and industrial metals (mostly from aluminum) were more than offset by losses in the other sub-sectors. Grains were one of the worst performing sub-sectors as a short position on wheat suffered as the market rose to a 7-month high amid
tight global ending stock projections.
Mixed performance across the asset classes traded led to a down March as losses came from interest rate, foreign exchange, and commodity positions while stock index holdings produced some partially offsetting
gains. Interest rate holdings produced some of the largest losses during the month. Long positioning on instruments within Germany sold off on higher EU inflation readings and as investors grew more comfortable that anti-EU political populism
in France and the Netherlands was stalling. Short positioning within the US was hurt when fixed income instruments reversed the recent downtrend mid-month amid a less hawkish Federal Open Market Committee (“FOMC”) message communicated after
their decision to hike interest rates on March 15th. Foreign exchange produced some additional losses as our models failed to successfully navigate a choppy month of price action for the US dollar. For example, long positioning on the New
Zealand dollar (kiwi) suffered early in the month as that currency weakened against the US dollar leading up to the mid-month FOMC meeting which was widely expected to be hawkish. Our models then flipped to short the kiwi only to see the
currency begin to strengthen when the US dollar sold off on the more dovish than expected message delivered by the Federal Reserve. Commodity holdings modestly detracted from the Trust during March. Some of the largest monthly losses came
from the energy, precious metal, industrial metal, and meat sub-sectors. Partially offsetting gains were found in the soft commodity and grain sub-sectors, with some of the best profits coming from sugar and wheat. Stock index holdings
contributed the strongest profits to the Trust during the month. Some of the best gains were found via long positions on European stock indices which benefited from the ongoing global reflation trade and dampening concerns around anti-EU
political populism in the region. Our models also saw success in Asia as long positioning within Australia, Hong Kong, and Taiwan proved profitable as ongoing improvements in the Chinese economy, linked with enduring hopes for US tax reform
and infrastructure spending, supported shares around the globe.
April gains came from stock index, foreign exchange, and interest rate holdings while commodities produced some partially offsetting losses for the Trust. Stock index holdings contributed the strongest profits to
the Trust during the month. Global stock markets generally shook off new tensions with North Korea and a US cruise-missile strike on targets in Syria. A market-friendly French election outcome, above-trend US earnings growth, and movement on
a number of policies by the White House all provided a positive offset to the worrisome news. Long positioning on global stock indices benefitted from the gains shown by equities during the month with some of the best profits coming from the
United States and Hong Kong. Foreign exchange holdings added to the Trust gains during April. A short position on the Canadian dollar (versus the US dollar) benefitted as the loonie fell in value after President Trump announced a planned
tariff on softwood lumber imports from Canada and also threatened to withdraw from the North American Free Trade Agreement (NAFTA). Some partially offsetting losses were seen from a short on the euro (versus the US dollar) when currency
markets cheered the French election outcome and sent the euro sharply higher late in the month. Interest rate positions produced some additional profits. Long positioning on 10-year notes in Canada and Japan saw some of the best monthly gains
within the sector as yields fell in those countries which sent bond prices higher. Commodity holdings produced losses during the month. Long positioning on crude suffered when that market saw a price drop as record US crude stockpiles began to
raise doubts about OPEC’s ability to curtail a global supply glut. Long holdings on the industrial metals showed losses when an unwind of the global reflation trade pushed commodity prices lower. Some gains were found in long positioning on
live cattle which saw sharp price gains amid supply concerns following declines in slaughter estimates and a drop in cold storage inventories.
May showed losses caused by foreign exchange and commodity positions, while stock index and interest rate holdings produced partially offsetting gains for the Trust. Foreign exchange holdings produced some of the
largest losses during May. Long positioning on the US dollar against most developed currencies drove the decline. An ongoing unwind of the Trump-induced reflation-trade, linked with some mixed US economic data and generally stronger European
data, conspired to send the greenback lower during the month. The political turmoil that gripped Washington DC added to the US dollar angst while a soothing of political tensions in Europe, due to the election of Emmanuel Macron in France,
helped support European currencies. Commodity holdings also produced losses during the month. Long positioning on natural gas suffered when that market saw a price drop as mild weather in the US reduced demand and as a new trade agreement with
China is expected to encourage US drillers to produce more of the commodity. A short cocoa position suffered amid flood conditions and unrest in the Ivory Coast which sent prices higher. The grains produced some partially offsetting gains as
a short soybean position profited from a sell-off in that market due to continued concerns surrounding increased South American planting expectations and steady US planting progress. Long holdings on global stock indices contributed some of the
strongest profits to the Trust. Some of the best gains were seen in Hong Kong and the US as technology stocks performed particularly well. Improving global growth, linked with still-accommodative central banks and ongoing hope the Trump
administration will ultimately get tax reform and infrastructure spending passed, kept the buy-the-dip mentality firmly in place. Interest rate positions produced additional profits. Long positioning on 10-year notes in Canada, Australia, and
Germany produced gains as central banks in those regions indicated they planned to remain patient with their accommodative policies.
The Trust showed a loss in June led down by Interest Rate Holdings as losses came from interest rate, commodities and foreign exchange positions, while stock index holdings had little impact on the Trust’s profit
& loss (P&L) during the month. Interest rate positions produced the largest losses for the Trust during June. Long positioning on European, Australian, United Kingdom, and Canadian interest rate notes were some of the worst performing
markets within the sector for the Trust. Late in the month, Mario Draghi, President of the European Central Bank (ECB), gave a speech at the opening of the ECB’s Forum on Central Banking which heightened expectations for monetary policy
tapering in Europe. In subsequent days, several other major central banks, such as the Bank of England (BOE) and the Bank of Canada (BOC), also delivered more hawkish messages. The US has already embarked on a series of interest rate hikes
and the Federal Open Market Committee (FOMC) has indicated that more hikes are likely to come. The specter of an end to ultra-loose monetary policy on both sides of the Atlantic triggered a widespread sell-off in global fixed income markets
which sent global yields higher and had a detrimental impact on the Trust. Commodity holdings produced additional losses during June. Some of the worst losses came from short positioning on wheat which rose amid declines in crop conditions,
strong export sales, and a weaker US dollar. Partially-offsetting gains were found in short energy positions as the crude complex saw a broad-based sell-off. Short soft commodity holdings benefitted from a decline fueled by ample supply
expectations. Foreign exchange markets also contributed to losses this month. Long holdings on the US dollar against the Canadian dollar was one of the worst performing FX positions. The loonie appreciated about 4% versus the US dollar as the
BOC kick-started the theme of policy normalization which led to losses. Long holdings on global stock indices ended the month showing little impact on the Trust. Early month gains were given back late in June as investors were unnerved by the
global rise in rates which pushed many markets down from recent highs.
The Trust showed a gain in July led by foreign exchange and stock index positions, while commodity and interest rate holdings produced partially offsetting losses during the month. Foreign exchange positions
produced some of the strongest monthly gains for the Trust. Broad-based US dollar weakness during July was the result of expectations that the US Federal Reserve would have to pause their recent path of higher interest rates due to weaker
inflation readings for the US economy. In addition, the unpredictability of the Trump administration and the general inability of the US Congress to make progress on any substantive policy priorities weighed on the US currency. Some of the
best gains were found in long positioning on the Australian dollar, euro, Canadian dollar, and Norwegian krone (all versus short US dollars). Long holdings on global stock indices also contributed to profits. Some of the best returns were
found in Hong Kong, the United States, India, and the Netherlands. Second quarter earnings reports were generally stronger than expected and a less hawkish US Federal Reserve both provided a tailwind for stocks. Equities saw a period of
unusually low volatility with the S&P VIX index touching an all-time low during July. Commodity holdings produced some of the largest losses during July. A short soybean holding drove losses in the grains sub-sector as the market rallied
amid lowered crop conditions. A short position on silver was hurt amid higher demand and a weaker US dollar which conspired to send the price of the precious metal higher. In the softs sub-sector, a coffee short suffered as that market
advanced to a 3-month high amid the weaker dollar and falling expectations for the Brazilian crop. Small offsetting gains were found in the energy sub-sector where a long on gasoline benefited from higher prices as crude inventories showed a
contraction during the month. Interest rate positions produced some smaller losses for the Trust. Choppy price action was difficult for the trading systems to navigate as rate markets grappled with changing central bank messaging and a
consolidation of the sharp sell-off seen in June.
The Trust showed a gain in August led by interest rate and commodity holdings, while foreign exchange and stock index positions produced some partially offsetting losses during the month. Interest rate positions
produced the best gains for the Trust. Long positioning on German and Japanese long-term interest rate notes contributed some of the best sector gains. Early in the month, a spike in demand for safe-haven assets drove bond prices higher amid
new threats by North Korea to launch missiles at the US territory of Guam. Later in the month, bonds benefitted again when North Korea launched a missile that flew over Japan, triggering a new round of safety-seeking trades. Commodity holdings
produced some additional profits during August. Long positioning on copper and zinc experienced gains on the back of strengthening Chinese demand and improving macro conditions. Short wheat positions also produced profits as those markets
sold-off amid steady harvest progress and improved crop ratings. The Trust experienced some partially offsetting losses in the energies, precious metals, and meats sub-sectors. Foreign exchange positions produced losses for the Trust. Long
positioning on the New Zealand dollar (versus the US dollar) suffered when that country’s central bank took a more dovish tone in the monetary policy statement they issued early in August. The head of their central bank, Graeme Wheeler, then
continued to jaw-bone down the currency in speeches later in the month. Long positioning on the British pound (versus the US dollar) also caused losses when that currency fell in value as UK economic data lagged Europe and prospects for higher
UK interest rates diminished. Global stock indices also contributed to losses during the month. Short positioning on the S&P 500 Volatility Index (also known as the VIX) produced losses for the Trust as that index shot up more than 30%
amid the North Korean missile threats early in August. Some partially offsetting gains were found in a long holding on the Hang Seng Index in Hong Kong which continued its strong year-to-date uptrend.
September shows losses from foreign exchange, commodity, and interest rate holdings, while stock index positions produced some partially offsetting gains during the month. Foreign exchange positions produced
losses for the Trust. Short US dollar positioning against a variety of developed market and emerging market currencies drove the Trust declines. The US dollar began to strengthen post the September 20th Federal Open Market Committee (FOMC)
interest rate meeting. On balance, the FOMC communication was more hawkish than expected. Later in the month, several FOMC members reinforced the hawkish rhetoric which cemented expectations for one more interest rate hike in 2017 which
fueled the US dollar higher, hurting the Trust. Commodity holdings produced additional losses during September. The biggest sub-sector losses were found within the industrial metals complex. Long positioning on copper and nickel suffered due
to the stronger US dollar and amid several bearish developments in China. Long positioning on gasoline also led to losses when that market sold-off as the impact from Hurricane Harvey on the Gulf Coast refinery infrastructure was less severe
than originally expected. Interest rate positions created further losses for the Trust. Long positioning on German government notes produced some of the largest losses within the sector. German notes fell in tandem with US notes as a
reflation trade fueled by President Trump’s tax overhaul plan generally pushed global yields higher. Global stock indices contributed some partially offsetting gains for the Trust. Long positioning in Japan, the United States, and continental
Europe produced some of the best gains. A weaker yen helped boost shares in Japan. In the US, shares traded higher as prospects for tax reform trumped two major hurricanes and threats from North Korea. A still accommodative European central
bank and the reelection of Chancellor Angela Merkel in Germany kept a strong tailwind behind stocks in that region.
The Trust showed gains in October from stock index, commodity, and interest rate holdings, while foreign exchange positions produced some partially offsetting losses during the month. Long positioning on global
stock indices drove some of the strongest gains for the Trust during the month. A synchronized upswing in global growth, earnings recovery, and still-supportive global monetary policy have been the key tenets of a fundamental narrative that
has boosted stocks this year. All three dynamics were on display during October. Global economic data was generally better-than-expected, as were third quarter corporate earnings reports. Most global central banks continued to maintain a
dovish bias. The European Central Bank (ECB) announced a “dovish taper” to their quantitative easing program that was well received by global markets. Traction in Washington DC around US tax reform provided an added tailwind for equity
prices. Commodity holdings produced some additional profits during October. A long position on Brent crude produced some of the best gains within the energy sub-sector. A combination of ongoing production cuts from OPEC and supply disruptions
combined to push prices higher. Long positioning on copper, nickel, and zinc produced gains as industrial metal prices rose amid bullish dynamics emanating from China. Interest rate positions added to the gains for the Trust. Long holdings
on sovereign European notes benefitted when the ECB monetary policy announcement was more dovish than expected which pushed the securities higher as yields fell. Tensions in Spain around Catalonia’s bid for independence also drove
flight-to-safety buying in the instruments. Foreign exchange positions contributed some partially offsetting losses for the Trust. Short US dollar positioning (against a variety of currencies) suffered amid a broad-based rise in the greenback
during the month. The possibility for tax reform in the US linked with expectations for yet another interest rate hike from the Federal Reserve in December helped to boost the US currency to three-month highs.
November gains came from stock indices, interest rates, and foreign exchange, while commodity positions produced some partially offsetting losses. Long positioning on global stock indices drove the strongest
gains for the Trust during the month with the US, Hong Kong, and Japan producing some of the best returns. Positive developments out of Washington DC regarding US tax reform proved to be a major tailwind for many indices, as was a
stronger-than-expected third quarter corporate earnings season. European indices produced some partially offsetting losses during the month as a stronger euro and some regional political angst produced underperformance from those markets.
Interest rate positions provided small gains to the Trust. Gains in Australia, France, Japan, and Italy were partially offset by losses in the US, Germany, and the United Kingdom. Trendless, range bound price action was seen across most of
the global interest rate markets traded within the Trust, leading to subdued profits. Foreign exchange positions contributed some additional profits. A long holding on the euro (versus the US dollar) was one of the best performing positions.
The euro rose in value against the US dollar amid steadily improving economic fundamentals in the euro-zone as evidenced by Germany’s economy, Europe’s largest, reporting its best Gross Domestic Product (GDP) number since 2011. Commodity
holdings produced the largest offsetting losses during November. Precious metals were one of the worst performing sub-sectors. Both gold and silver experienced choppy intra-month price action caused by conflicting drivers which proved
difficult for our quantitative trading systems to successfully navigate. Long positioning on the meat complex suffered as prices fell amid supply concerns. Falling industrial metal prices produced some losses as long positioning suffered from
signs of a Chinese economic slowdown as that government looks to reign in growth.
December gains came from commodity and stock index holdings, while interest rate and foreign exchange positions produced some partially offsetting losses. Commodity holdings produced some of the largest Trust
gains during the month. Long positioning within the crude complex, specifically on Brent, Gasoil, and WTI Crude, produced some of the best profits. The Brent holding profited as that product rose to two-and-a-half year highs due to supply
concerns. Long holdings on the base metals complex, notably on zinc, aluminum, and copper, also showed gains as a slew of Chinese supply disruptions set a year-end rally into motion, benefitting the Trust. Long positioning on global stock
indices drove additional profits for the Trust. Global stock indices showed some mixed returns during the month. Long positioning on indices within the United States, the United Kingdom, Australia, and Canada produced some of the best
results. Successful passage of US tax reform helped US indices, while bullish commodity price action was supportive of the other indices as they have more concentrated exposure to stocks tied to the oil and metals markets. Interest rate
positions, primarily from long-dated bond markets, created some of the largest losses for the Trust. Long positioning on sovereign bond markets in Australia, Germany, Italy, and the United States experienced some of the worst losses amid a
synchronized global sell-off which caused yields to rise. The sell-off was sparked by an amalgamation of bearish drivers including more hawkish central banks, higher expected issuance by governments, and growing concern that US tax reform,
linked with persistently stronger global growth, will start to increase inflationary pressures. Foreign exchange positioning, specifically in developed FX markets, also generated losses during December. Short positioning across some of the
commodity currencies, the New Zealand dollar, Australian dollar, and Canadian dollar (all versus the US dollar) suffered as those currencies appreciated in value. Intra-month strength in the energy and industrial metal complexes provided a
tailwind for these currencies.
Introduction
Past Results Not Necessarily Indicative of Future Performance
The Trust is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or a substantial amount of the Trust’s assets are
subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Trust’s main line of business.
Market movements result in frequent changes in the fair market value of the Trust’s open positions and, consequently, in its earnings and cash flow. The Trust’s market risk is influenced by a wide
variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Trust’s open positions and the
liquidity of the markets in which it trades.
The Trust rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario
will affect performance, and the Trust’s past performance is not necessarily indicative of its future results.
Standard of Materiality
Materiality as used in this section, “Quantitative and Qualitative Disclosures About Market Risk,” is based on an assessment of reasonably possible market movements and the potential losses caused
by such movements, taking into account the leverage and multiplier features of the Trust’s market sensitive instruments.
Quantifying the Trust’s Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Trust’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this
section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact (such as the dollar amount of maintenance margin required for market risk sensitive instruments held at the end of the
reporting period).
The Trust’s risk exposure in the various market sectors traded is estimated in terms of Value at Risk (VaR). The Trust estimates VaR using a model based upon historical simulation (with a
confidence level of 97.5%) which involves constructing a distribution of hypothetical daily changes in the value of a trading portfolio. The VaR model takes into account linear exposures to risks, including equity and commodity prices, interest
rates, foreign exchange rates, and correlation among these variables. The hypothetical changes in portfolio value are based on daily percentage changes observed in key market indices or other market factors to which the portfolio is sensitive.
The Trust’s VaR at a one day 97.5% confidence level corresponds to the negative change in portfolio value that, based on observed market risk factors, would have been exceeded once in 40 trading days or one day in 40. VaR typically does not
represent the worst case outcome.
The Trust uses approximately one quarter of daily market data and revalues its portfolio for each of the historical market moves that occurred over this time period. This generates a probability
distribution of daily “simulated profit and loss” outcomes. The VaR is the 2.5 percentile of this distribution.
The VaR for a sector represents the 2.5 percentile of outcomes for the aggregate exposures associated with that sector alone. The current methodology used to calculate the aggregate VaR represents
the VaR of the Trust’s open positions across all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes.
The Trust’s VaR computations are based on the risk representation of the underlying benchmark for each instrument or contract and does not distinguish between exchange and non-exchange
dealer-based instruments. It is also not based on exchange and/or dealer-based maintenance margin requirements.
VaR models, including the Trust’s, are continually evolving as trading portfolios become more diverse and modeling techniques and systems capabilities improve. Please note that the VaR model is
used to numerically quantify market risk for historic reporting purposes only and is not utilized by the Trust in its daily risk management activities. Please further note that VaR as described above may not be comparable to similarly titled
measures used by other entities.
Because the business of the Trust is the speculative trading of futures and forwards, the composition of the Trust’s trading portfolio can change significantly over any given time period, or even
within a single trading day, which could positively or negatively materially impact market risk as measured by VaR.
The Trust’s Trading Value at Risk in Different Market Sectors
The following tables indicate the trading Value at Risk associated with the Trust’s open positions by market category as of December 31, 2019, 2018 and 2017 and the trading gains/losses by market
category for the years then ended.
|
December 31, 2019
|
||||||||
|
Market Sector
|
Value
at Risk*
|
Trading
Gain/(Loss)**
|
||||||
|
Commodities
|
0.51
|
%
|
(8.12
|
)% | ||||
|
Currencies
|
0.60
|
%
|
(3.76
|
)%
|
||||
|
Interest Rates
|
0.61
|
%
|
12.88
|
|||||
|
Stock Indices
|
0.71
|
%
|
9.78
|
% | ||||
|
Aggregate/Total
|
1.19
|
%
|
10.78
|
%
|
||||
| * |
The VaR for a sector represents the 2.5 percentile of outcomes for the aggregate exposures associated with that sector alone. The aggregate VaR represents the VaR of the Trust’s open positions across all market sectors, and is
less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes.
|
| ** |
Represents the gross trading for the Trust for the year ended December 31, 2019.
|
Of the 7.75% return for the year ended December 31, 2019 for Series A, approximately 10.78% was due to trading gains (before commissions) and approximately 2.59% due to investment income, offset
by approximately (5.62)% due to brokerage fees, management fees, offering costs and operating costs borne by Series A.
Of the 8.29% return for year ended December 31, 2019 for Series B, approximately 10.78% was due to trading gains (before commissions) and approximately 2.59% due to investment income, offset by
approximately (5.08)% due to brokerage fees, management fees and operating costs borne by Series B.
Of the 7.79% return for the year ended December 31, 2019 for Series D, approximately 10.78% was due to trading gains (before commissions) and approximately 2.59% due to investment income, offset
by approximately (5.58)% due to brokerage fees, management fees, performance fees, offering costs and operating costs borne by Series D.
Of the 9.93% return for the year ended December 31, 2019 for Series W, approximately 10.78% was due to trading gains (before commissions) and approximately 2.59% due to investment income, offset
by approximately (3.44)% due to brokerage fees, management fees, offering costs and operating costs borne by Series W.
|
December 31, 2018
|
||||||||
|
Market Sector
|
Value
at Risk*
|
Trading
Gain/(Loss)**
|
||||||
|
Commodities
|
0.87
|
%
|
(2.00
|
)%
|
||||
|
Currencies
|
0.80
|
%
|
3.47
|
%
|
||||
|
Interest Rates
|
0.47
|
%
|
1.79
|
%
|
||||
|
Stock Indices
|
0.76
|
%
|
(9.13
|
)%
|
||||
|
Aggregate/Total
|
2.11
|
%
|
(5.87
|
)%
|
||||
| * |
The VaR for a sector represents the 2.5 percentile of outcomes for the aggregate exposures associated with that sector alone. The aggregate VaR represents the VaR of the Trust’s open positions across all market sectors, and is
less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes.
|
| ** |
Represents the gross trading for the Trust for the year ended December 31, 2018.
|
Of the (9.03)% return for the year ended December 31, 2018 for Series A, approximately (5.87)% was due to trading losses (before commissions) and approximately (5.14)% due to brokerage fees,
management fees, offering costs and operating costs, offset by approximately 1.98% due to investment income earned by Series A.
Of the (8.66)% return for year ended December 31, 2018 for Series B, approximately (5.87)% was due to trading losses (before commissions) and approximately (4.77)% due to brokerage fees,
management fees and operating costs, offset by approximately 1.98% due to investment income earned by Series B.
Of the (8.15)% return for the year ended December 31, 2018 for Series D, approximately (5.87)% was due to trading losses (before commissions) and approximately (4.26)% due to brokerage fees,
management fees, offering costs and operating costs, offset by approximately 1.98% due to investment income earned by Series D.
Of the (7.28)% return for the year ended December 31, 2018 for Series W, approximately (5.87)% was due to trading losses (before commissions) and approximately (3.39)% due to brokerage fees,
management fees, offering costs and operating costs, offset by approximately 1.98% due to investment income earned by Series W.
|
December 31, 2017
|
||||||||
|
Market Sector
|
Value
at Risk*
|
Trading
Gain/(Loss)**
|
||||||
|
Commodities
|
0.53
|
%
|
(5.04
|
)%
|
||||
|
Currencies
|
0.42
|
%
|
(5.05
|
)%
|
||||
|
Interest Rates
|
0.52
|
%
|
(4.29
|
)%
|
||||
|
Stock Indices
|
0.74
|
%
|
21.08
|
%
|
||||
|
Aggregate/Total
|
1.24
|
%
|
6.70
|
%
|
||||
| * |
The VaR for a sector represents the 2.5 percentile of outcomes for the aggregate exposures associated with that sector alone. The aggregate VaR represents the VaR of the Trust’s open positions across
all market sectors, and is less than the sum of the VaRs for all such market sectors due to the diversification benefit across asset classes.
|
| ** |
Represents the gross trading for the Trust for the year ended December 31, 2017.
|
Of the 2.58% return for the year ended December 31, 2017 for Series A, approximately 6.70% was due to trading gains (before commissions) and approximately 1.15% due to investment income, offset by
approximately (5.27)% due to brokerage fees, management fees, offering costs and operating costs borne by Series A.
Of the 3.09% return for the year ended December 31, 2017 for Series B, approximately 6.70% was due to trading gains (before commissions) and approximately 1.15% due to investment income, offset by
approximately (4.76)% due to brokerage fees, management fees and operating costs borne by Series B.
Of the 5.23% return for the year ended December 31, 2017 for Series D, which commenced trading on October 1, 2017, approximately 6.92% was due to trading gains (before commissions) and
approximately 0.19% due to investment income, offset by approximately (1.88)% due to brokerage fees, management fees, performance fees, offering costs and operating costs borne by Series D.
Of the 4.62% return for the year ended December 31, 2017 for Series W, approximately 6.70% was due to trading gains (before commissions) and approximately 1.15% due to investment income, offset
by approximately (3.23)% due to brokerage fees, management fees, service fees, offering costs and operating costs borne by Series W.
Material Limitations of Value at Risk as an Assessment of Market Risk
The following limitations of VaR as an assessment of market risk should be noted:
| 1) |
Past changes in market risk factors will not always result in accurate predictions of the distributions and correlations of future market movements;
|
| 2) |
Changes in portfolio value caused by market movements may differ from those of the VaR model;
|
| 3) |
VaR results reflect past trading positions while future risk depends on future positions;
|
| 4) |
VaR using a one day time horizon does not fully capture the market risk of positions that cannot be liquidated or hedged within one day; and
|
| 5) |
The historical market risk factor data for VaR estimation may provide only limited insight into losses that could be incurred under certain unusual market movements.
|
VaR is not necessarily representative of historic risk nor should it be used to predict the Trust’s future financial performance or its ability to manage and monitor risk. There can be no
assurance that the Trust’s actual losses on a particular day will not exceed the VaR amounts indicated or that such losses will not occur more than once in 40 trading days.
Non-Trading Risk
The Trust 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 Trust also has
non-trading market risk as a result of investing a portion of its available assets in U.S. Treasury Bills held at the broker and over-the-counter counterparty. The market risk represented by these investments is minimal. Finally, the Trust has
non-trading market risk on fixed income securities held as part of its cash management program. The cash manager will use its best endeavors in the management of the assets of the Trust but provide no guarantee that any profit or interest will
accrue to the Trust as a result of such management.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Trust’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the
descriptions of how the Trust 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 Trust’s primary market
risk exposures as well as the strategies used and to be used by Campbell & Company for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Trust’s
risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price
relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Trust. There can be
no assurance that the Trust’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or
substantially all of their investment in the Trust.
The following represent the primary trading risk exposures of the Trust as of December 31, 2019 by market sector.
Currencies
The Trust’s currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Trust trades in a large number of currencies, including cross-rates — i.e., positions between two currencies other than the U.S.
Dollar. Campbell & Company does not anticipate that the risk profile of the Trust’s currency sector will change significantly in the future.
Interest Rates
Interest rate movements directly affect the price of the sovereign bond positions held by the Trust 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 Trust’s profitability. The Trust’s primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries.
Campbell & Company anticipates that G-7 interest rates will remain the primary rate exposure of the Trust for the foreseeable future. Changes in the interest rate environment will have the most impact on longer dated fixed income positions,
at points of time throughout the year the majority of the speculative positions held by the Trust may be held in medium to long-term fixed income positions.
Stock Indices
The Trust’s primary equity exposure is to equity price risk in the G-7 countries as well as Australia, Hong Kong, Singapore, Spain, Taiwan, Netherlands, India, South Africa and Sweden. The stock
index futures traded by the Trust are by law limited to futures on broadly based indices. The Trust is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Japanese indices. Markets that trade
in a narrow range could result in the Trust’s positions being “whipsawed” into numerous small losses.
Energy
The Trust’s primary energy market exposure is to natural gas, crude oil and derivative product price movements often resulting from international political developments and ongoing conflicts in
the Middle East and the perceived outcome. Oil and gas prices can be volatile and substantial profits and losses have been and are expected to continue to be experienced in this market.
Metals
The Trust’s metals market exposure is to fluctuations in the price of aluminum, copper, gold, lead, nickel, palladium, platinum, silver and zinc.
Agricultural
The Trust’s agricultural exposure is to fluctuations of the price of cattle, cocoa, coffee, corn, cotton, hogs, soy, sugar and wheat.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the primary non-trading risk exposures of the Trust as of December 31, 2019.
Foreign Currency Balances
The Trust’s primary foreign currency balances are in Australian Dollar, British Pounds, Canadian Dollar, Euros, Hong Kong Dollar, Japanese Yen, Singapore Dollar, South African Rand and Swedish
Krona. The Trust controls the non-trading risk of these balances by regularly converting these balances back into dollars (no less frequently than twice a month, and more frequently if a particular foreign currency balance becomes unusually
large).
Fixed Income Securities
The Trust’s primary market exposure in instruments (other than treasury positions described in the subsequent section) held other than for trading is in its fixed income portfolio. The cash
manager, PNC, has authority to make certain investments on behalf of the Trust. All securities purchased by the cash manager on behalf of the Trust will be held in the Trust’s custody account at the custodian. The cash manager will use its best
endeavors in the management of the assets of the Trust but provides no guarantee that any profit or interest will accrue to the Trust as a result of such management.
U.S. Treasury Bill Positions Held for Margin Purposes
The Trust also has market exposure in its U.S. Treasury Bill portfolio. The Trust holds U.S. Treasury Bills with maturities no longer than six months. Violent fluctuations in prevailing interest
rates could cause minimal mark-to-market losses on the Trust’s U.S. Treasury Bills, although substantially all of these short-term investments are held to maturity.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Trust and Campbell & Company, severally, attempt to manage the risk of the Trust’s open positions is essentially the same in all market categories traded. Campbell &
Company applies risk management policies to its trading which generally limit the total exposure that may be taken per “risk unit” of assets under management. In addition, Campbell & Company follows diversification guidelines (often
formulated in terms of the balanced volatility between markets and correlated groups), as well as reducing position sizes dynamically in response to trading losses.
General
The Trust is unaware of any (i) anticipated known demands, commitments or capital expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii) trends or
uncertainties that will have a material effect on operations. From time to time, certain regulatory agencies have proposed increased margin requirements on futures contracts. Because the Trust generally will use a small percentage of assets as
margin, the Trust does not believe that any increase in margin requirements, as proposed, will have a material effect on the Trust’s operations.
Financial statements meeting the requirements of Regulation S-X appear beginning on Page 54 of this report. The supplementary financial information specified by Item 302 of Regulation S-K is
included in Item 6 — Selected Financial Data.
None.
Campbell & Company, the managing operator of the Trust, with the participation of the managing operator’s chief executive officer and chief operating officer, has evaluated the effectiveness
of the design and operation of its disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) with respect to the Trust as of the end of the period covered by this annual report. Based on
their evaluation, the chief executive officer and chief operating officer have concluded that these disclosure controls and procedures are effective. There were no changes in the managing operator’s internal control over financial reporting
applicable to the Trust identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the last fiscal quarter that have materially affected, or is reasonably likely to
materially affect, internal control over financial reporting applicable to the Trust.
Management’s Annual Report on Internal Control over Financial Reporting
Campbell & Company, LP (“Campbell & Company”), the managing operator of the Trust, is responsible for the management of the Trust. Management of Campbell & Company (“Management”) is
responsible for establishing and maintaining adequate internal control over financial reporting. The internal control over financial reporting is designed 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.
The Trust’s internal control over financial reporting includes those policies 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 Trust;
|
| ● |
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Trust’s transactions are being made
only in accordance with authorizations of Management and;
|
| ● |
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Trust’s assets that could have a material effect on the financial statements.
|
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2019. In making this assessment, Management used the framework established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment and based on the criteria in the COSO framework, management has concluded
that, as of December 31, 2019, the Trust’s internal control over financial reporting was effective.
Management’s report was not subject to attestation by the Trust’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the company
to provide only management’s report in this annual report.
None.
PART III
The Registrant has no directors or executive officers. The Registrant has no employees. It is managed by Campbell & Company in its capacity as managing operator. Campbell & Company has
been registered as a commodity pool operator (CPO) since September 1982. Its main business address is 2850 Quarry Lake Drive, Baltimore, Maryland, 21209, (410) 413-2600. Campbell & Company’s directors and executive officers are as follows:
G. William Andrews, born in 1972, joined Campbell & Company in April 1997 and, since November 2012, has served as the Chief Executive Officer of Campbell & Company and Campbell &
Company Investment Adviser LLC, a wholly-owned subsidiary of Campbell & Company, a registered commodity trading advisor and an SEC registered investment adviser. Mr. Andrews is a member of the Board of Directors of various organizations,
including Campbell & Company, LLC, the general partner of Campbell & Company; Campbell Core Offshore Limited and Campbell Advantage Offshore Limited, each an international business company incorporated in the Cayman Islands; The
Campbell Offshore Fund Limited SPC (formerly known as The Campbell Global Assets Fund Limited SPC), a segregated portfolio company incorporated in the Cayman Islands; Campbell Managed Futures Offshore Fund – CAD, an exempted company
incorporated in the Cayman Islands; Campbell Equity Alpha Offshore Fund Limited, an exempted company incorporated in the Cayman Islands; Campbell Equity Alpha Master Fund LP, an exempted limited partnership registered in the Cayman Islands; and
Campbell Financial Services, LLC, an SEC-registered broker-dealer and FINRA member. Since August 2017, Mr. Andrews has served as an officer of Campbell & Company Delaware, LLC, the general partner of the Campbell Equity Alpha Onshore Fund,
LP, a limited partnership formed in Delaware, the Campbell Equity Alpha Cayman, LP, an exempted limited partnership registered in the Cayman Islands, and the Campbell Equity Alpha Master Fund LP. Since November 2014, Mr. Andrews has also
served as an officer of Campbell & Company, LLC. Since August 2018 Mr. Andrews has served on the firm’s Executive Committee. Since March 2010, Mr. Andrews has served on the firm’s Investment Committee. Mr. Andrews served as Co-Director of
Research from November 2011 until October 2012; Chief Operating Officer from January 2010 to May 2012; Vice President, Director of Operations from April 2007 to January 2010; Vice President: Director of Research Operations from March 2006 to
April 2007 and Research Assistant from March 2005 to February 2006. Mr. Andrews has also served as the Vice President and Chief Operating Officer of Campbell & Company Investment Adviser LLC from March 2010 to June 2012. Mr. Andrews holds
an M.B.A. in Finance from Loyola College in Maryland and a Bachelor of Social Science from Waikato University, New Zealand. Mr. Andrews became listed as a Principal of Campbell & Company and Campbell & Company Investment Adviser LLC
effective June 21, 2006 and March 29, 2010, respectively and registered as an NFA Associate Member and an Associated Person of Campbell & Company effective April 10, 2013 and April 11, 2013, respectively.
D. Keith Campbell, born in 1942, has served as Chairman of the Board of Directors of Campbell & Company since its inception in January 1972. Mr. Campbell currently serves as the Chairman of
the Board of Directors of Campbell & Company, LLC, which is the general partner of Campbell & Company. Since August 2018 Mr. Campbell has served on the firm’s Executive Committee. Mr. Campbell served as the President of Campbell &
Company until January 1994, and was Chief Executive Officer until January 1998. Mr. Campbell has acted as a commodity trading advisor since January 1972 when, as general partner of the Campbell Fund Trust, a limited partnership engaged in
commodity futures trading, he assumed sole responsibility for trading decisions made on its behalf. Since then, he has applied various technical trading models to numerous discretionary futures trading accounts. Mr. Campbell, as a sole
proprietor, has been registered with the CFTC as a commodity pool operator since June 30, 1982 and a NFA Associate Member since July 1, 1984. Mr. Campbell became listed as a principal of Campbell & Company effective September 29, 1978 and
as a NFA Associate Member and an Associated Person effective September 29, 1997 and October 29, 1997, respectively. Mr. Campbell became listed as a principal of Campbell & Company Investment Adviser LLC effective July 9, 2008. With
respect to Mr. Campbell’s previously referenced commodity pool operator registration, Mr. Campbell became listed as a Principal effective March 10, 1975 and became registered as an Associated Person and a Swap Associated Person on February 28,
2013 and March 1, 2013, respectively.
Dr. Kevin Cole, born in 1972, joined Campbell & Company in October 2003 and has served as Chief Investment Officer of both Campbell & Company and Campbell & Company Investment Adviser
LLC, a wholly-owned subsidiary of Campbell & Company, a registered commodity trading advisor and an SEC-registered investment adviser, since June 2017. Since December 2019, Dr. Cole has served as both a director and an officer of Campbell
& Company, LLC, the general partner of Campbell & Company. Since August 2018, Mr. Cole has served on the firm’s Executive Committee. In February 2017, Dr. Cole was appointed to serve Campbell & Company and Campbell & Company
Investment Adviser LLC, a wholly-owned subsidiary of Campbell & Company, a registered commodity trading advisor and an SEC-registered investment adviser, as an executive officer. Since he joined the firm Dr. Cole has had a significant role
in the ongoing research and development of Campbell & Company’s trading systems. Dr. Cole formerly served as Deputy Chief Research Officer from January 2016 to June 2017, Director, Investment Strategies from October 2013 to December 2015,
Research Manager from October 2006 to September 2013 and Senior Researcher from October 2003 to September 2006. He was appointed to the firm’s Investment Committee in January 2016. As Chief Research Officer, Dr. Cole is responsible for the
management of the research and investment process at the firm. Dr. Cole holds a B.A. in Economics from Georgetown University, and received a Ph.D. in Economics with a concentration in Finance from the University of California, Berkeley. Dr.
Cole was listed as a Principal of Campbell & Company and Campbell & Company Investment Adviser LLC effective March 20, 2017.
Thomas P. Lloyd, born in 1959, joined Campbell & Company in September 2005 and, since December 2018, has served as General Counsel, Chief Compliance Officer, and Secretary of both Campbell
& Company and Campbell & Company Investment Adviser LLC, a wholly-owned subsidiary of Campbell & Company, a registered commodity trading advisor, and an SEC-registered investment adviser. In this capacity, Mr. Lloyd is currently
involved in all aspects of legal affairs, compliance and regulatory oversight. Since joining the firm, Mr. Lloyd has also served as an officer of Campbell & Company and its affiliates in multiple capacities, including: Co-General Counsel;
Chief Compliance Officer; President; Vice President; Secretary; and Assistant Treasurer. Since joining the firm, Mr. Lloyd has also served as an officer and/or a member of the Board of Directors of entities affiliated with Campbell &
Company, including: Campbell & Company Investment Adviser LLC; Campbell Financial Services, LLC, a wholly-owned subsidiary of Campbell & Company, an SEC-registered broker-dealer, and a FINRA member; Campbell & Company, LLC, the
general partner of Campbell & Company; Campbell & Company Delaware, LLC, the general partner of the Campbell Equity Alpha Onshore Fund, LP, a limited partnership formed in Delaware, and Campbell Equity Alpha Cayman, LP and the Campbell
Equity Alpha Master Fund LP, both exempted limited partnerships registered in the Cayman Islands; and Campbell Core Offshore Limited, Campbell Advantage Offshore Limited, and the Campbell Managed Futures Offshore Fund – CAD, each an
international business company incorporated in the Cayman Islands. From July 1999 to September 2005, Mr. Lloyd was employed by DBSI, a broker/dealer subsidiary of a global investment bank, in several positions, including Managing Director and
head of the legal group for Deutsche Bank Alex. Brown, the Private Client Division of DBSI. Mr. Lloyd holds a B.A. in Economics from the University of Maryland, and a J.D. from the University of Baltimore School of Law. Mr. Lloyd is a member
of the Bars of the State of Maryland and the United States Supreme Court. Mr. Lloyd initially became listed as a Principal of Campbell & Company and Campbell & Company Investment Adviser LLC effective October 20, 2005 and December 12,
2005, respectively. Mr. Lloyd became registered as a NFA Associate Member and an Associated Person of Campbell & Company effective August 30, 2010.
Gabriel Morris, CFA, Chief Operating Officer, born in 1977, joined Campbell & Company in October 2006 and since July 2019
has served as Chief Operating Officer of both Campbell & Company and Campbell & Company Investment Adviser LLC, a wholly-owned subsidiary of Campbell & Company, a registered commodity trading advisor, and an SEC- registered
investment adviser. In this capacity, Mr. Morris is responsible for overseeing middle office, back office, human resources and corporate finance functions. Since joining the firm, Mr. Morris has also served as an officer and/or a member of
the Board of Directors of entities affiliated with Campbell & Company, including: Campbell & Company Investment Adviser LLC; Campbell Financial Services, LLC, a wholly-owned subsidiary of Campbell & Company, an SEC-registered
broker-dealer, and a FINRA member; Campbell & Company, LLC, the general partner of Campbell & Company; Campbell & Company Delaware, LLC, the general partner of the Campbell Equity Alpha Onshore Fund, LP, a limited partnership
formed in Delaware, and Campbell Equity Alpha Cayman, LP and the Campbell Equity Alpha Master Fund LP, both exempted limited partnerships registered in the Cayman Islands; and Campbell Core Offshore Limited, Campbell Advantage Offshore
Limited, and the Campbell Managed Futures Offshore Fund – CAD, each an international business company incorporated in the Cayman Islands. Mr. Morris has also served as Managing Director, Operations & Finance from August 2018 to June
2019, Director of Market Data from March 2017 to July 2018, and Director of Investment Operations from September 2013 to March 2017. Mr. Morris also held the positions of Director of Performance Reporting, Performance Reporting Analyst,
Assistant Manager of Fund Administration and Fund Administration Associate. Prior to his employment at Campbell & Company, Mr. Morris was employed by Johns Hopkins University from October 2003 to October 2006. Mr. Morris holds a M.S. in
Technology Management from Columbia University and a B.S. in Business & Management from Johns Hopkins University. Mr. Morris is a CFA charterholder and holds Series 3, 7 and 27 licenses.
There has never been a material administrative, civil or criminal action brought against Campbell & Company or any of its directors, executive officers, promoters or control persons.
No Forms 3, 4, or 5 have been furnished to the Registrant since inception. To the best of the Registrant’s knowledge, no such forms have been or are required to be filed.
Audit Committee Financial Expert
No individual is named as the “audit committee expert’ because no member of the Audit Committee (“Committee”) individually meets all five qualifications in the SEC definition of an “audit
committee financial expert”; however, management has determined that the members of the Committee collectively possess the attributes necessary to perform this function.
Code of Ethics
Campbell & Company has adopted a code of ethics for its Chief Executive Officer, Chief Operating Officer, Director of Fund Accounting, Accounting Managers and persons performing similar
functions. A copy of the code of ethics may be obtained at no charge by written request to Campbell & Company’s corporate secretary, 2850 Quarry Lake Drive, Baltimore, Maryland 21209 or by calling 1-800-698-7235.
The Trust does not itself have any officers, directors or employees. The Trust pays management fees and performance fees to Campbell & Company. The directors and managing officers of Campbell
& Company are remunerated by Campbell & Company in their respective positions. The directors and managing officers receive no “other compensation” from the Trust. There are no compensation plans or arrangements relating to a change in
control of either the Trust or Campbell & Company.
Campbell & Company receives (i) a monthly management fee of 1/12 of 4% of the month-end net assets of the Series A Units and Series B Units without reductions for distributions, redemptions or
withdrawals during said month, totaling approximately 4% of the average month-end net assets per year of the Series A Units and Series B Units; (ii) a monthly management fee of 1/12 of 2.75% of the month-end net assets of the Series D Units
without reductions for distributions, redemptions or withdrawals during said month, totaling approximately 2.75% of average month-end net assets per year of the Series D Units; (iii) a monthly management fee of 1/12 of 2% of the month-end net
assets of the Series W Units without reductions for distributions, redemptions or withdrawals during said month, totaling approximately 2% of average month-end net assets per year of the Series W Units; and (iv) a quarterly performance fee of
20% of the aggregate cumulative appreciation (if any) in the net asset value per unit of the Series A Units, Series B Units, Series D Units and Series W Units at the end of each quarter, exclusive of appreciation attributable to interest
income, allocable to such Series of Units, and as adjusted for subscriptions and redemptions, on a cumulative high water mark basis, charged quarterly. In determining the fees in this paragraph, net assets shall not be reduced by the
performance fees being calculated for such current period. In respect of each Series of Units, “aggregate cumulative appreciation” means the total increase in Unit value of such Series of Units from the commencement of trading, minus the total
increase in Unit value of such Series of Units for all prior quarters, multiplied by the number of Units of such Series outstanding. The performance fee is paid only on profits attributable to each Series of Units outstanding. The performance
fee is accrued monthly and paid quarterly.
| (a) |
Security Ownership of Certain Beneficial Owners. As of December 31, 2019, no Units of Beneficial Interest are owned or held by an officer of Campbell & Company.
|
| (b) |
Security Ownership of Management. As of December 31, 2019, Campbell & Company did not own any Series A, Series B, Series D or Series W Units.
|
See Item 11 – Executive Compensation and Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
The principal accountant for the years ended December 31, 2019 and 2018 was Deloitte & Touche LLP.
| (a) |
Audit Fees
|
The aggregate fees billed for professional services rendered by the principal accountant for the audit of the Trust’s annual financial statements, for review of financial
statements included in the Trust’s Forms 10-Q and other services normally provided in connection with regulatory filings for the years ended December 31, 2019 and 2018 were $224,250 and $224,250, respectively.
| (b) |
Audit Related Fees
|
None.
| (c) |
Tax Fees
|
None.
| (d) |
All Other Fees
|
None.
| (e) |
The Board of Directors of Campbell & Company approved all of the services described above. The Board of Directors has determined that the payments made to its independent accountants for these services are compatible with
maintaining such auditors’ independence. The Board of Directors explicitly pre-approves all audit and non-audit services and all engagement fees and terms.
|
PART IV
| (a) |
The Following documents are filed as part of this report:
|
| (1) |
See Financial Statements beginning on Page 54 hereof.
|
| (2) |
Schedules:
|
Financial statement schedules have been omitted because they are not included in the financial statements or notes hereto applicable or because equivalent information has
been included in the financial statements or notes thereto.
|
(3)
|
Exhibits
|
|
Exhibit
Number
|
Description of Document
|
|
|
3.01
|
||
|
3.02
|
||
|
10.01
|
||
|
10.02
|
||
|
10.03
|
||
|
Certification of G. William Andrews, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
||
|
Certification of Gabriel A. Morris, Chief Operating Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
||
|
Certification of G. William Andrews, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.
|
||
|
Certification of Gabriel A. Morris, Chief Operating Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.
|
||
|
101.01
|
Interactive data file pursuant to Rule 405 of Regulation S-T: (i) Condensed Schedules of Investments as of December 31, 2019 and 2018, (ii) Statements of Financial Condition as of December
31, 2019 and 2018, (iii) Statements of Operations For the Years Ended December 31, 2019, 2018 and 2017, (iv) Statements of Cash Flows For the Years Ended December 31, 2019, 2018 and 2017, (v) Statements of Changes in Unitholders’
Capital (Net Asset Value) For the Years Ended December 31, 2019, 2018 and 2017, (vi) Financial Highlights For the Years Ended December 31, 2019, 2018 and 2017, (vii) Notes to Financial Statements.
|
| (1) |
Incorporated by reference to the respective exhibit to the Registrant’s Form 10 filed on April 30, 2003.
|
| (2) |
Incorporated by reference to the respective exhibit to the Registrant’s Quarterly Report on Form 10-Q filed on August 15, 2011.
|
| (3) |
Incorporated by reference to the respective exhibit to the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2014.
|
None.
EXHIBIT INDEX
|
Certification of G. William Andrews, Chief Executive Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
||
|
Certification of Gabriel A. Morris, Chief Operating Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
||
|
Certification of G. William Andrews, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.
|
||
|
Certification of Gabriel A. Morris, Chief Operating Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002.
|
||
|
101.01
|
Interactive data file pursuant to Rule 405 of Regulation S-T: (i) Condensed Schedules of Investments as of December 31, 2019 and 2018, (ii) Statements of Financial Condition as of December
31, 2019 and 2018, (iii) Statements of Operations For the Years Ended December 31, 2019, 2018 and 2017, (iv) Statements of Cash Flows For the Years Ended December 31, 2019, 2018 and 2017, (v) Statements of Changes in Unitholders’
Capital (Net Asset Value) For the Years Ended December 31, 2019, 2018 and 2017, (vi) Financial Highlights For the Years Ended December 31, 2019, 2018 and 2017, (vii) Notes to Financial Statements.
|
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 on March 27, 2020.
|
THE CAMPBELL FUND TRUST
|
||
|
By:
|
CAMPBELL & COMPANY, LP
|
|
|
Managing Operator
|
||
|
By:
|
/s/ G. William Andrews
|
|
|
G. William Andrews
|
||
|
Chief Executive Officer
|
||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities of Campbell &
Company, LP, the Managing Operator of the Registrant, indicated on March 27, 2020.
|
Signature
|
Capacity
|
|
|
/s/ G. William Andrews
|
Chief Executive Officer
|
|
|
G. William Andrews
|
||
|
/s/ Thomas P. Lloyd
|
General Counsel and Chief Compliance Officer
|
|
|
Thomas P. Lloyd
|
||
|
/s/ Gabriel A. Morris
|
Chief Operating Officer
|
|
|
Gabriel A. Morris
|
THE CAMPBELL FUND TRUST
ANNUAL REPORT
December 31, 2019
THE CAMPBELL FUND TRUST
INDEX
|
PAGES
|
|
|
56
|
|
|
Financial Statements
|
|
|
57-60
|
|
|
61
|
|
|
62
|
|
|
63
|
|
|
64-65
|
|
|
66-69
|
|
|
70-79
|
To the Unitholders of The Campbell Fund Trust
Opinion on the Financial Statements
We have audited the accompanying statements of financial condition of The Campbell Fund Trust (the “Trust”), including the
condensed schedules of investments, as of December 31, 2019 and 2018, the related statements of operations, cash flows, changes in unitholders’ capital (net asset value) and financial highlights for each of the three years in the period ended
December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Trust as of December 31, 2019
and 2018, and the results of its operations, its cash flows, changes in its unitholders’ capital (net asset value) and the financial highlights for each of the three years in the period ended December 31, 2019, in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the
Trust’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Trust in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control
over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
McLean, Virginia
March 27, 2020
We have served as the Trust’s auditor since 2005.
THE CAMPBELL FUND TRUST
DECEMBER 31, 2019
FIXED INCOME SECURITIES
|
Maturity
Face Value
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||||
|
|
Asset Backed Securities
|
||||||||||
|
United States
|
|||||||||||
|
Auto Loans
|
$
|
15,837,798
|
5.12
|
%
|
|||||||
|
Credit Cards
|
2,675,309
|
0.86
|
%
|
||||||||
|
Equipment Loans
|
618,295
|
0.20
|
%
|
||||||||
|
Utilities
|
544,640
|
0.18
|
%
|
||||||||
|
Total Asset Backed Securities (cost $19,601,083)
|
19,676,042
|
6.36
|
%
|
||||||||
|
Bank Deposits
|
|||||||||||
|
Singapore
|
|||||||||||
|
Financials (cost $2,837,086)
|
2,837,107
|
0.92
|
%
|
||||||||
|
United States
|
|||||||||||
|
Financials (cost $2,392,198)
|
2,393,483
|
0.77
|
%
|
||||||||
|
Total Bank Deposits (cost $5,229,284)
|
5,230,590
|
1.69
|
%
|
||||||||
|
Commercial Paper
|
|||||||||||
|
Australia
|
|||||||||||
|
Financials (cost $2,486,462)
|
2,485,923
|
0.80
|
%
|
||||||||
|
Canada
|
|||||||||||
|
Financials (cost $999,632)
|
999,620
|
0.32
|
%
|
||||||||
|
Sweden
|
|||||||||||
|
Financials (cost $2,990,273)
|
2,990,613
|
0.97
|
%
|
||||||||
|
Switzerland
|
|||||||||||
|
Financials (cost $4,296,981)
|
4,297,185
|
1.39
|
%
|
||||||||
|
United States
|
|||||||||||
|
Communications
|
2,995,139
|
0.97
|
%
|
||||||||
|
Consumer Discretionary
|
26,514,040
|
8.57
|
%
|
||||||||
|
Consumer Staples
|
4,537,769
|
1.47
|
%
|
||||||||
|
Financials
|
23,493,503
|
7.59
|
%
|
||||||||
|
Industrials
|
1,997,585
|
0.64
|
%
|
||||||||
|
Utilities
|
24,091,267
|
7.78
|
%
|
||||||||
|
Total United States (cost $83,630,421)
|
83,629,303
|
27.02
|
%
|
||||||||
|
Total Commercial Paper (cost $94,403,769)
|
94,402,644
|
30.50
|
%
|
||||||||
|
Corporate Bonds
|
|||||||||||
|
Canada
|
|||||||||||
|
Financials
|
5,910,253
|
1.91
|
%
|
||||||||
|
Industrials
|
1,595,400
|
0.52
|
%
|
||||||||
|
Total Canada (cost $7,494,451)
|
7,505,653
|
2.43
|
%
|
||||||||
|
Germany
|
|||||||||||
|
Consumer Discretionary (cost $5,147,253)
|
5,166,625
|
1.67
|
%
|
||||||||
|
Japan
|
|||||||||||
|
Financials (cost $2,020,000)
|
2,020,373
|
0.65
|
%
|
||||||||
|
United Kingdom
|
|||||||||||
|
Energy
|
2,120,364
|
0.69
|
%
|
||||||||
|
Financials
|
3,873,831
|
1.25
|
%
|
||||||||
|
Total United Kingdom (cost $5,979,474)
|
5,994,195
|
1.94
|
%
|
||||||||
|
United States
|
|||||||||||
|
Communications
|
|
3,078,403
|
0.99
|
%
|
|||||||
|
Consumer Discretionary
|
14,140,035
|
4.57
|
%
|
||||||||
|
Consumer Staples
|
3,547,193
|
1.14
|
%
|
||||||||
|
Energy
|
6,047,117
|
1.95
|
%
|
||||||||
|
Financials
|
23,371,727
|
7.55
|
%
|
||||||||
|
Industrials
|
5,427,486
|
1.75
|
%
|
||||||||
|
Materials
|
884,220
|
0.29
|
%
|
||||||||
|
Technology
|
5,066,126
|
1.64
|
%
|
||||||||
|
Utilities
|
2,348,096
|
0.76
|
%
|
||||||||
|
Total United States (cost $63,778,285)
|
63,910,403
|
20.64
|
%
|
||||||||
|
Total Corporate Bonds (cost $84,419,463)
|
84,597,249
|
27.33
|
%
|
||||||||
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2019
FIXED INCOME SECURITIES
|
Maturity
Face Value
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||||
|
Government And Agency Obligations
|
|||||||||||
|
United States
|
|||||||||||
|
U.S. Treasury Bills
|
|||||||||||
|
$
|
4,160,000
|
U.S. Treasury Bills Due 01/02/2020*
|
4,160,000
|
1.35
|
%
|
||||||
|
$
|
4,500,000
|
U.S. Treasury Bills Due 01/16/2020*
|
4,497,563
|
1.45
|
%
|
||||||
|
$
|
27,690,000
|
U.S. Treasury Bills Due 02/13/2020*
|
27,642,108
|
8.93
|
%
|
||||||
|
$
|
17,392,500
|
U.S. Treasury Bills Due 03/12/2020*
|
17,341,856
|
5.60
|
%
|
||||||
|
Total Government And Agency Obligations (cost $53,635,500)
|
53,641,527
|
17.33
|
%
|
||||||||
|
Total Fixed Income Securities ** (cost
$257,289,099)
|
$
|
257,548,052
|
83.21 |
%
|
|||||||
SHORT TERM INVESTMENTS
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||
|
Money Market Funds
|
||||||||
|
United States
|
||||||||
|
Money Market Funds (cost $4,780)
|
$
|
4,780
|
0.00
|
%
|
||||
|
Total Short Term Investments (cost $4,780)
|
$
|
4,780
|
0.00
|
%
|
||||
LONG FUTURES CONTRACTS
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||
|
Agriculture
|
$
|
111,797
|
0.04
|
%
|
||||
|
Energy
|
897,502
|
0.29
|
%
|
|||||
|
Metals
|
2,205,166
|
0.71
|
%
|
|||||
|
Stock indices
|
91,738
|
0.03
|
%
|
|||||
|
Short-term interest rates
|
(765,294
|
)
|
(0.25
|
)%
|
||||
|
Long-term interest rates
|
(4,935,840
|
)
|
(1.59
|
)%
|
||||
|
Net unrealized gain (loss) on long futures contracts
|
(2,394,931
|
)
|
(0.77
|
)%
|
||||
SHORT FUTURES CONTRACTS
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||
|
Agriculture
|
(2,850,079
|
)
|
(0.92
|
)%
|
||||
|
Energy
|
588,691
|
0.19
|
%
|
|||||
|
Metals
|
(4,618,405
|
)
|
(1.49
|
)%
|
||||
|
Stock indices
|
79,410
|
0.03
|
%
|
|||||
|
Short-term interest rates
|
(412
|
)
|
0.00
|
%
|
||||
|
Long-term interest rates
|
1,055,789
|
0.34
|
%
|
|||||
|
Net unrealized gain (loss) on short futures contracts
|
(5,745,006
|
)
|
(1.85
|
)%
|
||||
|
Net unrealized gain (loss) on open futures contracts
|
$
|
(8,139,937
|
)
|
(2.62
|
)%
|
|||
FORWARD CURRENCY CONTRACTS
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||
|
Various long forward currency contracts
|
$
|
22,090,636
|
7.14
|
%
|
||||
|
Various short forward currency contracts
|
(24,754,313
|
)
|
(8.00
|
)%
|
||||
|
Net unrealized gain (loss) on open forward currency contracts
|
$
|
(2,663,677
|
)
|
(0.86
|
)%
|
|||
|
*
|
Pledged as collateral for the trading of futures positions.
|
|
**
|
Included in fixed income securities are U.S. Treasury Bills with a fair value of $53,641,527 deposited with the futures brokers.
|
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2018
FIXED INCOME SECURITIES
|
Maturity
Face Value
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||||
|
Asset Backed Securities
|
|||||||||||
|
United States
|
|||||||||||
|
Auto Loans
|
$
|
11,260,081
|
3.37
|
%
|
|||||||
|
Credit Cards
|
7,922,740
|
2.37
|
%
|
||||||||
|
Equipment Loans
|
949,326
|
0.29
|
%
|
||||||||
|
Total Asset Backed Securities (cost $20,184,656)
|
20,132,147
|
6.03
|
%
|
||||||||
|
Bank Deposits
|
|||||||||||
|
United States
|
|||||||||||
|
Financials
|
4,348,492
|
1.30
|
%
|
||||||||
|
Total Bank Deposits (cost $4,350,132)
|
4,348,492
|
1.30
|
%
|
||||||||
|
Commercial Paper
|
|||||||||||
|
United States
|
|||||||||||
|
Communications
|
3,728,528
|
1.11
|
%
|
||||||||
|
Consumer Discretionary
|
8,545,981
|
2.56
|
%
|
||||||||
|
Consumer Staples
|
18,595,739
|
5.57
|
%
|
||||||||
|
Financials
|
2,026,496
|
0.61
|
%
|
||||||||
|
Industrials
|
4,103,477
|
1.23
|
%
|
||||||||
|
Utilities
|
|||||||||||
|
$
|
7,301,000
|
Kentucky Utilities Company Due 01/02/2019
|
7,299,939
|
2.19
|
%
|
||||||
|
$
|
885,000
|
Kentucky Utilities Company Due 01/08/2019
|
884,469
|
0.26
|
%
|
||||||
|
$
|
2,280,000
|
Kentucky Utilities Company Due 01/14/2019
|
2,277,534
|
0.68
|
%
|
||||||
|
$
|
6,750,000
|
Kentucky Utilities Company Due 01/23/2019
|
6,737,718
|
2.02
|
%
|
||||||
|
Other
|
16,156,320
|
4.84
|
%
|
||||||||
|
Total Commercial Paper (cost $70,360,185)
|
70,356,201
|
21.07
|
%
|
||||||||
|
Corporate Bonds
|
|||||||||||
|
Canada
|
|||||||||||
|
Financials (cost $13,018,958)
|
12,960,949
|
3.88
|
%
|
||||||||
|
Japan
|
|||||||||||
|
Financials (cost $2,697,498)
|
2,681,988
|
0.80
|
%
|
||||||||
|
United Kingdom
|
|||||||||||
|
Financials (cost $9,746,548)
|
9,700,528
|
2.91
|
%
|
||||||||
|
United States
|
|||||||||||
|
Communications
|
12,685,658
|
3.80
|
%
|
||||||||
|
Consumer Discretionary
|
9,534,815
|
2.85
|
%
|
||||||||
|
Consumer Staples
|
12,644,398
|
3.79
|
%
|
||||||||
|
Energy
|
2,760,187
|
0.83
|
%
|
||||||||
|
Financials
|
39,791,199
|
11.92
|
%
|
||||||||
|
Industrials
|
7,322,498
|
2.19
|
%
|
||||||||
|
Technology
|
6,235,512
|
1.87
|
%
|
||||||||
|
Utilities
|
942,078
|
0.28
|
%
|
||||||||
|
Total United States (cost $92,174,110)
|
91,916,345
|
27.53
|
%
|
||||||||
|
Total Corporate Bonds (cost $117,637,114)
|
117,259,810
|
35.12
|
%
|
||||||||
|
Government And Agency Obligations
|
|||||||||||
|
United States
|
|||||||||||
|
U.S. Treasury Bills
|
|||||||||||
|
$
|
8,735,000
|
U.S. Treasury Bills Due 01/17/2019*
|
8,726,578
|
2.61
|
%
|
||||||
|
$
|
14,392,500
|
U.S. Treasury Bills Due 02/21/2019*
|
14,344,561
|
4.30
|
%
|
||||||
|
$
|
28,162,500
|
U.S. Treasury Bills Due 03/28/2019*
|
28,002,067
|
8.39
|
%
|
||||||
|
Total Government And Agency Obligations (cost $51,077,094)
|
51,073,206
|
15.30
|
%
|
||||||||
|
Total Fixed Income Securities ** (cost $263,609,181)
|
$
|
263,169,856
|
78.82
|
%
|
|||||||
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2018
SHORT TERM INVESTMENTS
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||
|
Money Market Funds
|
||||||||
|
United States
|
||||||||
|
Money Market Funds (cost $2,868)
|
$
|
2,868
|
0.00
|
%
|
||||
|
Total Short Term Investments (cost $2,868)
|
$
|
2,868
|
0.00
|
%
|
||||
LONG FUTURES CONTRACTS
|
Description
|
Fair
Value ($)
|
|
% of Net
Asset Value
|
|||||
|
Agriculture
|
$
|
245,490
|
0.07
|
%
|
||||
|
Energy
|
(1,580,415
|
)
|
(0.47
|
)%
|
||||
|
Metals
|
(3,242,497
|
)
|
(0.97
|
)%
|
||||
|
Stock indices
|
(177,210
|
)
|
(0.05
|
)%
|
||||
|
Short-term interest rates
|
1,926,368
|
0.57
|
%
|
|||||
|
Long-term interest rates
|
2,133,111
|
0.64
|
%
|
|||||
|
Net unrealized gain (loss) on long futures contracts
|
(695,153
|
)
|
(0.21
|
)%
|
||||
SHORT FUTURES CONTRACTS
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||
|
Agriculture
|
3,069,621
|
0.92
|
%
|
|||||
|
Energy
|
906,219
|
0.27
|
%
|
|||||
|
Metals
|
4,581,047
|
1.37
|
%
|
|||||
|
Stock indices
|
49,319
|
0.01
|
%
|
|||||
|
Short-term interest rates
|
(10,448
|
)
|
0.00
|
%
|
||||
|
Long-term interest rates
|
(2,215,414
|
)
|
(0.66
|
)%
|
||||
|
Net unrealized gain (loss) on short futures contracts
|
6,380,344
|
1.91
|
%
|
|||||
|
Net unrealized gain (loss) on open futures contracts
|
$
|
5,685,191
|
1.70
|
%
|
||||
FORWARD CURRENCY CONTRACTS
|
Description
|
Fair
Value ($)
|
% of Net
Asset Value
|
||||||
|
Various long forward currency contracts
|
$
|
6,864,179
|
2.06
|
%
|
||||
|
Various short forward currency contracts
|
1,503,207
|
0.45
|
%
|
|||||
|
Net unrealized gain (loss) on open forward currency contracts
|
$
|
8,367,386
|
2.51
|
%
|
||||
| * |
Pledged as collateral for the trading of futures positions.
|
| ** |
Included in fixed income securities are U.S. Treasury Bills with a fair value of $51,073,206 deposited with the futures brokers.
|
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
DECEMBER 31, 2019 AND 2018
|
2019
|
2018
|
|||||||
|
ASSETS
|
||||||||
|
Equity in futures brokers trading accounts
|
||||||||
|
Cash
|
$
|
15,751,729
|
$
|
29,264,709
|
||||
|
Restricted cash
|
4,648,990
|
0
|
||||||
|
Fixed income securities (cost $53,635,500 and $51,077,094, respectively)
|
53,641,527
|
51,073,206
|
||||||
|
Net unrealized gain (loss) on open futures contracts
|
(8,139,937
|
)
|
5,685,191
|
|||||
|
Total equity in futures brokers trading accounts
|
65,902,309
|
86,023,106
|
||||||
|
Cash and cash equivalents
|
15,970,752
|
22,653,467
|
||||||
|
Restricted cash at interbank market maker
|
29,815,239
|
15,828,352
|
||||||
|
Short term investments (cost $4,780 and $2,868, respectively)
|
4,780
|
2,868
|
||||||
|
Fixed income securities (cost $203,653,599 and $212,532,087, respectively)
|
203,906,525
|
212,096,650
|
||||||
|
Net unrealized gain on open forward currency contracts
|
0
|
8,367,386
|
||||||
|
Interest receivable
|
635,953
|
865,914
|
||||||
|
Total assets
|
$
|
316,235,558
|
$
|
345,837,743
|
||||
|
LIABILITIES
|
||||||||
|
Accounts payable
|
$
|
327,900
|
$
|
315,936
|
||||
|
Management fee payable
|
995,719
|
1,104,485
|
||||||
|
Net unrealized loss on open forward currency contracts
|
2,663,677
|
0
|
||||||
|
Accrued commissions and other trading fees on open contracts
|
183,841
|
65,526
|
||||||
|
Offering costs payable
|
114,869
|
126,325
|
||||||
|
Redemptions payable
|
2,442,931
|
10,333,537
|
||||||
|
Total liabilities
|
6,728,937
|
11,945,809
|
||||||
|
UNITHOLDERS’ CAPITAL (Net Asset Value)
|
||||||||
|
Series A Units - Redeemable
|
||||||||
|
Other Unitholders - 95,005.038 and 111,488.756 units outstanding at December 31, 2019 and December 31, 2018
|
243,974,281
|
265,715,642
|
||||||
|
Series B Units – Redeemable
|
||||||||
|
Other Unitholders - 13,005.349 and 15,779.825 units outstanding at December 31, 2019 and December 31, 2018
|
36,551,654
|
40,954,227
|
||||||
|
Series D Units – Redeemable
|
||||||||
|
Other Unitholders - 3,366.350 and 1,569.589 units outstanding at December 31, 2019 and December 31, 2018
|
3,507,300
|
1,517,078
|
||||||
|
Series W Units – Redeemable
|
||||||||
|
Other Unitholders - 8,389.889 and 9,306.953 units outstanding at December 31, 2019 and December 31, 2018
|
25,473,386
|
25,704,987
|
||||||
|
Total unitholders’ capital (Net Asset Value)
|
309,506,621
|
333,891,934
|
||||||
|
Total liabilities and unitholders’ capital (Net Asset Value)
|
$
|
316,235,558
|
$
|
345,837,743
|
||||
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
STATEMENTS OF OPERATIONS
|
2019
|
2018
|
2017
|
||||||||||
|
TRADING GAINS (LOSSES)
|
||||||||||||
|
Futures trading gains (losses)
|
||||||||||||
|
Realized
|
$
|
59,284,141
|
$
|
(41,063,148
|
)
|
$
|
66,030,994
|
|||||
|
Change in unrealized
|
(13,825,128
|
)
|
(3,309,269
|
)
|
5,322,374
|
|||||||
|
Brokerage commissions
|
(2,033,950
|
)
|
(1,883,439
|
)
|
(2,870,975
|
)
|
||||||
|
Net gain (loss) from futures trading
|
43,425,063
|
(46,255,856
|
)
|
68,482,393
|
||||||||
|
Forward currency trading gains (losses)
|
||||||||||||
|
Realized
|
98,082
|
7,468,040
|
(31,295,280
|
)
|
||||||||
|
Change in unrealized
|
(11,031,063
|
)
|
5,265,522
|
(2,785,471
|
)
|
|||||||
|
Brokerage commissions
|
(264,320
|
)
|
(158,621
|
)
|
(143,438
|
)
|
||||||
|
Net gain (loss) from forward currency trading
|
(11,197,301
|
)
|
12,574,941
|
(34,224,189
|
)
|
|||||||
|
Total net trading gain (loss)
|
32,227,762
|
(33,680,915
|
)
|
34,258,204
|
||||||||
|
NET INVESTMENT INCOME (LOSS)
|
||||||||||||
|
Investment income
|
||||||||||||
|
Interest income
|
7,783,398
|
9,144,196
|
7,357,870
|
|||||||||
|
Realized gain (loss) on fixed income securities
|
17,516
|
(68,489
|
)
|
28,191
|
||||||||
|
Change in unrealized gain (loss) on fixed income securities
|
698,278
|
(329,773
|
)
|
(176,663
|
)
|
|||||||
|
Total investment income
|
8,499,192
|
8,745,934
|
7,209,398
|
|||||||||
|
Expenses
|
||||||||||||
|
Management fee
|
12,792,990
|
16,863,539
|
24,073,819
|
|||||||||
|
Service fee
|
0
|
0
|
25,238
|
|||||||||
|
Performance fee
|
21,165
|
0
|
3,207
|
|||||||||
|
Operating expenses
|
1,045,001
|
1,083,249
|
1,312,796
|
|||||||||
|
Total expenses
|
13,859,156
|
17,946,788
|
25,415,060
|
|||||||||
|
Net investment income (loss)
|
(5,359,964
|
)
|
(9,200,854
|
)
|
(18,205,662
|
)
|
||||||
|
NET INCOME (LOSS)
|
$
|
26,867,798
|
$
|
(42,881,769
|
)
|
$
|
16,052,542
|
|||||
|
NET INCOME (LOSS) PER OTHER
|
||||||||||||
|
UNITHOLDERS’ UNIT (1)
|
||||||||||||
|
(based on weighted average number of units outstanding during the year)
|
||||||||||||
|
Series A
|
$
|
206.88
|
$
|
(241.12
|
)
|
$
|
55.84
|
|||||
|
Series B
|
$
|
229.60
|
$
|
(268.63
|
)
|
$
|
64.98
|
|||||
|
Series D
|
$
|
7.56
|
$
|
(55.90
|
)
|
$
|
38.87
|
|||||
|
Series W
|
$
|
296.97
|
$
|
(226.75
|
)
|
$
|
147.87
|
|||||
|
INCREASE (DECREASE) IN NET ASSET VALUE
|
||||||||||||
|
PER OTHER UNITHOLDERS’ UNIT (1)
|
||||||||||||
|
Series A
|
$
|
184.67
|
$
|
(236.45
|
)
|
$
|
65.85
|
|||||
|
Series B
|
$
|
215.16
|
$
|
(246.07
|
)
|
$
|
85.28
|
|||||
|
Series D
|
$
|
75.33
|
$
|
(85.71
|
)
|
$
|
52.25
|
|||||
|
Series W
|
$
|
274.29
|
$
|
(216.72
|
)
|
$
|
131.44
|
|||||
|
WEIGHTED AVERAGE NUMBER OF UNITS
|
||||||||||||
|
OUTSTANDING DURING THE YEAR (1)
|
||||||||||||
|
Series A
|
101,873.281
|
136,862.599
|
190,971.399
|
|||||||||
|
Series B
|
13,936.620
|
20,850.911
|
30,486.440
|
|||||||||
|
Series D
|
1,923.132
|
1,054.474
|
164.537
|
|||||||||
|
Series W
|
8,679.578
|
18,617.272
|
22,999.170
|
|||||||||
| (1) |
Series D Units commenced trading on October 1, 2017
|
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
STATEMENTS OF CASH FLOWS
|
2019
|
2018
|
2017
|
||||||||||
|
Cash flows from (for) operating activities
|
||||||||||||
|
Net income (loss)
|
$
|
26,867,798
|
$
|
(42,881,769
|
)
|
$
|
16,052,542
|
|||||
|
Adjustments to reconcile net income (loss) to net cash from (for) operating activities
|
||||||||||||
|
Net change in unrealized on futures, forwards and investments
|
24,157,913
|
(1,626,480
|
)
|
(2,360,240
|
)
|
|||||||
|
(Increase) decrease in interest receivable
|
229,961
|
85,383
|
246,139
|
|||||||||
|
Increase (decrease) in accounts payable and accrued expenses
|
21,513
|
(667,896
|
)
|
(799,541
|
)
|
|||||||
|
Purchases of investments
|
(3,432,774,078
|
)
|
(4,845,927,971
|
)
|
(7,174,807,190
|
)
|
||||||
|
Sales/maturities of investments
|
3,439,092,248
|
5,076,894,272
|
7,396,586,326
|
|||||||||
|
Net cash from (for) operating activities
|
57,595,355
|
185,875,539
|
234,918,036
|
|||||||||
|
Cash flows from (for) financing activities
|
||||||||||||
|
Addition of units
|
17,036,486
|
24,249,599
|
24,768,797
|
|||||||||
|
Redemption of units
|
(74,709,778
|
)
|
(190,372,928
|
)
|
(254,787,739
|
)
|
||||||
|
Offering costs paid
|
(1,481,881
|
)
|
(1,685,691
|
)
|
(2,830,682
|
)
|
||||||
|
Net cash from (for) financing activities
|
(59,155,173
|
)
|
(167,809,020
|
)
|
(232,849,624
|
)
|
||||||
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
(1,559,818
|
)
|
18,066,519
|
2,068,412
|
||||||||
|
Cash, cash equivalents and restricted cash at beginning of year
|
67,746,528
|
49,680,009
|
47,611,597
|
|||||||||
|
Cash, cash equivalents and restricted cash at end of year
|
$
|
66,186,710
|
$
|
67,746,528
|
$
|
49,680,009
|
||||||
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Statements of Financial Condition that sum to the total of the same such amounts
shown in the Statements of Cash Flows.
|
2019
|
2018
|
2017
|
||||||||||
|
Cash, cash equivalents and restricted cash at end of year consists of:
|
||||||||||||
|
Cash in futures brokers trading accounts
|
$
|
15,751,729
|
$
|
29,264,709
|
$
|
46,914,581
|
||||||
|
Restricted cash in futures brokers trading accounts
|
4,648,990
|
0
|
936,583
|
|||||||||
|
Cash and cash equivalents
|
15,970,752
|
22,653,467
|
1,828,845
|
|||||||||
|
Restricted cash at interbank market maker
|
29,815,239
|
15,828,352
|
0
|
|||||||||
|
Total cash, cash equivalents and restricted cash at end of year
|
$
|
66,186,710
|
$
|
67,746,528
|
$
|
49,680,009
|
||||||
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
|
Series A - Other Unitholders
|
Series B - Other Unitholders
|
|||||||||||||||
|
Units
|
Amount
|
Units
|
Amount
|
|||||||||||||
|
Balances at December 31, 2016
|
224,143.366
|
$
|
572,449,293
|
36,691.856
|
$
|
101,127,802
|
||||||||||
|
Net income (loss)
|
10,664,096
|
1,981,153
|
||||||||||||||
|
Additions
|
5,671.031
|
14,279,057
|
14.356
|
40,002
|
||||||||||||
|
Redemptions
|
(74,158.124
|
)
|
(187,180,241
|
)
|
(12,096.895
|
)
|
(33,223,597
|
)
|
||||||||
|
Offering costs
|
(2,425,772
|
)
|
0
|
|||||||||||||
|
Balances at December 31, 2017
|
155,656.273
|
$
|
407,786,433
|
24,609.317
|
$
|
69,925,360
|
||||||||||
|
Net income (loss)
|
(33,000,037
|
)
|
(5,601,242
|
)
|
||||||||||||
|
Additions
|
6,664.265
|
16,077,415
|
0.000
|
0
|
||||||||||||
|
Redemptions
|
(50,831.782
|
)
|
(123,807,843
|
)
|
(8,829.492
|
)
|
(23,369,891
|
)
|
||||||||
|
Offering costs
|
(1,340,326
|
)
|
0
|
|||||||||||||
|
Balances at December 31, 2018
|
111,488.756
|
$
|
265,715,642
|
15,779.825
|
$
|
40,954,227
|
||||||||||
|
Net income (loss)
|
21,075,846
|
3,199,864
|
||||||||||||||
|
Additions
|
5,196.680
|
13,815,772
|
29.109
|
78,844
|
||||||||||||
|
Redemptions
|
(21,680.398
|
)
|
(55,305,132
|
)
|
(2,803.585
|
)
|
(7,681,281
|
)
|
||||||||
|
Offering costs
|
(1,327,847
|
)
|
0
|
|||||||||||||
|
Balances at December 31, 2019
|
95,005.038
|
$
|
243,974,281
|
13,005.349
|
$
|
36,551,654
|
||||||||||
|
Net Asset Value per Other Unitholders’ Unit - Series A
|
||||||||||
|
December 31, 2019
|
December 31, 2018
|
December 31, 2017
|
||||||||
|
$
|
2,568.01
|
$
|
2,383.34
|
$
|
2,619.79
|
|||||
|
Net Asset Value per Other Unitholders’ Unit - Series B
|
||||||||||
|
December 31, 2019
|
December 31, 2018
|
December 31, 2017
|
||||||||
|
$
|
2,810.51
|
$
|
2,595.35
|
$
|
2,841.42
|
|||||
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
STATEMENT OF CHANGES IN UNITHOLDERS’ CAPITAL (NET ASSET VALUE)
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
|
Series D - Other Unitholders(1)
|
Series W - Other Unitholders
|
Trust
|
||||||||||||||||||
|
Units
|
Amount
|
Units
|
Amount
|
Total Amount
|
||||||||||||||||
|
Balances at December 31, 2016
|
0.000
|
$
|
0
|
23,481.665
|
$
|
66,856,645
|
$
|
740,433,740
|
||||||||||||
|
Net income (loss)
|
6,394
|
3,400,899
|
16,052,542
|
|||||||||||||||||
|
Additions
|
259.610
|
267,000
|
3,627.522
|
10,232,738
|
24,818,797
|
|||||||||||||||
|
Redemptions
|
0.000
|
0
|
(4,334.223
|
)
|
(12,323,261
|
)
|
(232,727,099
|
)
|
||||||||||||
|
Offering costs
|
(219
|
)
|
(328,834
|
)
|
(2,754,825
|
)
|
||||||||||||||
|
Balances at December 31, 2017
|
259.610
|
$
|
273,175
|
22,774.964
|
$
|
67,838,187
|
$
|
545,823,155
|
||||||||||||
|
Net income (loss)
|
(58,946
|
)
|
(4,221,544
|
)
|
(42,881,769
|
)
|
||||||||||||||
|
Additions
|
1,361.229
|
1,357,448
|
2,393.603
|
6,764,736
|
24,199,599
|
|||||||||||||||
|
Redemptions
|
(51.250
|
)
|
(49,436
|
)
|
(15,861.614
|
)
|
(44,411,881
|
)
|
(191,639,051
|
)
|
||||||||||
|
Offering costs
|
(5,163
|
)
|
(264,511
|
)
|
(1,610,000
|
)
|
||||||||||||||
|
Balances at December 31, 2018
|
1,569.589
|
$
|
1,517,078
|
9,306.953
|
$
|
25,704,987
|
$
|
333,891,934
|
||||||||||||
|
Net income (loss)
|
14,533
|
2,577,555
|
26,867,798
|
|||||||||||||||||
|
Additions
|
1,848.016
|
2,039,148
|
353.915
|
1,102,722
|
17,036,486
|
|||||||||||||||
|
Redemptions
|
(51.255
|
)
|
(53,221
|
)
|
(1,270.979
|
)
|
(3,779,538
|
)
|
(66,819,172
|
)
|
||||||||||
|
Offering costs
|
(10,238
|
)
|
(132,340
|
)
|
(1,470,425
|
)
|
||||||||||||||
|
Balances at December 31, 2019
|
3,366.350
|
$
|
3,507,300
|
8,389.889
|
$
|
25,473,386
|
$
|
309,506,621
|
||||||||||||
|
Net Asset Value per Other Unitholders’ Unit - Series D(1)
|
||||||||||
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||
|
$
|
1,041.87
|
$
|
966.54
|
$
|
1,052.25
|
|||||
|
Net Asset Value per Other Unitholders’ Unit - Series W
|
||||||||||
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||
|
$
|
3,036.20
|
$
|
2,761.91
|
$
|
2,978.63
|
|||||
| (1) |
Series D Units commenced trading on October 1, 2017
|
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
The following information presents per unit operating performance data and other supplemental financial data for Series A units for the years ended December 31, 2019, 2018 and 2017. This information has been
derived from information presented in the financial statements.
|
Series A
|
||||||||||||
|
2019
|
2018
|
2017
|
||||||||||
|
Per Unit Performance
|
||||||||||||
|
(for a unit outstanding throughout the entire year)
|
||||||||||||
|
Net asset value per unit at beginning of year
|
$
|
2,383.34
|
$
|
2,619.79
|
$
|
2,553.94
|
||||||
|
Income (loss) from operations:
|
||||||||||||
|
Total net trading gains (losses) (1)
|
243.73
|
(169.98
|
)
|
156.57
|
||||||||
|
Net investment income (loss) (1)
|
(46.03
|
)
|
(56.68
|
)
|
(78.02
|
)
|
||||||
|
Total net income (loss) from operations
|
197.70
|
(226.66
|
)
|
78.55
|
||||||||
|
Offering costs (1)
|
(13.03
|
)
|
(9.79
|
)
|
(12.70
|
)
|
||||||
|
Net asset value per unit at end of year
|
$
|
2,568.01
|
$
|
2,383.34
|
$
|
2,619.79
|
||||||
|
Total Return
|
7.75
|
%
|
(9.03
|
)%
|
2.58
|
%
|
||||||
|
Supplemental Data
|
||||||||||||
|
Ratios to average net asset value:
|
||||||||||||
|
Expenses prior to performance fee
|
4.38
|
%
|
4.29
|
%
|
4.27
|
%
|
||||||
|
Performance fee
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||||
|
Total expenses
|
4.38
|
%
|
4.29
|
%
|
4.27
|
%
|
||||||
|
Net investment income (loss) (2)
|
(1.79
|
)%
|
(2.32
|
)%
|
(3.12
|
)%
|
||||||
Total returns are calculated based on the change in value of a unit during the year. An individual unitholder’s total returns and ratios may vary from the above total returns and ratios based
on the timing of additions and redemptions.
| (1) |
Net investment income (loss) per unit and offering costs per unit are calculated by dividing the net investment income (loss) and offering costs by the average number of units outstanding during the
year. Total net trading gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.
|
| (2) |
Excludes performance fee.
|
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
FINANCIAL HIGHLIGHTS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
The following information presents per unit operating performance data and other supplemental financial data for Series B units for the years ended December 31, 2019, 2018 and 2017. This information has been
derived from information presented in the financial statements.
|
Series B
|
||||||||||||
|
2019
|
2018
|
2017
|
||||||||||
|
Per Unit Performance
|
||||||||||||
|
(for a unit outstanding throughout the entire year)
|
||||||||||||
|
Net asset value per unit at beginning of year
|
$
|
2,595.35
|
$
|
2,841.42
|
$
|
2,756.14
|
||||||
|
Income (loss) from operations:
|
||||||||||||
|
Total net trading gains (losses) (1)
|
265.18
|
(184.39
|
)
|
169.72
|
||||||||
|
Net investment income (loss) (1)
|
(50.02
|
)
|
(61.68
|
)
|
(84.44
|
)
|
||||||
|
Total net income (loss) from operations
|
215.16
|
(246.07
|
)
|
85.28
|
||||||||
|
Net asset value per unit at end of year
|
$
|
2,810.51
|
$
|
2,595.35
|
$
|
2,841.42
|
||||||
|
Total Return
|
8.29
|
%
|
(8.66
|
)%
|
3.09
|
%
|
||||||
|
Supplemental Data
|
||||||||||||
|
Ratios to average net asset value:
|
||||||||||||
|
Expenses prior to performance fee
|
4.38
|
%
|
4.29
|
%
|
4.28
|
%
|
||||||
|
Performance fee
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||||
|
Total expenses
|
4.38
|
%
|
4.29
|
%
|
4.28
|
%
|
||||||
|
Net investment income (loss) (2)
|
(1.79
|
)%
|
(2.33
|
)%
|
(3.12
|
)%
|
||||||
Total returns are calculated based on the change in value of a unit during the year. An individual unitholder’s total returns and ratios may vary from the above total returns and ratios based
on the timing of additions and redemptions.
| (1) |
Net investment income (loss) per unit is calculated by dividing the net investment income (loss) by the average number of units outstanding during the year. Total net trading gains (losses) is a
balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.
|
| (2) |
Excludes performance fee.
|
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
FINANCIAL HIGHLIGHTS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
The following information presents per unit operating performance data and other supplemental financial data for Series D units for the years ended December 31, 2019, 2018 and for the period October 1, 2017
(commencement of trading) to December 31, 2017. This information has been derived from information presented in the financial statements.
|
Series D(1)
|
||||||||||||
|
2019
|
2018
|
2017
|
||||||||||
|
Per Unit Performance
|
||||||||||||
|
(for a unit outstanding throughout the entire period)
|
||||||||||||
|
Net asset value per unit at beginning of period
|
$
|
966.54
|
$
|
1,052.25
|
$
|
1,000.00
|
||||||
|
Income (loss) from operations:
|
||||||||||||
|
Total net trading gains (losses) (2)
|
98.30
|
(72.14
|
)
|
77.90
|
||||||||
|
Net investment income (loss) (2)
|
(17.65
|
)
|
(8.67
|
)
|
(24.32
|
)
|
||||||
|
Total net income (loss) from operations
|
80.65
|
(80.81
|
)
|
53.58
|
||||||||
|
Offering costs (2)
|
(5.32
|
)
|
(4.90
|
)
|
(1.33
|
)
|
||||||
|
Net asset value per unit at end of period
|
$
|
1,041.87
|
$
|
966.54
|
$
|
1,052.25
|
||||||
|
Total Return
|
7.79
|
%
|
(8.15
|
)%
|
5.23
|
%
|
||||||
|
Supplemental Data
|
||||||||||||
|
Ratios to average net asset value:
|
||||||||||||
|
Expenses prior to performance fee(4)
|
2.93
|
%
|
2.89
|
%
|
2.65
|
%
|
||||||
|
Performance fee
|
0.99
|
%
|
0.00
|
%
|
1.63
|
%
|
||||||
|
Total expenses
|
3.92
|
%
|
2.89
|
%
|
4.28
|
%
|
||||||
|
Net investment income (loss) (3)(4)
|
(0.60
|
)%
|
(0.85
|
)%
|
(1.62
|
)%
|
||||||
Total returns are calculated based on the change in value of a unit during the period. An individual unitholder’s total returns and ratios may vary from the above total returns and ratios
based on the timing of additions and redemptions.
| (1) |
Series D Units commenced trading on October 1, 2017.
|
| (2) |
Net investment income (loss) per unit and offering costs per unit are calculated by dividing the net investment income (loss) and offering costs by the average number of units outstanding during the
period. Total net trading gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.
|
| (3) |
Excludes performance fee.
|
| (4) |
Annualized.
|
See Accompanying Notes to Financial Statements.
THE CAMPBELL FUND TRUST
FINANCIAL HIGHLIGHTS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
The following information presents per unit operating performance data and other supplemental financial data for Series W units for the years ended December 31, 2019, 2018 and 2017. This information has been
derived from information presented in the financial statements.
|
Series W
|
||||||||||||
|
2019
|
2018
|
2017
|
||||||||||
|
Per Unit Performance
|
||||||||||||
|
(for a unit outstanding throughout the entire year)
|
||||||||||||
|
Net asset value per unit at beginning of year
|
$
|
2,761.91
|
$
|
2,978.63
|
$
|
2,847.19
|
||||||
|
Income (loss) from operations:
|
||||||||||||
|
Total net trading gains (losses) (1)
|
282.59
|
(194.56
|
)
|
177.38
|
||||||||
|
Net investment income (loss) (1)
|
6.95
|
(7.95
|
)
|
(31.64
|
)
|
|||||||
|
Total net income (loss) from operations
|
289.54
|
(202.51
|
)
|
145.74
|
||||||||
|
Offering costs (1)
|
(15.25
|
)
|
(14.21
|
)
|
(14.30
|
)
|
||||||
|
Net asset value per unit at end of year
|
$
|
3,036.20
|
$
|
2,761.91
|
$
|
2,978.63
|
||||||
|
Total Return
|
9.93
|
%
|
(7.28
|
)%
|
4.62
|
%
|
||||||
|
Supplemental Data
|
||||||||||||
|
Ratios to average net asset value:
|
||||||||||||
|
Expenses prior to performance fee
|
2.34
|
%
|
2.32
|
%
|
2.25
|
%
|
||||||
|
Performance fee
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||||
|
Total expenses
|
2.34
|
%
|
2.32
|
%
|
2.25
|
%
|
||||||
|
Net investment income (loss) (2)
|
0.23
|
%
|
(0.29
|
)%
|
(1.11
|
)%
|
||||||
Total returns are calculated based on the change in value of a unit during the year. An individual unitholder’s total returns and ratios may vary from the above total returns and ratios based
on the timing of additions and redemptions.
| (1) |
Net investment income (loss) per unit and offering costs per unit are calculated by dividing the net investment income (loss) and offering costs by the average number of units outstanding during the
year. Total net trading gains (losses) is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information.
|
| (2) |
Excludes performance fee.
|
See Accompanying Notes to Financial Statements.
A. General Description of the Trust
The Campbell Fund Trust (the “Trust”) is a Delaware statutory trust which operates as a commodity investment pool. The Trust engages in the speculative trading of futures contracts and forward
currency contracts.
Effective August 31, 2008, the Trust began offering units of beneficial interest classified into Series A units, Series B units and Series W units. Effective July 1, 2017, the Trust began
offering units of beneficial interest classified into Series D units. The rights of the Series A units, Series B units, Series D units and Series W units are identical, except that the fees and commissions vary on a Series-by-Series basis.
Series A, Series D and Series W commenced trading on October 1, 2008, October 1, 2017 and March 1, 2009, respectively. The initial minimum subscription for Series A units, Series D units and Series W units is $25,000. Series B units are only
available for additional investments by existing holders of Series B units. See Note 1G, Note 1I, Note 2 and Note 6 for an explanation of allocations and Series specific charges.
B. Regulation
As a registrant with the Securities and Exchange Commission (the “SEC”), the Trust is subject to the regulatory requirements under the Securities and Exchange Act of 1934. As a commodity
investment pool, the Trust is subject to the regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National
Futures Association, an industry self-regulatory organization; and the requirements of the various commodity exchanges where the Trust executes transactions. Additionally, the Trust is subject to the requirements of futures commission
merchants (the “futures brokers”) and interbank market maker through which the Trust trades.
C. Method of Reporting
The Trust’s financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which may require the use of certain estimates made
by the Trust’s management. Actual results may differ from these estimates.
The Trust meets the definition of an investment company according to the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946-10, Financial
Services - Investment Companies.
Investment transactions are accounted for on the trade date. Gains or losses are realized when contracts are liquidated. Realized gains or losses on spot trades associated with forward
currency contract trading are included in realized gains or losses from forward currency trading. Net unrealized gains and losses on open contracts (the difference between contract trade value and fair value) are reported in the Statements
of Financial Condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with ASC 210-20, Offsetting - Balance Sheet. The fair value of futures (exchange-traded) contracts is based on the
various futures exchanges, and reflects the settlement price for each contract as of the close on the last business day of the reporting period. The fair value of forward currency (non-exchange traded) contracts was extrapolated on a
forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) on the last business day of the reporting period.
The fixed income investments are marked to market on the last business day of the reporting period by the Administrator using a third party vendor hierarchy of pricing providers who specialize
in such markets. The prices furnished by the providers consider the yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Premiums and discounts
on fixed income securities are amortized and accreted for financial reporting purposes.
The short term investments represent cash held at the custodian and invested overnight in a money market fund.
For purposes of both financial reporting and calculation of redemption value, Net Asset Value per unit is calculated by dividing Net Asset Value by the number of outstanding units.
D. Fair Value
The Trust follows the provisions of ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the
inputs to valuation techniques used to measure fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.
ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Trust has the ability to access at the measurement date. An
active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The value of the Trust’s exchange-traded
futures contracts fall into this category.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. This category
includes forward currency contracts that the Trust values using models or other valuation methodologies derived from observable market data. This category also includes fixed income investments.
Level 3 inputs are unobservable inputs for an asset or liability (including the Trust’s own assumptions used in determining the fair value of investments). Unobservable
inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of
and for the years ended December 31, 2019 and December 31, 2018, the Trust did not have any Level 3 assets or liabilities.
The following tables set forth by level within the fair value hierarchy the Trust’s investments accounted for at fair value on a recurring basis as of December 31, 2019 and December 31,
2018.
|
Fair Value at December 31, 2019
|
||||||||||||||||
|
Description
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
|
Investments
|
||||||||||||||||
|
Short term investments
|
$
|
4,780
|
$
|
0
|
$
|
0
|
$
|
4,780
|
||||||||
|
Fixed income securities
|
0
|
257,548,052
|
0
|
257,548,052
|
||||||||||||
|
Other Financial Instruments
|
||||||||||||||||
|
Exchange-traded futures contracts
|
(8,139,937
|
)
|
0
|
0
|
(8,139,937
|
)
|
||||||||||
|
Forward currency contracts
|
0
|
(2,663,677
|
)
|
0
|
(2,663,677
|
)
|
||||||||||
|
Total
|
$
|
(8,135,157
|
)
|
$
|
254,884,375
|
$
|
0
|
$
|
246,749,218
|
|||||||
|
Fair Value at December 31, 2018
|
||||||||||||||||
|
Description
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
|
Investments
|
||||||||||||||||
|
Short term investments
|
$
|
2,868
|
$
|
0
|
$
|
0
|
$
|
2,868
|
||||||||
|
Fixed income securities
|
0
|
263,169,856
|
0
|
263,169,856
|
||||||||||||
|
Other Financial Instruments
|
||||||||||||||||
|
Exchange-traded futures contracts
|
5,685,191
|
0
|
0
|
5,685,191
|
||||||||||||
|
Forward currency contracts
|
0
|
8,367,386
|
0
|
8,367,386
|
||||||||||||
|
Total
|
$
|
5,688,059
|
$
|
271,537,242
|
$
|
0
|
$
|
277,225,301
|
||||||||
The gross presentation of the fair value of the Trust’s derivatives by instrument type is shown in Note 10. See Condensed Schedules of Investments for additional detail categorization.
E. Cash and Cash Equivalents
Cash and cash equivalents includes cash and overnight money market investments at financial institutions.
F. Income Taxes
The Trust prepares calendar year U.S. federal and applicable state information tax returns and reports to the unitholders their allocable shares of the Trust’s income, expenses and trading
gains or losses. No provision for income taxes has been made in the accompanying financial statements as each unitholder is individually responsible for reporting income or loss based on such unitholder’s respective share of the Trust’s
income and expenses as reported for income tax purposes.
Management has continued to evaluate the application of ASC 740, Income Taxes, to the Trust, and has determined that no reserves for uncertain tax positions were required. There are no tax
positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months. The Trust files federal and state tax returns. The 2016 through 2019 tax years
generally remain subject to examination by the U.S. federal and most state tax authorities.
G. Offering Costs
Campbell & Company, LP (“Campbell & Company”) has incurred all costs in connection with the initial and continuous offering of units of the Trust (“offering costs”). Series A units,
Series D units and Series W units will each bear the offering costs incurred in relation to the offering of Series A units, Series D units and Series W units, respectively. Offering costs are charged to Series A, Series D and Series W at a
monthly rate of 1/12 of 0.5% (0.5% annualized) of each Series’ month-end net asset value (as defined in the Declaration of Trust and Trust Agreement) until such amounts are fully reimbursed. Such amounts are charged directly to unitholders’
capital. Series A, Series D and Series W are only liable for payment of offering costs on a monthly basis. The offering costs allocable to the Series B units are borne by Campbell & Company.
If the Trust terminates prior to completion of payment to Campbell & Company for the unreimbursed offering costs incurred through the date of such termination, Campbell & Company will
not be entitled to any additional payments, and Series A units, Series D units and Series W units will have no further obligation to Campbell & Company. At December 31, 2019 and 2018, the amount of unreimbursed offering costs incurred
by Campbell & Company is $245,152 and $116,422 for Series A units, $78,736 and $53,235 for Series D units and $240,264 and $215,298 for Series W units, respectively.
H. Foreign Currency Transactions
The Trust’s functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the
U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the
rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income.
I. Allocations
Income or loss (prior to calculation of the management fee, service fee, offering costs and performance fee) is allocated pro rata to each Series of units. Each Series of units is then charged
the management fee, service fee, offering costs and performance fee applicable to such Series of units.
J. Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The primary focus of
ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU
2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An affected entity is permitted to adopt the removed or modified disclosures upon the issuance of ASU
2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Campbell & Company has adopted the new guidance, and management has determined its adoption has no
material impact on the Trust’s financial statement disclosures.
In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections – Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and
Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates. The primary focus of ASU 2019-07 is to clarify amendments made by the SEC with the intention of facilitating the
disclosure of information to investors and simplifying compliance without significantly altering the total mix of information provided to investors. As a result of these amendments, an analysis of changes in equity is required for the
current and comparative interim periods, with subtotals for each interim period. Campbell & Company has adopted the new guidance, and management has determined its adoption has no material impact on the Trust’s financial statement
disclosures.
K. Reclassifications
Certain 2017 amounts in the Statements of Cash Flows were reclassified to conform with the adoption of ASU 2016-18 in the 2018 presentation. Specifically, restricted cash is no longer included
as a cash flow from (for) operating activities; and a reconciliation of cash, cash equivalents and restricted cash to amounts on the Statements of Financial Condition is presented on a gross basis.
Certain 2018 and 2017 amounts in the Notes to the Financial Statements were reclassified to conform with the 2019 presentation. Specifically, trading gains and losses in Note 8 were
reclassified to include and disclose the amounts of gains and losses on foreign currency cash balances at the futures brokers.
Note 2. MANAGING OPERATOR AND COMMODITY TRADING ADVISOR
The managing operator of the Trust is Campbell & Company which conducts and manages the business of the Trust. Campbell & Company is also the commodity trading advisor of the Trust.
Series A units and Series B units pay the managing operator a monthly management fee equal to 1/12 of 4% (4% annually) of the Net Assets (as defined) of Series A units and Series B units,
respectively, as of the end of each month. Series D units pay the managing operator a monthly management fee equal to 1/12 of 2.75% (2.75% annually) of the Net Assets (as defined) of Series D units as of the end of each month. Series W units
pay the managing operator a monthly management fee equal to 1/12 of 2% (2% annually) of the Net Assets (as defined) of Series W units as of the end of each month. Each Series of units will pay the managing operator a quarterly performance fee
equal to 20% of the aggregate cumulative appreciation in Net Asset Value per Unit (as defined) exclusive of appreciation attributable to interest income on a Series-by-Series basis.
The performance fee is paid on the cumulative increase, if any, in the Net Asset Value per Unit over the highest previous cumulative Net Asset Value per Unit (commonly referred to as a High
Water Mark). In determining the management fee and performance fee (the “fees”), adjustments shall be made for capital additions and withdrawals and Net Assets shall not be reduced by the fees being calculated for such current period. The
performance fee is not subject to any clawback provisions. The fees are typically paid in the month following the month in which they are earned. The fees are paid from the available cash at the Trust’s bank, broker or cash management custody
accounts.
Note 3. TRUSTEE
The trustee of the Trust is U.S. Bank National Association, a national banking corporation. The trustee has delegated to the managing operator the duty and authority to manage the business and
affairs of the Trust and has only nominal duties and liabilities with respect to the Trust.
Note 4. ADMINISTRATOR AND TRANSFER AGENT
Northern Trust Hedge Fund Services LLC serves as the Administrator of the Trust. The Administrator receives fees at rates agreed upon between the Trust and the Administrator and is entitled to
reimbursement of certain actual out-of-pocket expenses incurred while performing its duties. The Administrator’s primary responsibilities are portfolio accounting and fund accounting services.
Effective January 1, 2019, NAV Consulting, Inc. serves as the Transfer Agent for the Trust. The Transfer Agent receives fees at rates agreed upon between the Trust and the Transfer Agent and is
entitled to reimbursement of certain actual out-of-pocket expenses incurred while performing its duties.
Note 5. CASH MANAGER AND CUSTODIAN
PNC Capital Advisors, LLC serves as the cash manager under the Investment Advisory Agreement to manage and control the liquid assets of the Trust. PNC Capital Advisors, LLC is registered as an
investment adviser with the SEC of the United States under the Investment Advisers Act of 1940.
The Trust has a custodial account at the Northern Trust Company (the “custodian”) and has granted the cash manager authority to make certain investments on behalf of the Trust provided such
investments are consistent with the investment guidelines created by the managing operator. All securities purchased by the cash manager on behalf of the Trust will be held in its custody account at the custodian. The cash manager will have
no beneficial or other interest in the securities and cash in such custody account.
Note 6. SERVICE FEE
Prior to March 1, 2017, the selling firms who sold Series W units received a monthly service fee equal to 1/12 of 0.25% of the month-end Net Asset Value (as defined) of the Series W units,
totaling approximately 0.25% per year. Effective March 1, 2017, a monthly service fee is no longer paid by the Series W Units.
Note 7. DEPOSITS WITH FUTURES BROKERS
The Trust deposits assets with UBS Securities LLC and Goldman Sachs & Co. LLC as the futures brokers, subject to Commodity Futures Trading Commission regulations and various exchange and
futures broker requirements. Margin requirements are satisfied by the deposit of U.S. Treasury Bills and cash with such futures brokers. The Trust typically earns interest income on its assets deposited with the futures brokers.
Note 8. DEPOSITS WITH INTERBANK MARKET MAKER
The Trust’s counterparty with regard to its forward currency transactions is NatWest Markets plc (“NatWest”). The Trust has entered into an International Swaps and Derivatives Association Master
Agreement (“ISDA Agreement”) with NatWest which governs these transactions. The credit ratings reported by the three major rating agencies for NatWest were considered investment grade as of December 31, 2019. Margin requirements are satisfied
by the deposit of cash with NatWest. The Trust typically earns interest income on its assets deposited with NatWest.
Note 9. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in the Trust are made by subscription agreement, subject to acceptance by Campbell & Company.
The Trust is not required to make distributions, but may do so at the sole discretion of Campbell & Company. A unitholder may request and receive redemption of units owned, subject to
restrictions in the Declaration of Trust and Trust Agreement. Units are transferable, but no market exists for their sale and none is expected to develop. Monthly redemptions are permitted upon ten (10) business days advance written notice to
Campbell & Company.
Redemption fees, which are paid to Campbell & Company, apply to Series A units through the first twelve month-ends following purchase (the month-end as of which the unit is purchased is
counted as the first month-end) as follows: 1.833% of Net Asset Value per unit redeemed through the second month-end, 1.666% of Net Asset Value per unit redeemed through the third month-end, 1.500% of Net Asset Value per unit redeemed through
the fourth month-end, 1.333% of Net Asset Value per unit redeemed through the fifth month-end, 1.167% of Net Asset Value per unit redeemed through the sixth month-end, 1.000% of Net Asset Value per unit redeemed through the seventh month-end,
0.833% of Net Asset Value per unit redeemed through the eighth month-end, 0.667% of Net Asset Value per unit redeemed through the ninth month-end, 0.500% of Net Asset Value per unit redeemed through the tenth month-end, 0.333% of Net Asset
Value per unit redeemed through the eleventh month-end and 0.167% of Net Asset Value per unit redeemed through the twelfth month end. For the years ended December 31, 2019 and 2018, Campbell & Company received redemption fees of $36 and
$896, respectively.
Note 10. TRADING ACTIVITIES AND RELATED RISKS
The Trust engages in the speculative trading of U.S. and foreign futures contracts and forward currency contracts (collectively, “derivatives”). Specifically, the Trust trades a portfolio
focused on futures and forward contracts, which are instruments designed to hedge changes in interest rates, currency exchange rates, stock index values, metals, energy and agriculture values. The Trust is exposed to both market risk, the
risk arising from changes in the fair value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract.
Market Risk
For derivatives, risks arise from changes in the fair value of the contracts. Market movements result in frequent changes in the fair value of the Trust’s open positions and, consequently, in
its earnings and cash flow. The Trust’s market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the fair value of financial instruments and contracts,
the diversification effects among the Trust’s open positions and the liquidity of the markets in which it trades. Theoretically, the Trust is exposed to a market risk equal to the notional contract value of futures and forward currency
contracts purchased and unlimited liability on such contracts sold short. See Note 1.C. for an explanation of how the Trust determines its valuation for derivatives as well as the netting of derivatives.
The Trust adopted the provisions of ASC 815, Derivatives and Hedging, (“ASC 815”). ASC 815 provides enhanced disclosures about how and why an entity uses derivative instruments, how derivative
instruments are accounted for, and how derivative instruments affect an entity’s financial position, financial performance and cash flows.
The following tables summarize quantitative information required by ASC 815. The fair value of the Trust’s derivatives by instrument type, as well as the location of those instruments on the
Statements of Financial Condition, as of December 31, 2019 and 2018 is as follows:
|
Type of Instrument *
|
Statements of Financial Condition Location
|
Asset
Derivatives at
December 31, 2019
Fair Value
|
Liability
Derivatives at
December 31, 2019
Fair Value
|
Net
|
|||||||||
|
Agriculture Contracts
|
Net unrealized gain (loss) on open futures contracts
|
$
|
193,039
|
$
|
(2,931,321
|
)
|
$
|
(2,738,282
|
)
|
||||
|
Energy Contracts
|
Net unrealized gain (loss) on open futures contracts
|
1,761,936
|
(275,743
|
)
|
1,486,193
|
||||||||
|
Metal Contracts
|
Net unrealized gain (loss) on open futures contracts
|
5,593,742
|
(8,006,981
|
)
|
(2,413,239
|
)
|
|||||||
|
Stock Indices Contracts
|
Net unrealized gain (loss) on open futures contracts
|
1,340,862
|
(1,169,714
|
)
|
171,148
|
||||||||
|
Short-Term Interest Rate Contracts
|
Net unrealized gain (loss) on open futures contracts
|
314,422
|
(1,080,128
|
)
|
(765,706
|
)
|
|||||||
|
Long-Term Interest Rate Contracts
|
Net unrealized gain (loss) on open futures contracts
|
1,421,030
|
(5,301,081
|
)
|
(3,880,051
|
)
|
|||||||
|
Forward Currency Contracts
|
Net unrealized gain (loss) on open forward currency contracts
|
23,303,459
|
(25,967,136
|
)
|
(2,663,677
|
)
|
|||||||
|
Totals
|
|
$
|
33,928,490
|
$
|
(44,732,104
|
)
|
$
|
(10,803,614
|
)
|
||||
| * |
Derivatives not designated as hedging instruments under ASC 815
|
|
Type of Instrument *
|
Statements of Financial Condition Location
|
Asset
Derivatives at
December 31, 2018
Fair Value
|
Liability
Derivatives at
December 31, 2018
Fair Value
|
Net
|
|||||||||
|
Agriculture Contracts
|
Net unrealized gain (loss) on open futures contracts
|
$
|
3,387,407
|
$
|
(72,296
|
)
|
$
|
3,315,111
|
|||||
|
Energy Contracts
|
Net unrealized gain (loss) on open futures contracts
|
944,156
|
(1,618,352
|
)
|
(674,196
|
)
|
|||||||
|
Metal Contracts
|
Net unrealized gain (loss) on open futures contracts
|
4,959,401
|
(3,620,851
|
)
|
1,338,550
|
||||||||
|
Stock Indices Contracts
|
Net unrealized gain (loss) on open futures contracts
|
1,209,323
|
(1,337,214
|
)
|
(127,891
|
)
|
|||||||
|
Short-Term Interest Rate Contracts
|
Net unrealized gain (loss) on open futures contracts
|
1,943,511
|
(27,591
|
)
|
1,915,920
|
||||||||
|
Long-Term Interest Rate Contracts
|
Net unrealized gain (loss) on open futures contracts
|
2,271,180
|
(2,353,483
|
)
|
(82,303
|
)
|
|||||||
|
Forward Currency Contracts
|
Net unrealized gain (loss) on open forward currency contracts
|
22,965,576
|
(14,598,190
|
)
|
8,367,386
|
||||||||
|
Totals
|
|
$
|
37,680,554
|
$
|
(23,627,977
|
)
|
$
|
14,052,577
|
|||||
| * |
Derivatives not designated as hedging instruments under ASC 815
|
The trading gains and losses of the Trust’s derivatives by instrument type, as well as the location of those gains and losses on the Statements of Operations, for the years ended December 31,
2019, 2018 and 2017 is as follows:
|
Type of Instrument
|
Trading Gains/(Losses)
for the Year Ended
December 31, 2019
|
Trading Gains/(Losses)
for the Year Ended
December 31, 2018
|
Trading Gains/(Losses)
for the Year Ended
December 31, 2017
|
|||||||||
|
Agriculture Contracts
|
$
|
(7,126,680
|
)
|
$
|
(11,585,635
|
)
|
$
|
(22,546,602
|
)
|
|||
|
Energy Contracts
|
(12,721,868
|
)
|
12,454,587
|
(13,289,345
|
)
|
|||||||
|
Metal Contracts
|
(7,521,499
|
)
|
(12,610,804
|
)
|
(182,753
|
)
|
||||||
|
Stock Indices Contracts
|
31,676,122
|
(41,707,511
|
)
|
135,814,324
|
||||||||
|
Short-Term Interest Rate Contracts
|
10,229,458
|
8,897,512
|
(4,394,419
|
)
|
||||||||
|
Long-Term Interest Rate Contracts
|
30,923,480
|
179,434
|
(24,047,837
|
)
|
||||||||
|
Forward Currency Contracts
|
(10,932,981
|
)
|
12,733,562
|
(34,080,751
|
)
|
|||||||
|
Total
|
$
|
34,526,032
|
$
|
(31,638,855
|
)
|
$
|
37,272,617
|
|||||
|
Line Item in the Statements of Operations
|
Trading Gains/(Losses)
for the Year Ended
December 31, 2019
|
Trading Gains/(Losses)
for the Year Ended
December 31, 2018
|
|
Trading Gains/(Losses)
for the Year Ended
December 31, 2017
|
||||||||
|
Futures trading gains (losses):
|
||||||||||||
|
Realized**
|
$
|
59,284,141
|
$
|
(41,063,148
|
)
|
$
|
66,030,994
|
|||||
|
Change in unrealized
|
(13,825,128
|
)
|
(3,309,269
|
)
|
5,322,374
|
|||||||
|
Forward currency trading gains (losses):
|
||||||||||||
|
Realized**
|
98,082
|
7,468,040
|
(31,295,280
|
)
|
||||||||
|
Change in unrealized
|
(11,031,063
|
)
|
5,265,522
|
(2,785,471
|
)
|
|||||||
|
Total
|
$
|
34,526,032
|
$
|
(31,638,855
|
)
|
$
|
37,272,617
|
|||||
| ** |
For the years ended December 31, 2019, 2018 and 2017, the amounts above include gains and losses on foreign currency cash balances at the futures brokers of $208,630, $(44,052) and $126,994,
respectively; and gains and losses on spot trades in connection with forward currency trading at the interbank market makers of $1,391,620, $0 and $0, respectively.
|
For the years ended December 31, 2019, 2018 and 2017, the monthly average of futures contracts bought
and sold was approximately 47,500, 42,800 and 60,700, respectively, and the monthly average of notional value of forward currency contracts was $3,184,100,000, $2,076,800,000 and $2,489,600,000, respectively.
Open contracts generally mature within three months; as of December 31, 2019, the latest maturity date for open futures contracts is March 2021 and the latest maturity date for open forward
currency contracts is March 2020. However, the Trust intends to close all futures and forward currency contracts prior to maturity.
Credit Risk
The Trust trades futures contracts on exchanges that require margin deposits with the futures brokers. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange
Act requires a futures broker to segregate all customer transactions and assets from such futures broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury Bills) deposited with a futures broker are
considered commingled with all other customer funds subject to the futures broker’s segregation requirements. In the event of a futures broker’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is
possible that the recovered amount could be less than total cash and other property deposited.
The Trust trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty nonperformance. Accordingly, the risks associated with
forward currency contracts are generally greater than those associated with exchange traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency contracts typically involves delayed cash
settlement.
The Trust has a portion of its assets on deposit with PNC Bank. In the event of a financial institution’s insolvency, recovery of the Trust’s assets on deposit may be limited to account
insurance or other protection afforded such deposits.
Under the terms of the ISDA Agreement with NatWest, upon the designation of an Event of Default, as defined in the ISDA Agreement, the non-defaulting party may set-off any sum or obligation owed
by the defaulting party to the non-defaulting party against any sum or obligation owed by the non-defaulting party to the defaulting party. If any sum or obligation is unascertained, the non-defaulting party may in good faith estimate that
sum or obligation and set-off in respect to that estimate, accounting to the other party when such sum or obligation is ascertained.
Under the terms of each of the master netting agreement with UBS Securities and Goldman Sachs, upon occurrence of a default by the Trust, as defined in respective account documents, UBS
Securities and Goldman Sachs have the right to close out any or all open contracts held in the Trust’s account; sell any or all of the securities held; and borrow or buy any securities, contracts or other property for the Trust’s account. The
Trust would be liable for any deficiency in its account resulting from such transactions.
The amount of required margin and good faith deposits with the futures broker and interbank market maker usually range from 10% to 30% of Net Asset Value. The fair value of securities held to
satisfy such requirements at December 31, 2019 and 2018 was $53,641,527 and $51,073,206, respectively, which equals approximately 17% and 15% of Net Asset Value, respectively. The cash deposited with the interbank market maker at December 31,
2019 and 2018 was $44,667,046 and 36,845,456, respectively, which equals approximately 14% and 11% of Net Asset Value, respectively. These amounts are included in cash, cash equivalents, and restricted cash. Included in cash deposits with the
futures brokers and interbank market maker at December 31, 2019 and 2018 was restricted cash for margin requirements of $34,464,229 and $15,828,352, respectively, which equals approximately 11% and 5% of Net Asset Value, respectively.
Set forth below are tables which disclose both gross information and net information about instruments and transactions eligible for offset in the Statements of Financial Condition and
instruments and transactions that are subject to a master netting agreement as well as amounts related to financial collateral (including U.S. Treasury Bills and cash collateral) held at clearing brokers and counterparties. Margin reflected
in the collateral tables is limited to the net amount of unrealized loss at each counterparty. Actual margin amounts required at each counterparty are based on the notional amounts or the number of contracts outstanding and may exceed the
margin presented in the collateral tables.
|
Offsetting of Derivative Assets by Counterparty
|
|||||||||||||
|
As of December 31, 2019
|
|
||||||||||||
|
Type of Instrument
|
Counterparty
|
Gross
Amounts of
Recognized Assets
|
Gross
Amounts
Offset in the
Statements of
Financial Condition
|
Net Amounts of
Unrealized Gain
Presented in the
Statements of
Financial Condition
|
|||||||||
|
Futures contracts
|
UBS Securities LLC |
$
|
5,396,065
|
$
|
(5,396,065
|
)
|
$
|
0
|
|||||
|
Futures contracts
|
Goldman Sachs & Co. LLC
|
5,228,966
|
(5,228,966
|
)
|
0
|
||||||||
|
Forward currency contracts
|
NatWest Markets plc
|
23,303,459
|
(23,303,459
|
)
|
0
|
||||||||
|
Total derivatives
|
$
|
33,928,490
|
$
|
(33,928,490
|
)
|
$
|
0
|
||||||
|
Derivative Assets and Collateral Received by Counterparty
|
||||||||||||||||
|
As of December 31, 2019
|
Net Amount
|
|||||||||||||||
|
Counterparty
|
Net Amounts of
Unrealized Gain
in the Statements
of Financial Condition
|
Gross Amounts Not Offset in the
Statements of Financial Condition
|
||||||||||||||
|
Financial
Instruments
|
Cash Collateral
Received
|
|||||||||||||||
|
UBS Securities LLC
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||||
|
Goldman Sachs & Co. LLC
|
0
|
0
|
0
|
0
|
||||||||||||
|
NatWest Markets plc
|
0
|
0
|
0
|
0
|
||||||||||||
|
Total
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||||
|
Offsetting of Derivative Liabilities by Counterparty
|
|||||||||||||
|
As of December 31, 2019
|
|
||||||||||||
|
Type of Instrument
|
Counterparty
|
Gross Amounts
of Recognized
Liabilities
|
Gross
Amounts
Offset in the
Statements of
Financial Condition
|
Net Amounts of
Unrealized Loss
Presented in the
Statements of
Financial Condition
|
|||||||||
|
Futures contracts
|
UBS Securities LLC
|
$
|
9,348,737
|
$
|
(5,396,065
|
)
|
$
|
3,952,672
|
|||||
|
Futures contracts
|
Goldman Sachs & Co. LLC
|
9,416,231
|
(5,228,966
|
)
|
4,187,265
|
||||||||
|
Forward currency contracts
|
NatWest Markets plc
|
25,967,136
|
(23,303,459
|
)
|
2,663,677
|
||||||||
|
Total derivatives
|
|
$
|
44,732,104
|
$
|
(33,928,490
|
)
|
$
|
10,803,614
|
|||||
|
Derivative Liabilities and Collateral Pledged by Counterparty
|
||||||||||||||||
|
As of December 31, 2019
|
||||||||||||||||
|
Counterparty
|
Net Amounts of
Unrealized Loss
in the Statements
of Financial Condition
|
Gross Amounts Not Offset in the
Statements of Financial Condition
|
Net Amount
|
|||||||||||||
|
Financial
Instruments
|
Cash Collateral
Pledged
|
|||||||||||||||
|
UBS Securities LLC
|
$
|
3,952,672
|
$
|
0
|
$
|
(3,952,672
|
)
|
$
|
0
|
|||||||
|
Goldman Sachs & Co. LLC
|
4,187,265
|
0
|
(4,187,265
|
)
|
0
|
|||||||||||
|
NatWest Markets plc
|
2,663,677
|
0
|
(2,663,677
|
)
|
0
|
|||||||||||
|
Total
|
$
|
10,803,614
|
$
|
0
|
$
|
(10,803,614
|
)
|
$
|
0
|
|||||||
|
Offsetting of Derivative Assets by Counterparty
|
|||||||||||||
|
As of December 31, 2018
|
|
||||||||||||
|
Type of Instrument
|
Counterparty
|
Gross
Amounts of
Recognized Assets
|
Gross
Amounts
Offset in the
Statements of
Financial Condition
|
Net Amounts of
Unrealized Gain
Presented in the
Statements of
Financial Condition
|
|||||||||
|
Futures contracts
|
UBS Securities LLC
|
$
|
7,589,907
|
$
|
(4,587,126
|
)
|
$
|
3,002,781
|
|||||
|
Futures contracts
|
Goldman Sachs & Co. LLC
|
7,125,071
|
(4,442,661
|
)
|
2,682,410
|
||||||||
|
Forward currency contracts
|
NatWest Markets plc
|
22,965,576
|
(14,598,190
|
)
|
8,367,386
|
||||||||
|
Total derivatives
|
|
$
|
37,680,554
|
$
|
(23,627,977
|
)
|
$
|
14,052,577
|
|||||
|
Derivative Assets and Collateral Received by Counterparty
|
||||||||||||||||
|
As of December 31, 2018
|
||||||||||||||||
|
Counterparty
|
Net Amounts of
Unrealized Gain
in the Statements
of Financial Condition
|
Gross Amounts Not Offset in the
Statements of Financial Condition
|
Net Amount
|
|||||||||||||
|
Financial
Instruments
|
Cash Collateral
Received
|
|||||||||||||||
|
UBS Securities LLC
|
$
|
3,002,781
|
$
|
0
|
$
|
0
|
$
|
3,002,781
|
||||||||
|
Goldman Sachs & Co. LLC
|
2,682,410
|
0
|
0
|
2,682,410
|
||||||||||||
|
NatWest Markets plc
|
8,367,386
|
0
|
0
|
8,367,386
|
||||||||||||
|
Total
|
$
|
14,052,577
|
$
|
0
|
$
|
0
|
$
|
14,052,577
|
||||||||
|
Offsetting of Derivative Liabilities by Counterparty
|
|||||||||||||
|
As of December 31, 2018
|
|
||||||||||||
|
Type of Instrument
|
Counterparty
|
Gross Amounts
of Recognized
Liabilities
|
Gross
Amounts
Offset in the
Statements of
Financial Condition
|
Net Amounts of
Unrealized Loss
Presented in the
Statements of
Financial Condition
|
|||||||||
|
Futures contracts
|
UBS Securities LLC
|
$
|
4,587,126
|
$
|
(4,587,126
|
)
|
$
|
0
|
|||||
|
Futures contracts
|
Goldman Sachs & Co. LLC
|
4,442,661
|
(4,442,661
|
)
|
0
|
||||||||
|
Forward currency contracts
|
NatWest Markets plc
|
14,598,190
|
(14,598,190
|
)
|
0
|
||||||||
|
Total derivatives
|
|
$
|
23,627,977
|
$
|
(23,627,977
|
)
|
$
|
0
|
|||||
|
Derivative Liabilities and Collateral Pledged by Counterparty
|
||||||||||||||||
|
As of December 31, 2018
|
||||||||||||||||
|
Counterparty
|
Net Amounts of
Unrealized Loss
in the Statements
of Financial Condition
|
Gross Amounts Not Offset in the
Statements of Financial Condition
|
Net Amount
|
|||||||||||||
|
Financial
Instruments
|
Cash Collateral
Pledged
|
|||||||||||||||
|
UBS Securities LLC
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||||
|
Goldman Sachs & Co. LLC
|
0
|
0
|
0
|
0
|
||||||||||||
|
NatWest Markets plc
|
0
|
0
|
0
|
0
|
||||||||||||
|
Total
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||||
Campbell & Company has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so.
Campbell & Company’s basic market risk control procedures consist of continuously monitoring open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30%. Campbell & Company’s
attempt to manage the risk of the Trust’s open positions is essentially the same in all market categories traded. Campbell & Company applies risk management policies to its trading which generally limit the total exposure that may be
taken per “risk unit” of assets under management. In addition, Campbell & Company follows diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as reducing
position sizes dynamically in response to trading losses. Campbell & Company controls the risk of the Trust’s non-trading fixed income instruments by limiting the duration of such instruments and requiring a minimum credit quality of the
issuers of those instruments.
Campbell & Company seeks to minimize credit risk primarily by depositing and maintaining the Trust’s assets at financial institutions and brokers which Campbell & Company believes to be
credit worthy. The unitholder bears the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received.
Note 11. INDEMNIFICATIONS
In the normal course of business, the Trust enters into contracts and agreements that contain a variety of representations and warranties which provide general indemnifications. The Trust’s
maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. The Trust expects the risk of any future obligation under these indemnifications to be
remote.
Note 12. SUBSEQUENT EVENTS
The impact of the coronavirus (“COVID-19”) outbreak on the financial
performance of the Trust’s investments will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of COVID-19 on the financial markets
and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Trust’s ability to trade and investment results may be materially affected.
Effective January 1, 2020, NAV Consulting, Inc. replaced Northern Trust Hedge Fund Services LLC as the Trust’s Administrator.
Management of the Trust has evaluated subsequent events through the date the financial statements were filed. There are no other subsequent events to disclose or record.
79