UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended: September 30, 2020

 

Or

 

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

 

Commission File Number: 000-54028

 

MILLBURN MULTI-MARKETS FUND L.P.

(Exact name of registrant as specified in its charter)

 

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

 

c/o MILLBURN RIDGEFIELD CORPORATION

55 West 46^th Street, 31^st Floor

New York, NY 10036 

 (Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (212) 332-7300

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		None		None

 

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

 

Yes ☒ No ☐

 

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

 

Yes ☒ No ☐

 

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

 

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

 

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

 

Yes  ☐ No ☐

 

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

 

Yes ☐ No ☒

 

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Millburn Multi-Markets Fund L.P.

Financial statements

For the three and nine months ended September 30, 2020 and 2019 (unaudited)

 

Statements of Financial Condition (a)		1
Statements of Operations (c)		2
Statements of Changes in Partners’ Capital (b)		4
Statements of Financial Highlights (c)		5
Notes to Financial Statements		9

 

(a)

At September 30, 2020 (unaudited) and December 31, 2019

(b)

For the nine months ended September 30, 2020 and 2019 (unaudited)

(c)

For the three and nine months ended September 30, 2020 and 2019 (unaudited)

  

 

Millburn Multi-Markets Fund L.P.

Statements of Financial Condition

 

		September 30, 2020 (unaudited)				December 31, 2019
ASSETS
Investment in Millburn Multi-Markets
Trading L.P. (the “Master Fund”)		$	145,308,218			$	191,189,357
Due from the Master Fund			7,775,717				736,814
Cash and cash equivalents			60,000				2,864,000
Total assets		$	153,143,935			$	194,790,171
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Capital contributions received in advance		$	60,000			$	2,864,000
Capital withdrawals payable to Limited Partners			7,775,717				736,814
Total liabilities			7,835,717				3,600,814
PARTNERS’ CAPITAL:
General Partner			2,717,415				3,122,595
Limited partners:
Series A (107,164.3869 and 132,149.4067  units outstanding)			114,353,977				166,972,241
Series B (6,342.6726 and 7,006.4813 units outstanding)			8,027,115				10,343,480
Series C (3,305.9311 and 3,207.8856 units outstanding)			4,268,791				4,831,807
Series D (13,053.9392 and 4,132.1394 units outstanding)			15,940,920				5,919,234
Total limited partners			142,590,803				188,066,762
Total partners’ capital			145,308,218				191,189,357
TOTAL		$	153,143,935			$	194,790,171
NET ASSET VALUE PER UNIT OUTSTANDING:
Series A		$	1,067.09			$	1,263.51
Series B		$	1,265.57			$	1,476.27
Series C		$	1,291.25			$	1,506.23
Series D		$	1,221.16			$	1,432.49

 

See notes to financial statements (Unaudited) 

 

 

Millburn Multi-Markets Fund L.P.

Statements of Operations (UNAUDITED)

 

		For the three months ended
		September 30, 2020				September 30, 2019
INVESTMENT INCOME:
Interest income		$	1			$	-
Interest income (allocated from the Master Fund) (1)			224,644				976,040
Total investment income			224,645				976,040
EXPENSES:
Management fees (allocated from the Master Fund) (1)			767,867				861,699
Brokerage commissions (allocated from the Master Fund) (1)			184,387				251,295
Selling commissions and platform fees (allocated from the Master Fund) (1)			654,093				774,127
Administrative and operating expenses (allocated from the Master Fund) (1)			117,935				148,720
Custody fees and other expenses (allocated from the Master Fund) (1)			7,258				7,216
Total expenses			1,731,540				2,043,057
NET INVESTMENT LOSS			(1,506,895	)			(1,067,017	)
REALIZED AND UNREALIZED GAINS (LOSSES)
ALLOCATED FROM THE MASTER FUND (1)
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			5,183,119				3,870,390
Foreign exchange transactions			444,691				(85,052	)
Net change in unrealized:
Futures and forward currency contracts			1,701,388				(1,455,882	)
Foreign exchange translation			(6,377	)			(104,967	)
Net gains (losses) from U.S. Treasury notes:
Realized			4,818				29,655
Net change in unrealized			(182,589	)			(89,503	)
Net realized and unrealized gains allocated from the Master Fund			7,145,050				2,164,641
NET INCOME			5,638,155				1,097,624
LESS PROFIT SHARE ALLOCATION TO THE MASTER FUND			-				210,708
NET INCOME AFTER PROFIT SHARE		$	5,638,155			$	886,916
NET INCOME PER UNIT OUTSTANDING:
Series A		$	37.04			$	5.40
Series B		$	50.01			$	11.96
Series C		$	51.02			$	12.20
Series D		$	46.06			$	9.54

 

(1)

The Partnership’s proportionate share of income and expenses allocated from the Master Fund as of period end.

  

See notes to financial statements (Unaudited)

(Continued)

 

 

Millburn Multi-Markets Fund L.P.

Statements of Operations (UNAUDITED)

 

		For the nine months ended
		September 30, 2020				September 30, 2019
INVESTMENT INCOME:
Interest income		$	5,930			$	-
Interest income (allocated from the Master Fund) (1)			1,392,430				2,866,732
Total investment income			1,398,360				2,866,732
EXPENSES:
Management fees (allocated from the Master Fund) (1)			2,462,296				2,477,881
Brokerage commissions (allocated from the Master Fund) (1)			605,926				641,629
Selling commissions and platform fees (allocated from the Master Fund) (1)			2,132,257				2,244,243
Administrative and operating expenses (allocated from the Master Fund) (1)			428,301				444,276
Custody fees and other expenses (allocated from the Master Fund) (1)			22,051				21,270
Total expenses			5,650,831				5,829,299
NET INVESTMENT LOSS			(4,252,471	)			(2,962,567	)
REALIZED AND UNREALIZED GAINS (LOSSES)
ALLOCATED FROM THE MASTER FUND (1)
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			(29,969,802	)			14,311,372
Foreign exchange transactions			214,124				(175,671	)
Net change in unrealized:
Futures and forward currency contracts			3,078,876				(6,602,536	)
Foreign exchange translation			(78,656	)			(57,796	)
Net gains (losses) from U.S. Treasury notes:
Realized			207,165				28,729
Net change in unrealized			(75,751	)			250,751
Net realized and unrealized gains (losses) allocated from the Master Fund			(26,624,044	)			7,754,849
NET INCOME (LOSS)			(30,876,515	)			4,792,282
LESS PROFIT SHARE ALLOCATION TO THE MASTER FUND			-				930,747
NET INCOME (LOSS) AFTER PROFIT SHARE		$	(30,876,515	)		$	3,861,535
NET INCOME (LOSS) PER UNIT OUTSTANDING:
Series A		$	(196.42	)		$	25.84
Series B		$	(210.70	)		$	46.55
Series C		$	(214.98	)		$	47.49
Series D		$	(211.33	)		$	38.13

 

(1)

The Partnership’s proportionate share of income and expenses allocated from the Master Fund as of period end.

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Fund L.P.

Statements of Changes in Partners’ Capital (UNAUDITED)

For the nine months ended September 30, 2020 and 2019

  

		General								Limited Partners
		Partner								Series A								Series B								Series C								Series D								Total
		Amount				Units				Amount				Units				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS’ CAPITAL — January 1, 2020		$	3,122,595				1,623.2659			$	166,972,241				132,149.4067			$	10,343,480				7,006.4813			$	4,831,807				3,207.8856			$	5,919,234				4,132.1394			$	191,189,357
Capital contributions			-				-				2,257,400				1,790.7268				150,000				120.8101				150,000				106.9465				11,859,000				9,052.9189				14,416,400
Capital withdrawals			-				-				(28,285,064	)			(26,775.7466	)			(968,765	)			(784.6188	)			(11,039	)			(8.9010	)			(156,156	)			(131.1191	)			(29,421,024	)
Net (loss) before profit share			(405,180	)			-				(26,590,600	)			-				(1,497,600	)			-				(701,977	)			-				(1,681,158	)			-				(30,876,515	)
Profit share			-				-				-				-				-				-				-				-				-				-				-
PARTNERS’ CAPITAL — September 30, 2020		$	2,717,415				1,623.2659			$	114,353,977				107,164.3869			$	8,027,115				6,342.6726			$	4,268,791				3,305.9311			$	15,940,920				13,053.9392			$	145,308,218
Net Asset Value per Unit at September 30, 2020						$	1,674.04							$	1,067.09							$	1,265.57							$	1,291.25							$	1,221.16

  

		General				Limited Partners
		Partner				Series A								Series B								Series C								Series D								Total
		Amount				Amount				Units				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS’ CAPITAL — January 1, 2019		$	2,788,913			$	144,621,713				121,399.2481			$	9,305,965				6,794.4628			$	2,008,278				1,437.1195			$	794,737				593.8529			$	159,519,606
Capital contributions			-				20,942,369				17,256.2975				997,500				718.8190				1,211,000				859.3543				4,369,150				3,240.6694				27,520,019
Capital withdrawals			-				(9,505,879	)			(7,839.2192	)			(653,063	)			(467.7075	)			(218,608	)			(153.9490	)			-				-				(10,377,550	)
Net income before profit share			162,779				3,958,644				-				409,204				-				119,196				-				142,459				-				4,792,282
Profit share			-				(796,416	)			-				(81,759	)			-				(24,080	)			-				(28,492	)			-				(930,747	)
PARTNERS’ CAPITAL — September 30 2019		$	2,951,692			$	159,220,431				130,816.3264			$	9,977,847				7,045.5743			$	3,095,786				2,142.5248			$	5,277,854				3,834.5223			$	180,523,610
Net Asset Value per Unit at September 30, 2019										$	1,217.13							$	1,416.19							$	1,444.92							$	1,376.40

  

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Fund L.P.

 Statement of Financial Highlights (UNAUDITED)

 For the three months ended September 30, 2020 

 

The following information presents per unit operating performance data for each series for the three months ended September 30, 2020.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C				Series D
NET ASSET VALUE PER UNIT — Beginning of period		$	1,030.05			$	1,215.56			$	1,240.23			$	1,175.10
INCOME (LOSS) ALLOCATED FROM THE MASTER FUND:
Net investment loss (1)			(11.07	)			(6.87	)			(7.15	)			(9.36	)
Total trading and investing gains (1)			48.11				56.88				58.17				55.42
Net income before profit share allocation from the Master Fund			37.04				50.01				51.02				46.06
Less: profit share allocation from the Master Fund (1) (6)			0.00				0.00				0.00				0.00
Net income from operations after profit share allocation from the Master Fund			37.04				50.01				51.02				46.06
NET ASSET VALUE PER UNIT — End of period		$	1,067.09			$	1,265.57			$	1,291.25			$	1,221.16
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			3.60	%			4.11	%			4.11	%			3.92	%
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6)			0.00				0.00				0.00				0.00
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			3.60	%			4.11	%			4.11	%			3.92	%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.80	%			2.80	%			2.80	%			3.55	%
Profit share allocation from the Master Fund (2) (6)			0.00				0.00				0.00				0.00
Total expenses			4.80	%			2.80	%			2.80	%			3.55	%
Net investment loss (3) (4) (5)			(4.22	)%			(2.22	)%			(2.22	)%			(2.98	)%

 

(1)

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

(2)

Not Annualized.

(3)

Annualized.

(4)

Includes the Partnership’s proportionate share of income (if applicable) and expenses allocated from the Master Fund.

(5)

Excludes profit share allocation from the Master Fund.

(6)

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

   

See notes to financial statements (Unaudited)

(Continued)

 

 

Millburn Multi-Markets Fund L.P.

 Statement of Financial Highlights (UNAUDITED)

 For the nine months ended September 30, 2020 

 

The following information presents per unit operating performance data for each series for the nine months ended September 30, 2020.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C				Series D
NET ASSET VALUE PER UNIT — Beginning of period		$	1,263.51			$	1,476.27			$	1,506.23			$	1,432.49
INCOME (LOSS) ALLOCATED FROM THE MASTER FUND:
Net investment loss (1)			(30.13	)			(16.49	)			(16.99	)			(23.53	)
Total trading and investing losses (1)			(166.29	)			(194.21	)			(197.99	)			(187.80	)
Net loss before profit share allocation from the Master Fund			(196.42	)			(210.70	)			(214.98	)			(211.33	)
Less: profit share allocation from the Master Fund (1) (6)			0.00				0.00				0.00				0.00
Net loss from operations after profit share allocation from the Master Fund			(196.42	)			(210.70	)			(214.98	)			(211.33	)
NET ASSET VALUE PER UNIT — End of period		$	1,067.09			$	1,265.57			$	1,291.25			$	1,221.16
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(15.55	)%			(14.27	)%			(14.27	)%			(14.75	)%
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6)			0.00				0.00				0.00				0.00
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			(15.55	)%			(14.27	)%			(14.27	)%			(14.75	)%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.85	%			2.85	%			2.85	%			3.59	%
Profit share allocation from the Master Fund (2) (6)			0.00				0.00				0.00				0.00
Total expenses			4.85	%			2.85	%			2.85	%			3.59	%
Net investment loss (3) (4) (5)			(3.72	)%			(1.73	)%			(1.73	)%			(2.60	)%

 

(1)

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

(2)

Not Annualized.

(3)

Annualized.

(4)

Includes the Partnership’s proportionate share of income (if applicable) and expenses allocated from the Master Fund.

(5)

Excludes profit share allocation from the Master Fund.

(6)

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

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended September 30, 2019

 

The following information presents per unit operating performance data for each series for the three months ended September 30, 2019.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C				Series D
NET ASSET VALUE PER UNIT — Beginning of period		$	1,211.73			$	1,404.23			$	1,432.72			$	1,366.86
INCOME (LOSS) ALLOCATED FROM THE MASTER FUND:
Net investment loss (1)			(8.25	)			(2.50	)			(2.67	)			(5.25	)
Total trading and investing gains (1)			14.99				17.39				17.45				17.33
Net income (loss) before profit share allocation from the Master Fund			6.74				14.89				14.78				12.08
Less: profit share allocation from the Master Fund (1) (6)			1.34				2.93				2.58				2.54
Net income (loss) from operations after profit share allocation from the Master Fund			5.40				11.96				12.20				9.54
NET ASSET VALUE PER UNIT — End of period		$	1,217.13			$	1,416.19			$	1,444.92			$	1,376.40
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			0.56	%			1.06	%			1.06	%			0.93	%
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6)			0.11				0.21				0.21				0.23
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			0.45	%			0.85	%			0.85	%			0.70	%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.95	%			2.96	%			2.96	%			3.70	%
Profit share allocation from the Master Fund (2) (6)			0.11				0.21				0.21				0.23
Total expenses			5.06	%			3.17	%			3.17	%			3.93	%
Net investment loss (3) (4) (5)			(2.71	)%			(0.71	)%			(0.71	)%			(1.46	)%

 

(1)

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

(2)

Not Annualized.

(3)

Annualized.

(4)

Includes the Partnership’s proportionate share of income (if applicable) and expenses allocated from the Master Fund.

(5)

Excludes profit share allocation from the Master Fund.

(6)

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

  

See notes to financial statements (Unaudited)

(Continued)

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the nine months ended September 30, 2019

 

The following information presents per unit operating performance data for each series for the nine months ended September 30, 2019.

 

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C				Series D
NET ASSET VALUE PER UNIT — Beginning of period		$	1,191.29			$	1,369.64			$	1,397.43			$	1,338.27
INCOME (LOSS) ALLOCATED FROM THE MASTER FUND:
Net investment loss (1)			(23.57	)			(6.34	)			(6.63	)			(14.13	)
Total trading and investing gains (1)			55.88				64.49				67.36				63.97
Net income before profit share allocation from the Master Fund			32.31				58.15				60.73				49.84
Less: profit share allocation from the Master Fund (1) (6)			6.47				11.60				13.24				11.71
Net income from operations after profit share allocation from the Master Fund			25.84				46.55				47.49				38.13
NET ASSET VALUE PER UNIT — End of period		$	1,217.13			$	1,416.19			$	1,444.92			$	1,376.40
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			2.71	%			4.23	%			4.33	%			3.71	%
LESS: PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2) (6)			0.54				0.83				0.93				0.86
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM THE MASTER FUND (2)			2.17	%			3.40	%			3.40	%			2.85	%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.90	%			2.90	%			2.91	%			3.67	%
Profit share allocation from the Master Fund (2) (6)			0.54				0.83				0.93				0.86
Total expenses			5.44	%			3.73	%			3.84	%			4.53	%
Net investment loss (3) (4) (5)			(2.61	)%			(0.61	)%			(0.62	)%			(1.38	)%

 

(1)

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

(2)

Not Annualized.

(3)

Annualized.

(4)

Includes the Partnership’s proportionate share of income (if applicable) and expenses allocated from the Master Fund.

(5)

Excludes profit share allocation from the Master Fund.

(6)

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

  

See notes to financial statements (Unaudited)

(Concluded)

 

 

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Millburn Multi-Markets Fund L.P.’s (the “Partnership”) financial condition at September 30, 2020 (unaudited) and December 31, 2019 and the results of its operations for the three and nine months ended September 30, 2020 and 2019 (unaudited).

 

These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Partnership’s 2019 annual report included in Form 10-K filed with the Securities and Exchange Commission. The December 31, 2019 information has been derived from the audited financial statements as of December 31, 2019.

 

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

 

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

 

The Income Taxes (Topic 740) of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2016 to 2019, Millburn Ridgefield Corporation (the “General Partner”) has determined that no reserves for uncertain tax positions were required.

 

There have been no material changes with respect to the Partnership’s critical accounting policies, off-balance sheet arrangements or disclosure of contractual obligations as reported in the Partnership’s Annual Report on Form 10-K for fiscal year 2019.

 

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

 

The Partnership invests substantially all of its assets in Millburn Multi-Markets Trading L.P. (the “Master Fund”). The Partnership’s ownership percentage of the Master Fund at September 30, 2020 and December 31, 2019 was 22.66% and 30.30%, respectively, of total partners’ capital of the Master Fund. See the attached financial statements of the Master Fund.

 

3. RELATED PARTY TRANSACTIONS

 

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

 

Series A Limited Partners that redeem Units at or prior to the end of the first eleven months after such Units are sold shall be assessed redemption charges calculated based on their redeemed Units’ net asset value as of the date of redemption. All redemption charges will be paid to the General Partner. At September 30, 2020 and December 31, 2019, there were no redemption charges owed to the General Partner.

 

4. FINANCIAL HIGHLIGHTS

 

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

 

		Three months ended September 30,								Nine months ended September 30,
		2020				2019				2020				2019
Series A			118,034.723				125,709.641				127,159.028				123,125.249
Series B			6,537.753				7,109.971				6,850.092				7,045.821
Series C			3,305.893				2,181.524				3,288.386				1,818.834
Series D			13,018.240				3,510.215				10,959.560				2,434.064

 

5. SUBSEQUENT EVENTS

 

During the period from October 1, 2020 to November 12, 2020, contributions of $249,500 were made to the Partnership. The General Partner has performed its evaluation of subsequent events through November 12, 2020, the date the form 10-Q was filed. Based on such evaluation, no further events were discovered that required disclosure or adjustment to the Financial Statements.

 

 

Millburn Multi-Markets Trading L.P.

Financial statements

For the three and nine months ended September 30, 2020 and 2019 (unaudited)

 

Statements of Financial Condition (a)	11
Condensed Schedules of Investments (a)	12
Statements of Operations (c)	16
Statements of Changes in Partners’ Capital (b)	18
Statements of Financial Highlights (c)	19
Notes to Financial Statements	21

 

(a)	At September 30, 2020 (unaudited) and December 31, 2019

(b)	For the nine months ended September 30, 2020 and 2019 (unaudited)

(c)	For the three and nine months ended September 30, 2020 and 2019 (unaudited)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Condition

 

		September 30, 2020 (unaudited)				December 31, 2019
ASSETS
EQUITY IN TRADING ACCOUNTS:
Investments in U.S. Treasury notes — at fair value (amortized cost $76,239,671 and $99,692,940)		$	76,305,893			$	99,835,520
Net unrealized appreciation on open futures and forward currency contracts			9,798,973				5,430,488
Due from brokers, net			47,821,242				20,430,870
Cash denominated in foreign currencies (cost $29,482,037 and $31,152,549)			29,574,880				31,566,671
Total equity in trading accounts			163,500,988				157,263,549
INVESTMENTS IN U.S. TREASURY NOTES — at fair value (amortized cost $455,513,791 and $440,349,793)			455,672,774				440,688,034
CASH AND CASH EQUIVALENTS			50,147,363				53,997,893
ACCRUED INTEREST RECEIVABLE			3,071,664				2,333,434
DUE FROM MILLBURN MULTI-MARKETS LTD.			-				100
TOTAL		$	672,392,789			$	654,283,010
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Net unrealized depreciation on open futures and forward currency contracts		$	1,100,687			$	5,818,429
Cash overdrafts denominated in foreign currencies (cost $4,172,452 and $0)			4,167,129				-
Subscriptions received in advance			-				1,565,000
Capital withdrawals payable to Limited Partners			19,520,112				736,814
Capital withdrawal payable to General Partner			-				9,224,590
Management fee payable			725,504				798,199
Selling commissions payable			215,538				283,920
Accrued expenses			533,342				254,637
Due to brokers, net			4,776,888				4,479,776
Commissions and other trading fees on open futures contracts			61,666				119,320
Accrued profit share			105,482				-
Total liabilities			31,206,348				23,280,685
PARTNERS’ CAPITAL			641,186,441				631,002,325
TOTAL		$	672,392,789			$	654,283,010

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments (UNAUDITED)

September 30, 2020

 

FUTURES AND FORWARD CURRENCY CONTRACTS		Net Unrealized Appreciation (Depreciation) as a % of Partners’ Capital				Net Unrealized Appreciation (Depreciation)
FUTURES CONTRACTS
Long futures contracts:
Energies			0.01	%		$	46,620
Grains			0.20				1,261,865
Interest rates:
2 Year U.S. Treasury Note (951 contracts, settlement date December 2020)			0.00				30,946
10 Year U.S. Treasury Note (1,202 contracts, settlement date December 2020)			0.00				22,250
30 Year U.S. Treasury Bond (311 contracts, settlement date December 2020)			0.00				1,781
Other interest rates			0.67				4,268,656
Total interest rates			0.67				4,323,633
Metals			0.00				(8,187	)
Softs			0.02				120,496
Stock indices			0.15				980,941
Total long futures contracts			1.05				6,725,368
Short futures contracts:
Energies			0.03				163,087
Grains			(0.18	)			(1,117,034	)
Interest rates			0.00				(6,480	)
Livestock			0.00				3,650
Metals			0.04				233,167
Softs			0.01				88,570
Stock indices			0.04				232,788
Total short futures contracts			(0.06	)			(402,252	)
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net			0.99				6,323,116
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			(1.55	)			(9,946,552	)
Total short forward currency contracts			1.92				12,321,722
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net			0.37				2,375,170
TOTAL			1.36	%		$	8,698,286

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments (UNAUDITED)

September 30, 2020

 

U.S. TREASURY NOTES

 

Face Amount				Description		Fair Value as a % of Partners’ Capital				Fair Value
$	138,540,000			U.S. Treasury notes, 1.750%, 11/15/2020			21.65	%		$	138,829,527
	121,540,000			U.S. Treasury notes, 2.250%, 02/15/2021			19.11				122,510,896
	134,900,000			U.S. Treasury notes, 2.625%, 05/15/2021			21.37				137,007,813
	130,640,000			U.S. Treasury notes, 2.750%, 08/15/2021			20.84				133,630,431
				Total investments in U.S. Treasury notes (amortized cost $531,753,462)			82.97	%		$	531,978,667

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2019

 

FUTURES AND FORWARD CURRENCY CONTRACTS		Net Unrealized Appreciation (Depreciation) as a % of Partners’ Capital				Net Unrealized Appreciation (Depreciation)
FUTURES CONTRACTS
Long futures contracts:
Energies			0.16	%		$	1,041,056
Grains			0.02				97,048
Interest rates:
2 Year U.S. Treasury Note (300 contracts, settlement date March 2020)			0.00				11,242
5 Year U.S. Treasury Note (612 contracts, settlement date March 2020)			0.00				1,312
Other interest rates			(0.04	)			(274,802	)
Total interest rates			(0.04	)			(262,248	)
Livestock			0.00				(560	)
Metals			0.30				1,850,831
Softs			0.01				78,535
Stock indices			0.05				334,857
Total long futures contracts			0.50				3,139,519
Short futures contracts:
Energies			0.07				447,160
Grains			(0.17	)			(1,053,425	)
Interest rates:
10 Year U.S. Treasury Note (773 contracts, settlement date March 2020)			0.00				15,234
Other interest rates			0.35				2,235,084
Total interest rates			0.35				2,250,318
Metals			(0.07	)			(432,195	)
Softs			(0.01	)			(90,206	)
Stock indices			0.19				1,169,317
Total short futures contracts			0.36				2,290,969
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net			0.86				5,430,488
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			2.22				13,991,397
Total short forward currency contracts			(3.14	)			(19,809,826	)
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net			(0.92	)			(5,818,429	)
TOTAL			(0.06	)%		$	(387,941	)

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2019

 

U.S. TREASURY NOTES

 

Face Amount				Description		Fair Value as a % of   Partners’ Capital				Fair Value
$	178,740,000			U.S. Treasury notes, 1.375%, 02/15/2020			28.32	%		$	178,698,108
	184,140,000			U.S. Treasury notes, 1.500%, 05/15/2020			29.17				184,089,649
	177,840,000			U.S. Treasury notes, 1.500%, 08/15/2020			28.17				177,735,797
				Total investments in U.S. Treasury notes (amortized cost $540,042,733)			85.66	%		$	540,523,554

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED)

 

		For the three months ended
		September 30,				September 30,
		2020				2019
INVESTMENT INCOME — Interest income		$	953,944			$	3,354,029
EXPENSES:
Brokerage commissions			786,171				870,942
Management fees			2,199,572				2,241,169
Selling commissions and platform fees			660,975				776,923
Administrative and operating expenses			293,017				302,196
Custody fees and other expenses			31,152				25,133
Total expenses			3,970,887				4,216,363
NET INVESTMENT LOSS			(3,016,943	)			(862,334	)
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			26,629,664				12,039,616
Foreign exchange transactions			1,834,663				(263,750	)
Net change in unrealized:
Futures and forward currency contracts			5,221,855				(3,925,457	)
Foreign exchange translation			23,731				(411,180	)
Net gains (losses) from U.S. Treasury notes:
Realized			20,841				103,281
Net change in unrealized			(776,203	)			(313,407	)
Total net realized and unrealized gains			32,954,551				7,229,103
NET INCOME			29,937,608				6,366,769
LESS PROFIT SHARE TO GENERAL PARTNER			72,899				1,007,012
NET INCOME AFTER PROFIT SHARE TO GENERAL PARTNER		$	29,864,709			$	5,359,757

 

See notes to financial statements (Unaudited)

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED)

 

		For the nine months ended
		September 30,				September 30,
		2020				2019
INVESTMENT INCOME — Interest income		$	5,780,865			$	9,502,971
EXPENSES:
Brokerage commissions			2,512,532				2,141,062
Management fees			6,977,202				6,174,785
Selling commissions and platform fees			2,149,586				2,252,534
Administrative and operating expenses			937,709				880,074
Custody fees and other expenses			94,547				70,388
Total expenses			12,671,576				11,518,843
NET INVESTMENT LOSS			(6,890,711	)			(2,015,872	)
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			(122,763,161	)			43,681,528
Foreign exchange transactions			926,261				(585,846	)
Net change in unrealized:
Futures and forward currency contracts			9,086,227				(19,350,534	)
Foreign exchange translation			(315,956	)			(189,202	)
Net gains (losses) from U.S. Treasury notes:
Realized			875,124				100,553
Net change in unrealized			(255,616	)			821,663
Total net realized and unrealized gains (losses)			(112,447,121	)			24,478,162
NET INCOME (LOSS)			(119,337,832	)			22,462,290
LESS PROFIT SHARE TO GENERAL PARTNER			105,482				3,692,622
NET INCOME (LOSS) AFTER PROFIT SHARE TO GENERAL PARTNER		$	(119,443,314	)		$	18,769,668

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Changes in Partners’ Capital (UNAUDITED)

 

For the nine months ended September 30, 2020

 

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS’ CAPITAL - January 1, 2020		$	629,952,934			$	-			$	1,049,391			$	631,002,325
Contributions			268,999,600				-				-				268,999,600
Withdrawals			(139,372,170	)			-				-				(139,372,170	)
Net (loss) before profit share			(119,203,276	)			-				(134,556	)			(119,337,832	)
General Partner’s allocation - profit share			(105,482	)			-				-				(105,482	)
PARTNERS’ CAPITAL - September 30, 2020		$	640,271,606			$	-			$	914,835			$	641,186,441

 

For the nine months ended September 30, 2019

 

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS’ CAPITAL - January 1, 2019		$	473,885,200			$	-			$	939,174			$	474,824,374
Contributions			191,493,602				90,153				-				191,583,755
Withdrawals			(84,628,037	)			-				-				(84,628,037	)
Net income before profit share			22,409,213				698				52,379				22,462,290
General Partner’s allocation - profit share			(3,692,622	)			-				-				(3,692,622	)
PARTNERS’ CAPITAL - September 30, 2019		$	599,467,356			$	90,851			$	991,553			$	600,549,760

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Highlights (UNAUDITED)

 

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

 

		For the three months ended								For the nine months ended
		September 30,				September 30,				September 30,				September 30,
		2020				2019				2020				2019
Total return before General Partner profit share allocation (3)			4.17	%			1.11	%			(14.12	)%			4.42	%
Less: General Partner profit share allocation (3) (5)			0.00				0.22				0.00				0.87
Total return after General Partner profit share allocation (3)			4.17	%			0.89	%			(14.12	)%			3.55	%
Ratios to average net asset value:
Expenses (1) (4)			2.64	%			2.68	%			2.61	%			2.65	%
General Partner profit share allocation (3) (5)			0.00				0.22				0.00				0.87
Total expenses (1)			2.64	%			2.90	%			2.61	%			3.52	%
Net investment loss (1) (2) (4)			(2.08	)%			(0.48	)%			(1.50	)%			(0.37	)%

 

Total returns and the ratios to average net asset value are calculated for a Limited Partner.

 

(1)

Includes the Limited Partner’s proportionate share of expenses allocated from the Master Fund’s operations for the   three and nine months ended September 30, 2020 and 2019.

(2)

Excludes General Partner profit share allocation and includes interest income.

(3)

Not Annualized.

(4)

Annualized.

(5)

In instances of 0.00, value is less than 0.01 when rounded to two decimal places.

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Highlights (UNAUDITED)

 

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

 

		For the three months ended								For the nine months ended
		September 30,				September 30,				September 30,				September 30,
		2020				2019				2020				2019
Total return before General Partner profit share allocation (3)			4.65	%			1.10	%			(13.75	)%			4.29	%
Less: General Partner profit share allocation (3)			0.01				0.17				0.02				0.67
Total return after General Partner profit share allocation (3)			4.64	%			0.93	%			(13.77	)%			3.62	%
Ratios to average net asset value:
Expenses (1) (4)			2.40	%			2.76	%			2.45	%			2.77	%
General Partner profit share allocation (3)			0.01				0.17				0.02				0.67
Total expenses (1)			2.41	%			2.93	%			2.47	%			3.44	%
Net investment loss (1) (2) (4)			(1.84	)%			(0.56	)%			(1.33	)%			(0.48	)%

 

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

 

(1)

Includes the Limited Partners’ proportionate share of expenses allocated from the Master Fund’s operations for the three and nine months ended September 30, 2020 and 2019.

(2)

Excludes General Partner profit share allocation and includes interest income.

(3)

Not Annualized.

(4)

Annualized.

 

See notes to financial statements (Unaudited)

 

 

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

The accompanying financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Master Fund’s financial condition at September 30, 2020 (unaudited) and December 31, 2019 and the results of its operations for the three and nine months ended September 30, 2020 and 2019 (unaudited).

 

These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes included in the Master Fund’s annual report for the year ended December 31, 2019 included in the Partnership’s annual report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2019 information has been derived from the audited financial statements as of December 31, 2019.

 

The preparation of financial statements in conformity with U.S. GAAP in the U.S, as detailed in the FASB Codification, requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Actual results could differ from these estimates.

 

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

 

The Income Taxes (Topic 740) of the Codification clarifies the accounting for uncertainty in tax positions. This requires that the Partnership recognize in its financial statements the impact of any uncertain tax positions. Based on a review of the Partnership’s open tax years, 2016 to 2019, the General Partner has determined that no reserves for uncertain tax positions were required.

 

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

 

The Partnership and the Cayman Feeder invest substantially all of their assets in the Master Fund. At September 30, 2020 and December 31, 2019, the respective ownership percentages of the Master Fund are detailed below. The remaining interests are held by direct investors in the Master Fund.

 

		September 30,				December 31,
		2020				2019
Partnership			22.66	%			30.30	%
Cayman Feeder			69.60	%			60.29	%
Total			92.26	%			90.59	%

 

The capital withdrawals payable at September 30, 2020 and December 31, 2019 were $19,520,112 and $9,961,404, respectively, as detailed below.

 

		September 30,				December 31,
		2020				2019
Direct investors (1)		$	-			$	9,224,590
Partnership			7,775,717				736,814
Cayman Feeder			11,744,395				-
Total		$	19,520,112			$	9,961,404

 

(1)	Includes General Partner’s profit share of $9,224,590 at December 31, 2019.

 

 

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

 

3. FAIR VALUE

 

The Fair Value Measurement (Topic 820) of the Codification defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The three levels of the fair value hierarchy are described below:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

During the three and nine months ended September 30, 2020 and 2019, there were no transfers of assets or liabilities between Level 1 and Level 2. The following tables represent the Master Fund’s investments by hierarchical level as of September 30, 2020 and December 31, 2019 in valuing the Master Fund’s investments at fair value. At September 30, 2020 and December 31, 2019, the Master Fund had no assets or liabilities in Level 3.

 

 

Financial assets and liabilities at fair value as of September 30, 2020

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	531,978,667			$	-			$	531,978,667
Short-Term Money Market Fund*			49,897,263				-				49,897,263
Exchange-traded futures contracts
Energies			209,707				-				209,707
Grains			144,831				-				144,831
Interest rates			4,317,153				-				4,317,153
Livestock			3,650				-				3,650
Metals			224,980				-				224,980
Softs			209,066				-				209,066
Stock indices			1,213,729				-				1,213,729
Total exchange-traded futures contracts			6,323,116				-				6,323,116
Over-the-counter forward currency contracts			-				2,375,170				2,375,170
Total futures and forward currency contracts (2)			6,323,116				2,375,170				8,698,286
Total financial assets and liabilities at fair value		$	588,199,046			$	2,375,170			$	590,574,216
Per line item in the Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral										$	76,305,893
Investments in U.S. Treasury notes held in custody											455,672,774
Total investments in U.S. Treasury notes										$	531,978,667
(2)
Net unrealized appreciation on open futures and forward currency contracts										$	9,798,973
Net unrealized depreciation on open futures and forward currency contracts											(1,100,687	)
Total net unrealized appreciation on open futures and forward currency contracts										$	8,698,286

 

*

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

 

 

Financial assets and liabilities at fair value as of December 31, 2019

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	540,523,554			$	-			$	540,523,554
Short-Term Money Market Fund*			53,739,414				-				53,739,414
Exchange-traded futures contracts
Energies			1,488,216				-				1,488,216
Grains			(956,377	)			-				(956,377	)
Interest rates			1,988,070				-				1,988,070
Livestock			(560	)			-				(560	)
Metals			1,418,636				-				1,418,636
Softs			(11,671	)			-				(11,671	)
Stock indices			1,504,174				-				1,504,174
Total exchange-traded futures contracts			5,430,488				-				5,430,488
Over-the-counter forward currency contracts			-				(5,818,429	)			(5,818,429	)
Total futures and forward currency contracts (2)			5,430,488				(5,818,429	)			(387,941	)
Total financial assets and liabilities at fair value		$	599,693,456			$	(5,818,429	)		$	593,875,027
Per line item in the Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral										$	99,835,520
Investments in U.S. Treasury notes											440,688,034
Total investments in U.S. Treasury notes										$	540,523,554
(2)
Net unrealized appreciation on open futures and forward currency contracts										$	5,430,488
Net unrealized depreciation on open futures and forward currency contracts											(5,818,429	)
Total net unrealized depreciation on open futures and forward currency contracts										$	(387,941	)

 

*

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

 

 

4. DERIVATIVE INSTRUMENTS

 

The Derivatives and Hedging (Topic 815) of the Codification requires qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.

 

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

 

During February 2020, the Cayman Feeder created a new GBP share class. As the Cayman Feeder determines its net asset value in U.S. dollars and the GBP share class’s functional currency is British Pound Sterling, an investment in the GBP share class involves exchange-rate risk; hedging the Cayman Feeder’s GBP share class exposure to U.S. dollars takes place at the Master Fund level. It’s the Master Fund’s general practice to enter into a one-month forward currency contract at the beginning of each month for the purpose of hedging the GBP share class’ beginning of month exposure to U.S. dollars. In the event of mid-month investor subscriptions or redemptions, the Master Fund may increase or decrease its hedge by entering into one or more additional forward currency contracts. The Master Fund may or may not adjust the hedge during a month for profits and losses.

 

The Master Fund engages in the speculative trading of futures and forward contracts on interest rates, grains, softs, currencies, metals, energies, livestock and stock indices. The following were the primary trading risk exposures of the Master Fund at September 30, 2020 by market sector:

 

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

 

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

 

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

 

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

 

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

 

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

 

The Derivatives and Hedging (Topic 815) of the Codification requires entities to recognize in the Statements of Financial Condition all derivative contracts as assets or liabilities. Fair values of futures and forward currency contracts in an asset position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized appreciation on open futures and forward currency contracts.” Fair values of futures and forward currency contracts in a liability position by counterparty are recorded in the Statements of Financial Condition as “Net unrealized depreciation on open futures and forward currency contracts.” The Master Fund’s policy regarding fair value measurement is discussed in the Fair Value note, contained herein.

 

The derivatives held or sold by the Master Fund are for primarily speculative trading purposes. Accordingly, all realized gains and losses, as well as any change in net unrealized gains or losses on open positions from the preceding period, are recognized as part of the Master Fund’s trading gains and losses in the Statements of Operations.

 

 

The following tables present the fair value of open futures and forward currency contracts, held long or sold short, at September 30, 2020 and December 31, 2019. Fair value is presented on a gross basis even though the contracts are subject to master netting agreements and qualify for net presentation in the Master Fund’s Statements of Financial Condition.

  

Fair value of futures and forward currency contracts at September 30, 2020  

 

																		Net Unrealized Gain (Loss)
		Fair Value - Long Positions								Fair Value - Short Positions								on Open
Sector		Gains				Losses				Gains				Losses				Positions
Futures contracts:
Energies		$	81,030			$	(34,410	)		$	312,884			$	(149,797	)		$	209,707
Grains			1,342,523				(80,658	)			23,478				(1,140,512	)			144,831
Interest rates			5,702,458				(1,378,825	)			4,488				(10,968	)			4,317,153
Livestock			-				-				12,940				(9,290	)			3,650
Metals			1,642,847				(1,651,034	)			986,249				(753,082	)			224,980
Softs			155,781				(35,285	)			90,360				(1,790	)			209,066
Stock indices			2,439,373				(1,458,432	)			303,279				(70,491	)			1,213,729
Total futures contracts			11,364,012				(4,638,644	)			1,733,678				(2,135,930	)			6,323,116
Forward currency contracts			8,390,679				(18,337,231	)			20,451,330				(8,129,608	)			2,375,170
Total futures and forward currency contracts		$	19,754,691			$	(22,975,875	)		$	22,185,008			$	(10,265,538	)		$	8,698,286

 

Fair value of futures and forward currency contracts at December 31, 2019

 

																		Net Unrealized Gain (Loss)
		Fair Value - Long Positions								Fair Value - Short Positions								on Open
Sector		Gains				Losses				Gains				Losses				Positions
Futures contracts:
Energies		$	1,656,534			$	(615,478	)		$	454,900			$	(7,740	)		$	1,488,216
Grains			108,438				(11,390	)			27,625				(1,081,050	)			(956,377	)
Interest rates			100,513				(362,761	)			2,831,719				(581,401	)			1,988,070
Livestock			220				(780	)			-				-				(560	)
Metals			3,111,912				(1,261,081	)			1,384,686				(1,816,881	)			1,418,636
Softs			85,545				(7,010	)			51,203				(141,409	)			(11,671	)
Stock indices			1,842,192				(1,507,335	)			1,346,994				(177,677	)			1,504,174
Total futures contracts			6,905,354				(3,765,835	)			6,097,127				(3,806,158	)			5,430,488
Forward currency contracts			16,640,916				(2,649,519	)			2,433,081				(22,242,907	)			(5,818,429	)
Total futures and forward currency contracts		$	23,546,270			$	(6,415,354	)		$	8,530,208			$	(26,049,065	)		$	(387,941	)

 

 

The effect of trading futures and forward currency contracts is represented on the Master Fund’s Statements of Operations for the three and nine months ended September 30, 2020 and 2019 as “Net realized gains (losses) on closed positions: Futures and forward currency contracts” and “Net change in unrealized: Futures and forward currency contracts.” These trading gains and losses are detailed below.

 

Trading gains (losses) of futures and forward currency contracts for the three and nine months ended September 30, 2020 and 2019

 

		Three months				Three months				Nine months				Nine months
		ended:				ended:				ended:				ended:
		September 30,				September 30,				September 30,				September 30,
Sector		2020				2019				2020				2019
Futures contracts:
Energies		$	3,755,596			$	(12,309,977	)		$	38,622,323			$	(27,559,291	)
Grains			(2,756,806	)			2,941,487				(2,222,408	)			8,314,005
Interest rates			(11,243,708	)			2,340,881				(11,545,189	)			30,021,915
Livestock			349,200				(771,270	)			1,101,830				167,190
Metals			3,466,841				(1,169,758	)			(5,805,613	)			(2,076,929	)
Softs			23,463				1,315,912				1,041,892				823,078
Stock indices			23,781,674				14,121,622				(158,123,044	)			19,664,710
Total futures contracts			17,376,260				6,468,897				(136,930,209	)			29,354,678
Forward currency contracts			14,475,259				1,645,262				23,253,275				(5,023,684	)
Total futures and forward currency contracts		$	31,851,519			$	8,114,159			$	(113,676,934	)		$	24,330,994

 

For the three months ended September 30, 2020 and 2019, the monthly average number of future contracts bought and sold and the monthly average notional value of forward currency contracts traded are detailed below:

 

		2020				2019
Average bought			104,534				105,299
Average sold			103,187				108,308
Average notional		$	8,746,000,000			$	11,350,000,000

 

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

 

 

The following tables represent gross amounts of assets or liabilities which qualify for offset as presented in the Statements of Financial Condition as of September 30, 2020 and December 31, 2019.

 

Offsetting of derivative assets and liabilities at September 30, 2020 

 

Assets		Gross amounts of recognized assets				Gross amounts offset in the Statements of Financial Condition				Net amounts of assets presented in the Statements of Financial Condition
Futures contracts
Counterparty C		$	4,614,164			$	(1,947,394	)		$	2,666,770
Counterparty J			2,049,070				(312,676	)			1,736,394
Counterparty L			6,388,957				(4,454,367	)			1,934,590
Total futures contracts			13,052,191				(6,714,437	)			6,337,754
Forward currency contracts
Counterparty K			16,127,682				(12,666,463	)			3,461,219
Total assets		$	29,179,873			$	(19,380,900	)		$	9,798,973

 

Liabilities		Gross amounts of recognized liabilities				Gross amounts offset in the Statements of Financial Condition				Net amounts of liabilities presented in the Statements of Financial Condition
Futures contracts
Counterparty I		$	60,137			$	(45,499	)		$	14,638
Forward currency contracts
Counterparty G			13,800,376				(12,714,327	)			1,086,049
Total liabilities		$	13,860,513			$	(12,759,826	)		$	1,100,687

 

 

		Amounts Not Offset in the Statements of Financial Condition
Counterparty		Net amounts of assets presented in the Statements of Financial Condition				Financial Instruments				Collateral Received(1)(2)				Net Amount(3)
Counterparty C		$	2,666,770			$	-			$	(2,666,770	)		$	-
Counterparty J			1,736,394				-				(1,736,394	)			-
Counterparty L			1,934,590				-				(1,934,590	)			-
Counterparty K			3,461,219				-				-				3,461,219
Total		$	9,798,973			$	-			$	(6,337,754	)		$	3,461,219

 

		Amounts Not Offset in the Statements of Financial Condition
Counterparty		Net amounts of liabilities presented in the Statements of Financial Condition				Financial Instruments				Collateral Pledged(1)(2)				Net Amount(4)
Counterparty I		$	14,638			$	-			$	14,638			$	-
Counterparty G			1,086,049				-				1,086,049				-
Total		$	1,100,687			$	-			$	1,100,687			$	-

 

(1)

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

(2)

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

(3)

Net amount represents the amount that is subject to loss in the event of a counterparty failure as of September 30, 2020.

(4)

Net amount represents the amounts owed by the Master Fund to each counterparty as of September 30, 2020.

 

 

Offsetting of derivative assets and liabilities at December 31, 2019

 

Assets		Gross amounts of recognized assets				Gross amounts offset in the Statements of Financial Condition				Net amounts of assets presented in the Statements of Financial Condition
Futures contracts
Counterparty C		$	3,717,018			$	(1,875,962	)		$	1,841,056
Counterparty I			8,233,113				(4,958,504	)			3,274,609
Counterparty J			1,052,350				(737,527	)			314,823
Total assets		$	13,002,481			$	(7,571,993	)		$	5,430,488

  

Liabilities		Gross amounts of recognized liabilities				Gross amounts offset in the Statements of Financial Condition				Net amounts of liabilities presented in the Statements of Financial Condition
Forward currency contracts
Counterparty G		$	13,703,550			$	(9,104,039	)		$	4,599,511
Counterparty K			11,188,876				(9,969,958	)			1,218,918
Total liabilities		$	24,892,426			$	(19,073,997	)		$	5,818,429

 

 

		Amounts Not Offset in the Statements of Financial Condition
Counterparty		Net amounts of assets presented in the Statements of Financial Condition				Financial Instruments				Collateral Received(1)(2)				Net Amount(3)
Counterparty C		$	1,841,056			$	-			$	(1,841,056	)		$	-
Counterparty I			3,274,609				-				(3,274,609	)			-
Counterparty J			314,823				-				(314,823	)			-
Total		$	5,430,488			$	-			$	(5,430,488	)		$	-

 

		Amounts Not Offset in the Statements of Financial Condition
Counterparty		Net amounts of liabilities presented in the Statements of Financial Condition				Financial Instruments				Collateral Pledged(1)(2)				Net Amount(4)
Counterparty G		$	4,599,511			$	-			$	4,599,511			$	-
Counterparty K		$	1,218,918				-			$	1,218,918				-
Total		$	5,818,429			$	-			$	5,818,429			$	-

                 

(1)

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

(2)

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

(3)

Net amount represents the amount that is subject to loss in the event of a counterparty failure as of December 31, 2019.

(4)

Net amount represents the amounts owed by the Partnership to each counterparty as of December 31, 2019.

 

 

CONCENTRATION OF CREDIT RISK

 

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

 

The General Partner seeks to minimize credit risk primarily by depositing and maintaining the Master Fund’s assets at financial institutions and trading counterparties which the General Partner believes to be creditworthy. In addition, for OTC forward currency contracts, the Master Fund enters into master netting agreements with its counterparties. Collateral posted at the various counterparties for trading of futures and forward currency contracts includes cash and U.S. Treasury notes.

 

The Master Fund’s forward currency trading activities are cleared by DB and BA. The Master Fund’s concentration of credit risk associated with DB, or BA nonperformance includes unrealized gains inherent in such contracts, which are recognized in the Statements of Financial Condition plus the value of margin or collateral held by DB, and BA. The amount of such credit risk was $67,667,007 and $55,480,494 at September 30, 2020 and December 31, 2019, respectively.

 

5. PROFIT SHARE

 

The following table indicates the total profit share earned and accrued during the three and nine months ended September 30, 2020 and 2019. Profit share earned (from Limited Partners’ redemptions) is credited to the New Profit Memo Account as defined in the Master Fund’s Agreement of Limited Partnership.

 

		Three months ended:				Three months ended:
		September 30, 2020				September 30, 2019
Profit share earned		$	-			$	59,980
Reversal of profit share (1)			(32,583	)			(2,655,437	)
Profit share accrued			105,482				3,602,469
Total profit share		$	72,899			$	1,007,012

  

		Nine months ended:				Nine months ended:
		September 30, 2020				September 30, 2019
Profit share earned		$	-			$	90,153
Profit share accrued			105,482				3,602,469
Total profit share		$	105,482			$	3,692,622

 

(1)

Reversal of profit share occurs on July 1st

 

6. FINANCIAL HIGHLIGHTS

 

Ratios to average capital are calculated based on 1) a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and 20% of Trading Profits and 2) Limited Partners’ capital taken as a whole. The computation of such ratios based on the amount of expenses and profit share allocation assessed to an individual partner’s capital account may vary from these ratios based on the timing of capital transactions and differences in individual partners’ management fee, selling commission, platform fee and profit share allocation arrangements. Returns are calculated based on 1) a Limited Partner that is charged a monthly management fee of 1/12 of 2.00% (2.00% per annum) and 20% of Trading Profits and 2) Limited Partners’ capital taken as a whole. An individual partner’s returns may vary from these returns based on the timing of capital transactions and differences in individual partners’ management fee, selling commission, platform fee and profit share allocation arrangements.

 

7. SUBSEQUENT EVENTS

 

During the period from October 1, 2020 to November 12, 2020, contributions of $20,349,500 were made to the Master Fund and withdrawals of $14,264,800 were made from the Master Fund. The General Partner has performed its evaluation of subsequent events through November 12, 2020, the date this form 10-Q was filed. Based on such evaluation, no further events were discovered that required disclosure or adjustment to the 10-Q.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Reference is made to Item 1, “Financial Statements.” The information contained therein is essential to, and should be read in connection with, the following analysis.

 

OPERATIONAL OVERVIEW

 

The Partnership invests substantially all of its assets in the Master Fund. Due to the nature of the Master Fund’s business, its results of operations depend on the General Partner’s ability to recognize and capitalize on trends and other profit opportunities in different sectors of the global capital and commodity markets. The General Partner’s investment and trading methods are confidential so that substantially the only information that can be furnished regarding the Master Fund’s results of operations is contained in the performance record of its trading. Unlike operating businesses, general economic or seasonal conditions do not directly affect the profit potential of the Master Fund, and its past performance is not necessarily indicative of future results. The General Partner believes, however, that there are certain market conditions, for example, markets with strong price trends, in which the Master Fund has a better likelihood of being profitable than in others. 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Units may be offered for sale as of the beginning, and may be redeemed as of the end, of each month.

 

The amount of capital raised for the Partnership should not have a significant impact on its operations, as the Partnership and the Master Fund have no significant capital expenditure or working capital requirements other than for monies to pay trading losses, brokerage commissions and charges. Within broad ranges of capitalization, the General Partner’s trading positions should increase or decrease in approximate proportion to the size of the Master Fund (in which the Partnership participates).

 

The Partnership raises additional capital only through the sale of Units and capital is increased through trading profits (if any). Neither the Partnership nor the Master Fund engages in borrowing.

 

The Master Fund trades futures, forwards, and spot contracts on interest rate instruments, agricultural commodities, currencies, metals, energy and stock indices, and forward contracts on currencies, and may trade options on the foregoing and swaps thereon. Risk arises from changes in the value of these contracts (market risk) and the potential inability of counterparties or brokers to perform under the terms of their contracts (credit risk). Market risk is generally measured by the face amount of the futures positions acquired and the volatility of the markets traded. The credit risk from counterparty non-performance associated with these instruments is the net unrealized gain, if any, on these positions plus the value of the margin or collateral held by the counterparty. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with OTC transactions because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. In most OTC transactions, on the other hand, traders must rely (typically but not universally) solely on the credit of their respective individual counterparties. Margins which may be subject to loss in the event of a default are generally required in exchange trading and counterparties may require margin or collateral in the OTC markets.

 

The General Partner has procedures in place to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. These procedures primarily focus on (1) real time monitoring of open positions; (2) diversifying positions among various markets; (3) limiting the assets committed as margin or collateral, generally within a range of 5% to 35% of an account’s net assets, though the amount may at any time be substantially higher; and (4) prohibiting pyramiding (that is, using unrealized profits in a particular market as margin for additional positions in the same market). The General Partner attempts to control credit risk by causing the Partnership to deal exclusively with large, well-capitalized financial institutions as brokers and counterparties. 

 

The financial instruments traded by the Master Fund contain varying degrees of off-balance sheet risk whereby changes in the market values of the futures, forward, and spot contracts or the Master Fund’s satisfaction of the obligations may exceed the amount recognized in the Statements of Financial Condition of the Master Fund.

 

Due to the nature of the Master Fund’s business, substantially all its assets are represented by cash, cash equivalents, and U.S. government obligations, while the Master Fund maintains its market exposure through open futures, forward, and spot contract positions.

 

The Master Fund’s futures contracts are settled by offset and are cleared by the exchange clearinghouse function. Open futures positions are marked-to-market each trading day and the Master Fund’s trading accounts are debited or credited accordingly. Options on futures contracts are settled either by offset or by exercise. If an option on a future is exercised, the Master Fund is assigned a position in the underlying future which is then settled by offset. The Master Fund’s spot and forward currency transactions conducted in the interbank market are settled by netting offsetting positions or payment obligations and by cash payments.

 

 

The value of the Master Fund’s cash and financial instruments is not materially affected by inflation. Changes in interest rates, which are often associated with inflation, could cause the value of certain of the Master Fund’s debt securities to decline, but only to a limited extent. More importantly, changes in interest rates could cause periods of strong up or down market price trends, during which the Master Fund’s profit potential generally increases. However, inflation can also give rise to markets which have numerous short price trends followed by rapid reversals, markets in which the Master Fund is likely to suffer losses.

 

The Master Fund’s assets are generally held as cash or cash equivalents, including U.S. government securities or securities issued by federal agencies, other Commodity Futures Trading Commission-authorized investments or bank held or certain other money market instruments (e.g., bankers acceptances and Eurodollar or other time deposits), which are used to margin the Master Fund’s futures, forwards, and spot currency positions and withdrawn, as necessary, to pay redemptions and expenses. Other than potential market-imposed limitations on liquidity, due, for example, to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Master Fund’s futures, forward and spot trading, the Master Fund’s assets are highly liquid and are expected to remain so. During its operations through September 30, 2020, the Partnership, through its investment in the Master Fund, experienced no meaningful periods of illiquidity in any of the numerous markets traded by the General Partner.

 

CRITICAL ACCOUNTING ESTIMATES

 

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

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, such as accrual of expenses, that affect the amounts and disclosures reported in the financial statements. Based on the nature of the business and operations of the Partnership, the General Partner believes that the estimates utilized in preparing the Partnership’s financial statements are appropriate and reasonable, however actual results could differ from these estimates. The estimates used do not provide a range of possible results that would require the exercise of subjective judgment. The General Partner further believes that, based on the nature of the business and operations of the Partnership, no other reasonable assumptions relating to the application of the Partnership’s critical accounting estimates other than those currently used would likely result in materially different amounts from those reported.

 

RESULTS OF OPERATIONS

 

Due to the nature of the Partnership’s trading, through its investment in the Master Fund, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.

 

 

Periods ended September 30, 2020

 

 

		Total
		Partners’
		Capital of the
Month Ended:		Partnership
September 30, 2020		$	145,308,218
June 30, 2020			155,420,631
December 31, 2019			191,189,357

  

		Three Months				Nine Months
Change in Partners’ Capital		$	(10,112,413	)		$	(45,881,139	)
Percent Change			(6.51	)%			(24.00	)%

 

 

THREE MONTHS ENDED SEPTEMBER 30, 2020

 

The decrease in the Partnership’s net assets of $10,112,413 was attributable to withdrawals of $16,026,568 which were partially offset by net income after profit share through its investment in the Master Fund of $5,638,155 and contributions of $276,000.

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2020 decreased $93,832 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2020, relative to the corresponding period in 2019.

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2020 decreased $66,908 relative to the corresponding period in 2019. The decrease was due to a decrease in the trading volume during the three months ended September 30, 2020, relative to the corresponding period in 2019.

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the three months ended September 30, 2020 decreased $120,034 relative to the corresponding period in 2019. The decrease was due predominantly to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2020, relative to the corresponding period in 2019. 

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2020 decreased $30,785 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended September 30, 2020, relative to the corresponding period in 2019.

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2020 decreased $751,396 relative to the corresponding period in 2019. The decrease was due predominantly to a decrease in short-term U.S. Treasury yields during the three months ended September 30, 2020, relative to the corresponding period in 2019.

 

For the three months ended September 30, 2020, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized gains of $7,145,050 from trading operations (including foreign exchange transactions and translations). Management fees of $767,867, brokerage commissions of $184,387, selling commissions and platform fees of $654,093, administrative and operating expenses of $117,935, custody fees and other expenses of $7,258. Interest income of $224,645 partially offset the Master Fund expenses allocated to the Partnership resulting in net income after profit share of $5,638,155.

 

An analysis of the Master Fund’s trading gain (loss) by sector is as follows:

  

		% Gain
Sector		(Loss)
Currencies			1.95	%
Energies			0.58	%
Grains			(0.41	)%
Interest rates			(1.67	)%
Livestock			0.05	%
Metals			0.52	%
Softs			0.01	%
Stock indices			3.67	%
Trading gain*			4.70	%

 

*

Percentage of the Partnership Capital

 

 

NINE MONTHS ENDED SEPTEMBER 30, 2020

 

The decrease in the Partnership’s net assets of $45,881,139 was attributable to net loss after profit share through its investment in the Master Fund of $30,876,515 and withdrawals of $29,421,024 which were partially offset by contributions of $14,416,400. 

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2020 decreased $15,585 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2020, relative to the corresponding period in 2019.

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2020 decreased $35,703 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2020, relative to the corresponding period in 2019.

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the nine months ended September 30, 2020 decreased $111,986 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2020, relative to the corresponding period in 2019. 

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2020 decreased $15,975 relative to the corresponding period in 2019. The decrease was due to a decrease in the average net asset value of the Partnership during the nine months ended September 30, 2020, relative to the corresponding period in 2019.

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2020 decreased $1,474,302 relative to the corresponding period in 2019. This decrease was due predominantly to a decrease in short-term U.S. Treasury yields and partially offset by an increase in average net asset value of the Partnership during the nine months ended September 30, 2020 relative to the corresponding period in 2019.

 

For the nine months ended September 30, 2020, the Partnership, through its investment in the Master Fund, experienced net realized and unrealized losses of $26,624,044 from trading operations (including foreign exchange transactions and translations). Management fees of $2,462,296, brokerage commissions of $605,926, selling commissions and platform fees of $2,132,257, administrative and operating expenses of $428,301, custody fees and other expenses of $22,051. Interest income of $1,398,360 partially offset the Master Fund expenses allocated to the Partnership resulting in net loss after profit share of $30,876,515.

 

An analysis of the Master Fund’s trading gain (loss) by sector is as follows:

  

Sector		% Gain (Loss)
Currencies			3.25	%
Energies			4.72	%
Grains			(0.33	)%
Interest rates			(1.42	)%
Livestock			0.12	%
Metals			(0.79	)%
Softs			0.13	%
Stock indices			(18.82	)%
Trading loss*			(13.14	)%

 

*

Percentage of the Partnership Capital

 

 

MANAGEMENT DISCUSSION – 2020 

 

Three months ended September 30, 2020 

 

The Partnership was profitable in the third quarter as gains from trading equity, energy and metal futures and currency forwards outpaced losses from trading interest rate and grain futures. Trading of soft commodity and livestock futures was nearly flat.

 

With global fiscal and monetary policy stances remaining accommodative, the economic rebound that commenced during the second half of the second quarter continued during July and August. By September, however, rising COVID-19 cases in many countries and ensuing restrictions, a tapering of fiscal support programs, uncertainty surrounding the upcoming U.S. presidential election, continued tensions between Beijing and Washington, and contentious Brexit talks led to a deceleration in economic momentum and increased turbulence in markets.

 

This economic environment, together with the fact that leading tech companies reported strong profits, was quite supportive of stock markets. Still, there were times when equities faced headwinds because of investors’ concerns about rising or elevated levels of coronavirus infections, the uneven pace of economic recovery and political risks.

 

During the quarter, Millburn’s models successfully shifted between long and short positions. For example, both long and short positions in U.S. equity futures, especially for the NASDAQ, were profitable. Trading of the EAFE and emerging markets index futures was also profitable both long and short. Long positions in Chinese, Canadian, French, German and Swedish index futures added to the gains, as did short VIX and Spanish futures trades. On the other hand, short Japanese stock index futures positions, a long British futures position and trading of the Australian index future registered partially offsetting losses.

 

Throughout the quarter, crude oil prices traded in a $6 band around $40/barrel. Production control efforts from both The Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC producers and signs of economic reopening undergirded prices while the demand destruction from the COVID-19 pandemic restrained any upward impulse. Short positions in WTI crude oil, heating oil and London gasoil and trading of Brent crude oil were each fractionally profitable. A long RBOB gasoline position was also profitable in September. On the other hand, a short natural gas position posted a partially offsetting loss. Natural gas prices, after plumbing 10-year lows in the wake of the pandemic and a stubborn supply overhang, were boosted in August by strong cooling demand due to an extraordinarily hot summer in the U.S.; rising industrial demand as economies gradually emerged from lockdown; and from short covering as Hurricane Laura produced a surprise hit on critical natural gas export infrastructure.

 

For most of the quarter, a weaker U.S. dollar, low interest rates and safe haven demand affected the precious metals markets. Long gold and silver positions were profitable. Silver also benefitted from increased industrial demand. Short copper and aluminum positions registered partially offsetting losses in July and August, and in September, a modest U.S. dollar rebound and weakening economic activity weighed on metal prices. The Partnership experienced small losses on long silver, zinc and gold positions, further reducing the sector’s quarterly gain.

 

From late March into mid-September the U.S. dollar fell about 10% in volatile trading. The interest rate differential that had previously favored the U.S. dollar collapsed as the Federal Reserve (“Fed”) cut policy rates to near zero. Numerous other Fed programs, including expanded swap lines, reduced an emerging U.S. dollar shortage. The potential of the passage of a joint European fiscal program led to euro strength versus the U.S. dollar. Rising uncertainty concerning the upcoming U.S. presidential election and the strength of U.S. growth relative to that abroad also affected enthusiasm for the U.S. dollar. In September, however, the U.S. dollar did recover somewhat during the risk-off environment that characterized most of the month. Overall, short U.S. dollar positions versus euro, yen, Indian rupee, South African rand, Singapore dollar and New Zealand dollar were profitable in July and August. A short Mexican peso trade was profitable in September. A long sterling trade was profitable in July and a short sterling trade was profitable in September. Elsewhere, trading the U.S. dollar against the Russian and Polish currencies produced partially offsetting losses, especially during September.

 

Interest rates were volatile during the quarter. Accommodative monetary policy, declining inflation and shrinking economies globally kept downward pressure on interest rates for most of the period, although interest rates did poke higher intermittently. In August, concern about the ability of governments to fund burgeoning fiscal deficits and debt, and about the potential for future increases in inflation, underscored by the announcement of the Fed’s new long-run policy framework, pushed up global interest rates and led to a steeper yield curve in the U.S. Then, after drifting lower again, rates spiked higher in late September in the wake of the unsettling U.S. presidential debate and after Bank of England officials declined to embrace negative interest rates. Overall, trading of German, British, Australian, Canadian and U.S. interest rate futures were unprofitable. Long positions in Italian interest rate futures registered a partially offsetting profit.

 

Grain trading was fractionally unprofitable during the quarter. The possibility that severely hot weather in the U.S. Midwest could reduce crop yields together with Chinese buying of soybeans and a declining U.S. dollar pushed up grain prices. Short corn, wheat, soybean meal and soybean oil positions posted losses, especially during August and September. Meanwhile, a long soybean trade posted a partially offsetting profit in September.

 

 

Three months ended June 30, 2020

 

The Partnership was profitable in the second quarter as gains from long equity and interest rate futures positions and from trading currency forwards and grain futures outdistanced losses from trading energy, metal and soft commodity futures.

 

The sentiment of equity market participants improved continuously throughout the quarter in response to a steady stream of aggressive monetary and fiscal policy actions from global authorities—especially in the U.S.; surprising improvements in economic activity as economies cautiously reopened; and sporadic encouraging news concerning COVID-19 therapies and vaccines. But this overall attitude improvement was muted periodically-- and especially during the second half of June—by: evidence of new COVID-19 hotspots such as Beijing, Germany, Australia, EM and several U.S. states; the statistical reports on growth and unemployment; and the expanding tensions between the U.S. (and other many western countries) and China. Long positions in U.S. equity futures were particularly profitable, although long positions in German, French, Dutch, Chinese, Taiwanese and Korean stock futures added to the gains. A short U.K. FTSE position and trading of the Canadian equity future were also profitable, as was a short VIX trade in May. On the other hand, short positions in Japanese, Australian, Italian and Spanish equity futures and trading of the EAFE and emerging market index futures posted partially offsetting losses.

 

Long interest rate futures positions were profitable during the quarter. Strongly accommodative monetary policies, a plunge in global growth, and disinflationary impulses worldwide restrained interest rates across yield curves. Safe haven buying of government securities also placed downward pressure on rates. Not even the extraordinary fiscal policy efforts leading to unprecedentedly large deficits and debt/GDP levels across the globe were able to boost borrowing cost more than temporarily. Long positions in U.S., Canadian, German, French, Italian and British interest rate futures were profitable, while a long Japanese government bond future position was unprofitable.

 

The U.S. dollar traded in a narrow range from the start of April until mid-May, fell about 5% into early June and edged up a bit into the end of the quarter and long euro and Swiss franc positions versus the U.S. dollar were profitable. Long positions in high yielding Polish and South African currencies relative to the U.S. dollar also produced gains. A long New Zealand dollar trade was profitable against a supportive domestic backdrop that has seen the New Zealand government announce a complete end to COVID-19 restrictions due to the virtual eradication of the virus in the country. Trading the U.S. currency against the Brazilian real, Singapore dollar and Turkish lira was also profitable during the quarter. On the other hand, the Aussie dollar, which had fallen sharply during the first quarter of 2020, rebounded in April and a short position was unprofitable. Long U.S. dollar trades versus the currencies of Norway, Chile and Colombia were also unprofitable.

 

Ample grain supplies globally continue to weigh on prices and short wheat positions and trading of corn were profitable in June. A reduction in demand for corn to make ethanol pushed stockpiles higher. Meanwhile, trading of the soybean complex was slightly unprofitable.

 

Energy markets were buffeted by conflicting forces during the second quarter. On the one hand, the massive COVID-19 demand shock saw a collapse of WTI prices from near $61/barrel at the start of 2020 to only $12/barrel near the end of April—having actually fallen briefly below zero in mid-April. On the other hand, supply reductions from the Organization of the Petroleum Exporting Countries (“OPEC”) via agreements and from non-OPEC producers in response to plunging market prices helped prices to recover sharply in May and June to around $40/barrel, as market participants were encouraged by signs of economic reopening. Overall, losses from trading WTI crude, Brent crude, RBOB gasoline and heating oil outpaced a small profit from a short natural gas trade.

 

Copper prices, which had fallen sharply earlier this year, rebounded during the quarter among a weaker dollar and encouraging signs of economic reopening, particularly from Asia, and the Partnership’s short copper positions were unprofitable. Short positions in other industrial metals—aluminum, nickel, zinc, and platinum—also registered losses and were reduced or reversed. The Partnership saw a gain on a long gold position in April. Trading of silver was also fractionally profitable.

 

Finally, trading of sugar and cotton futures were each slightly unprofitable.

 

Three months ended March 31, 2020

  

The Partnership posted a sizable loss in the first quarter as the COVID-19 pandemic and its economic impacts spread across the globe, roiling financial and commodity markets. The onset of the oil price war between Saudi Arabia and Russia in early March added significantly to the market turmoil. Losses from long equity futures positions and, to a much lesser extent, from trading interest rate and metal futures far outpaced the profits from trading energy futures, currency forwards and soft and agricultural commodity futures.

 

Equity futures, which had been underpinned early in January by the U.S.-China trade deal, accommodative global monetary policy and the conservative election victory in Great Britain, collapsed as COVID-19 spread from China to the Middle East to Europe to the U.S.A. and became a global pandemic. As the potential scope and duration of the damage to global demand became evident, the selling of equities and other financial investments cascaded violently. In response, strong, coordinated and unprecedented monetary and fiscal measures were implemented by countries across the globe. For example in the U.S., the Federal Reserve (the “Fed”), at two emergency meetings, cut interest rates by 1.5% to near zero; the Fed also expanded the magnitude and scope of its quantitative easing (“QE”), swap lines and other lending facilities well beyond that seen during the Global Financial Crisis; and a fiscal stimulus package measured at about 10% of GDP was assembled in about a week and was added to two smaller packages announced early in March. While these policy efforts did give a fillip to financial markets and help to stabilize them, the damage to equity prices and markets remained large. Broad-based losses were sustained on a short VIX trade and on long positions in U.S., Canadian, European, British, Japanese, non-Japan Asian and emerging markets equity index futures, especially in the second half of the quarter.

 

 

Interest rates on government debt were buffeted by a variety of cross currents during the quarter including: the actual and anticipated negative impact of the pandemic on global growth; a flight to safety that boosted demand for government debt; a rush for liquidity and U.S. dollars that at times led to a forced liquidation of government debt; 27 central banks cutting official rates 68 times during March, according to centralbankrates.com; and central banks creating numerous massive liquidity provision and QE programs in order to stabilize struggling financial markets globally. Overall, short positions in U.S., German and Canadian note and bond futures posted losses and were reversed to long positions. Trading of British Gilts, long positions in French and Australian bond futures and a long position in the short-term Euribor future were also unprofitable, particularly in mid-March, when market participants sought liquidity. Long positions in short-term eurodollar, British, Italian and Australian interest rate futures and in Japanese government bond futures produced partially offsetting profits. A long position in the 5-year U.S. note in January was also profitable.

 

Trading of metal futures was fractionally unprofitable. Industrial metal prices were pummeled in response to the actual and expected growth-reducing impacts of COVID-19. The price of silver, which had been supported for a time as a safe haven precious metal, succumbed to profit-taking and to a dramatic weakening in industrial demand and a long position was unprofitable. A long platinum position was also unprofitable. On the other hand, short copper, aluminum, nickel and zinc positions were profitable and a long gold trade benefitted from safe haven demand and also posted a gain.

 

Oil prices fell to their lowest levels in 17 years as demand collapsed due to shelter-in-place orders, travel bans and other efforts to mitigate the pandemic, and as supply surged due to the unrelenting price war between Saudi Arabia and Russia. The price of WTI crude oil, which had eased down from $61/barrel at the end of 2019 to about $54/barrel on February 20, plunged precipitously thereafter, falling to under $20/barrel on March 30. Short positions in Brent crude, WTI crude, RBOB gasoline, London gas oil, heating oil and natural gas were highly profitable, particularly in March.

 

Foreign exchange rates were buffeted by a variety of cross currents from interest rate, liquidity, safe haven and energy price influences during the quarter. Performance in these instruments was mixed but slightly profitable. Long U.S. dollar trades against the Brazilian real, Russian ruble, Aussie dollar and a few other emerging market currencies were profitable. A long euro/short Norway trade was also profitable in the wake of the oil price collapse. On the other hand, long U.S. dollar trades versus the euro, yen, Singapore dollar, and Swedish krona were unprofitable, as was trading versus the British, Canadian, Indian, South African, Norwegian, Polish and New Zealand currencies.

 

Trading of soft and agricultural commodity futures was fractionally profitable.

 

 

Periods ended September 30, 2019 

 

 

		Total
		Partners’
		Capital of the
Month Ended:		Partnership
September 30, 2019		$	180,523,610
June 30, 2019			165,257,957
December 31, 2018			159,519,606

  

		Three Months				Nine Months
Change in Partners’ Capital		$	15,265,653			$	21,004,004
Percent Change			9.24	%			13.17	%

  

THREE MONTHS ENDED SEPTEMBER 30, 2019

 

The increase in the Partnership’s net assets of $15,265,653 was attributable to net income after profit share through its investment in the Master Fund of $886,916 and contributions of $19,133,869 which were partially offset by withdrawals of $4,755,132.

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2019 increased $90,266 relative to the corresponding period in 2018. The increase was due to an increase in the average net asset value of the Partnership during the three months ended September 30, 2019, relative to the corresponding period in 2018.

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2019 increased $120,304 relative to the corresponding period in 2018. The increase was due to an increase in trading activity during the three months ended September 30, 2019, relative to the corresponding period in 2018.

 

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the three months ended September 30, 2019 increased $66,539 relative to the corresponding period in 2018. The increase was due to an increase in the average net asset value of commission paying investors of the Partnership during the three months ended September 30, 2019, relative to the corresponding period in 2018. 

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2019 decreased $7,436 relative to the corresponding period in 2018. The decrease was due to a decrease in professional fee accruals during the three months ended September 30, 2019, relative to the corresponding period in 2018.

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the three months ended September 30, 2019 increased $243,249 relative to the corresponding period in 2018. This increase was due predominantly to an increase in short-term U.S. Treasury yields during the three months ended September 30, 2019 relative to the corresponding period in 2018.

 

For the three months ended September 30, 2019, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized gains of $2,164,641 from trading operations (including foreign exchange transactions and translations). Management fees of $861,699, brokerage commissions of $251,295, selling commissions and platform fees of $774,127, administrative and operating expenses of $148,720, custody fees and other expenses of $7,216, and profit share of $210,708 were paid or accrued. Interest income of $976,040 partially offset the Master Fund expenses allocated to the Partnership resulting in net income after profit share of $886,916.

 

An analysis of the Master Fund’s trading gain (loss) by sector is as follows:

 

		% Gain
Sector		(Loss)
Currencies			0.28	%
Energies			(2.01	)%
Grains			0.48	%
Interest rates			0.39	%
Livestock			(0.13	)%
Metals			(0.20	)%
Softs			0.21	%
Stock indices			2.38	%
Trading gain*			1.40	%

 

*

Percentage of the Partnership Capital

 

NINE MONTHS ENDED SEPTEMBER 30, 2019

 

The increase in the Partnership’s net assets of $21,004,004 was attributable to net income after profit share through its investment in the Master Fund of $3,861,535 and contributions of $27,520,019 which were partially offset by withdrawals of $10,377,550.

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2019 increased $43,253 relative to the corresponding period in 2018. The increase was due to an increase in the average net asset value of the Partnership during the nine months ended September 30, 2019, relative to the corresponding period in 2018. 

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2019 increased $231,863 relative to the corresponding period in 2018. The increase was due to an increase in trading activity during the nine months ended September 30, 2019, relative to the corresponding period in 2018.

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the nine months ended September 30, 2019 increased $26,985 relative to the corresponding period in 2018. The increase was due to an increase in the average net asset value of commission paying investors of the Partnership during the nine months ended September 30, 2019, relative to the corresponding period in 2018. 

 

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2019 decreased $25,965 relative to the corresponding period in 2018. The decrease was due to a decrease in professional fee accruals during the nine months ended September 30, 2019, relative to the corresponding period in 2018.

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the nine months ended September 30, 2019 increased $959,831 relative to the corresponding period in 2018. This increase was due predominantly to an increase in short-term U.S. Treasury yields during the nine months ended September 30, 2019 relative to the corresponding period in 2018.

 

For the nine months ended September 30, 2019, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized gains of $7,754,849 from trading operations (including foreign exchange transactions and translations). Management fees of $2,477,881, brokerage commissions of $641,629, selling commissions and platform fees of $2,244,243, administrative and operating expenses of $444,276, custody fees and other expenses of $21,270, and profit share of $930,747 were paid or accrued. Interest income of $2,866,732 partially offset the Master Fund expenses allocated to the Partnership resulting in net income after profit share of $3,861,535.

 

An analysis of the Master Fund’s trading gain (loss) by sector is as follows:

 

		% Gain
Sector		(Loss)
Currencies			(1.12	)%
Energies			(4.95	)%
Grains			1.44	%
Interest rates			6.09	%
Livestock			(0.01	)%
Metals			(0.45	)%
Softs			0.10	%
Stock indices			3.50	%
Trading gain*			4.60	%

         

*

Percentage of the Partnership Capital

  

MANAGEMENT DISCUSSION – 2019

  

Three months ended September 30, 2019

  

The Partnership was profitable during the quarter as gains from trading stock index, interest rate, grain and soft commodity futures, and currency forwards outpaced losses from trading energy, metal and livestock futures.

 

Financial and commodity market participants rode a risk roller coaster during the quarter. Whenever there was an escalation of the U.S.-China trade war, evidence of slowing global growth and trade, rising Brexit uncertainty, increasing geopolitical tension—such as in Hong Kong, India/Pakistan, Japan/Korea, Iran/U.S., Saudi Arabia/Iran, Argentina, Russia—or mounting political tensions in the U.S., risk appetites would recede. On the other hand, whenever these factors calmed or whenever global central banks, led by the Federal Reserve, would lower interest rates or emphasize their preferences for easier policy stances, risk appetites would expand.

 

Continuing the trend started earlier this year, central banks around the globe reduced interest rates 56 times versus only 6 increases during the third quarter. Despite a few bouts of selling during the quarter, trading of equity futures was profitable overall, including gains from long positions in European, U.S., British, Taiwanese, Singaporean and the Japanese Nikkei futures indices. In addition, during the August selloff, short positions in the Emerging Market, Korean Kospi, S&P 400 and Japanese Topix indices also posted gains. A short VIX trade was also profitable. On the other hand, trading of Chinese, Hong Kong, Thai, Australian and the Russell equity indices registered partially offsetting losses.

 

Interest rates were volatile during the period as evidenced by the 10-year U.S. rate that fell from about 2% on July 1st to 1.47% on September 3rd, rebounded to 1.9% on September 13th before closing the quarter at 1.68% on September 30th. Long positions in Italian interest rate futures were profitable as investors sought out higher Italian yields. Short positions in U.K. interest rate futures were profitable as yields rose on Brexit worries in September. Trading of the U.S. long bond was also profitable. On the other hand, during August when risk aversion was at its highest, demand for government securities pushed yields down sharply. The magnitude and speed of the declines in interest rates combined with inverted yield curves prompted our trading models to take counter trend positions, looking for a bounce back in yields. As yields continued to fall, the Partnership sustained sizable losses on our short interest rate futures positions. Subsequently, short positions in German, French, U.K., Japanese, U.S., Canadian and Australian interest rate futures were unprofitable. On balance then for the quarter, interest rate trading produced only a fractional gain.

 

 

The U.S. dollar index gained about 2% during the quarter, but followed a volatile, jagged, saw-toothed path to this gain. Consequently, currency sector results were mixed and only fractionally positive. Long dollar positions against the currencies of Japan, the euro, Switzerland, Sweden, Australia, New Zealand and India, and trading versus the Turkish lira were profitable. Conversely, trading the U.S. dollar relative to the Canadian, Mexican, Norwegian, Polish, Russian and South African currencies, and trading the euro against the Norwegian and Polish currencies produced largely offsetting losses.

 

Energy prices were volatile during the quarter. They were depressed by the trade and global growth worries, particularly during August; soared in mid-September after the apparently devastating attack on Saudi production and export facilities; and collapsed thereafter when after-attack reports showed the actual damage to be easily managed. Overall, long positions in Brent crude, WTI crude, RBOB gasoline, heating oil and London gas oil were unprofitable. A short natural gas trade was also unprofitable, particularly in August and early September, driven by a short covering price rally.

 

Trade policy impacts, and large grain inventories and harvests weighed on grain prices, especially in July and August. Consequently, short corn and wheat positions and trading of soybeans were profitable, although prices lifted late in the quarter, reducing profits somewhat. Short coffee, sugar and cotton trades were also marginally profitable during the July-September period. Meanwhile trading of livestock was marginally unprofitable.

 

Trading of silver futures produced a fractional loss that marginally outweighed the small profits from a long nickel position and from short zinc and aluminum trades.

  

Three months ended June 30, 2019

 

The Partnership was nearly flat for the quarter as profits from trading interest rate, grain and livestock futures only slightly outpaced losses from trading energy and soft commodity futures and currency forwards. Trading of stock index and metal futures were essentially flat.

 

The economic outlook, which had improved significantly in April, deteriorated quickly and sharply beginning in early May after Presidents Trump and Xi Jinping unexpectedly dashed hopes that a trade deal was close to being signed and instead ramped up the trade confrontation to the level of a trade war. This development, continuing Brexit uncertainty, and disappointing economic data during May and June out of the U.S., China, Europe, and several large emerging economies pushed organizations such as the International Monetary Fund, World Bank and Organization for Economic Co-operation and Development to cut their 2019 global growth forecasts. The escalating U.S.-Iran conflict, including tanker attacks in the Strait of Hormuz and the shooting down of an American drone, further clouded the economic outlook. In response, the Federal Reserve (the “Fed”), the European Central Bank, and the Bank of Japan suggested that they were prepared to loosen their monetary policy positions if circumstances warranted. Indeed, a number of other central banks, including the People’s Bank of China, did cut official interest rates, reduced reserve requirements and/or took other actions to support flagging growth. Also, market participants seemed to expect at least a ceasefire on the trade front emerging from the Osaka G-20 meeting between Presidents Trump and Xi Jinping at the end of June.

 

Against this background it is not surprising that equity prices vacillated widely and that trading of equity futures finished the quarter nearly flat after being profitable in April, quite unprofitable in May and profitable again in June. Overall, long positions in Dutch, French, British, Australian, Canadian, Thai and Singaporean equity futures were profitable. A short position in Korean futures and trading of South African futures were also profitable. Short volatility index trades registered gains too. On the other hand, long positions in U.S., Chinese, Hong Kong, Taiwanese, German and Swedish equity futures were unprofitable, especially in May. Trading of EAFE, EURO STOXX 50, and Japanese equity futures were unprofitable as well.

 

The combination of trade uncertainties, chaotic Brexit discussions, slowing growth, dormant inflation and actual and prospective central bank policy easing led to increased demand for government notes and bonds. For example, yields on Italian 10-year bonds, which had been supported in the run-up to European elections by the wrangling between Italy’s coalition government and the European Commission over mounting debt levels, dropped markedly from near 2.7% at the end of May to about 2.15% at the end of June. Consequently, long positions in Italian interest rate futures were quite profitable. Long positions in French and U.K. bond futures and in Eurodollar futures added to the gains. A short Japanese government bond futures position and trading of U.S. long bond and 2-year note futures were also profitable. Conversely, short positions in German, Australian and Canadian note and bond futures, a short position in U.S. 10-year note futures, and long positions in short-term Euribor and sterling rate futures produced partially offsetting losses.

 

Although trade disputes and the African swine fever depressed grain prices for most of 2019, extreme weather in the U.S. during May and June, which delayed planting of and may hinder the development and/or harvesting of corn and soybean crops, pushed grain prices up sharply during the second half of the quarter. Consequently, long corn and soybean trades were profitable later in the period. Trading of livestock futures was profitable as well.

 

Energy prices were quite volatile during the quarter. For the first four months of 2019 energy prices were underpinned by news that the U.S. would end waivers on Iranian crude oil exports, by the continued Organization of the Petroleum Exporting Countries effort to curtail production, and by the impact of the Libyan crisis on production. However, as the economic outlook deteriorated and as U.S. shale production pushed U.S. crude inventories to 2 year highs, crude oil prices fell over 20% from the 2019 highs reached in late April to 5 month lows in mid-June. Thereafter, the heightened U.S.-Iran tensions pushed prices sharply higher once again. A long Brent crude oil position was unprofitable, especially in May. Trading of WTI crude oil and of London gas oil was also unprofitable. A long RBOB gasoline trade was profitable, especially after a U.S. east coast refinery fire in June reduced supplies for the immediate future. A short natural gas trade was also profitable as gas supplies remained ample.

 

 

Currency trading was also volatile and unprofitable during the quarter. Early on the U.S. dollar was supported by solid growth, safe haven demand and high relative interest rates. Political uncertainties in Europe, the U.K., Sweden, India, and Australia also underpinned the U.S. currency. Later in the period, however, worries that growth was slowing caused U.S. market interest rates to decline and prompted the Fed to indicate that it would ease policy if necessary, and depressing the U.S. currency. The resolution of the aforementioned political doubts in a favorable way also led to some U.S. dollar sales. Long U.S. dollar trades versus the Australian and New Zealand dollars, the euro and Japanese yen, and short dollar positions against the pound sterling and Brazilian real posted losses. On the other hand, short dollar trades against the Canadian dollar, Indian rupee, Russian ruble and Turkish lira, and long dollar positions versus the Swiss, Swedish and Korean currencies produced partially offsetting profits.

 

Finally, trading of cotton futures was marginally unprofitable and trading of metal futures was marginally profitable.

  

Three months ended March 31, 2019

  

After a quarter of significant economic and political uncertainty that tended to mute position sizes, the Partnership was profitable in the first quarter of 2019 as gains from trading interest rate and, to a lesser extent, equity futures outpaced losses from trading energy futures and currency forwards. Trading of non-energy commodities was nearly flat.

 

An unexpectedly dovish pivot by global central banks—especially the Federal Reserve (the “Fed”) and European Central Bank, indications of slowing growth globally, slackening inflation pressures in Europe, China and the U.S. and persistent uncertainties around Brexit and U.S.-China trade negotiations supported demand for government fixed income investments. Against this backdrop, long positions in German, French, Italian, British, and Australian interest rate futures were profitable. A long position in U.S. bond futures added to the sector gains. On the other hand, short positions in U.S. 2-, 5-, and 10-year note futures, short-term Eurodollar futures, and Canadian futures resulted in partially offsetting losses.

 

Equity markets were buffeted by opposing forces during the quarter. On the one hand, there were positive influences from a more accommodative global monetary policy environment and from supportive fiscal policy initiatives in China. On the other hand, there were negative influences from global growth worries, trade tensions and Brexit uncertainty. Despite these opposing conditions, global equity markets rebounded from the sharp selloff that occurred during the fourth quarter of 2018. While there were broad losses from short equity futures positions in January, the Partnership’s trading strategy did subsequently swing to widespread long stock index futures positions as the quarter progressed, and the sector registered a fractional profit overall for the quarter. Long positions in U.S., Chinese, Hong Kong, emerging market, and EAFE index futures were profitable. A short VIX trade also posted a gain. On the other hand, short positions in German, French, Spanish, British, Japanese, Australian, Singaporean, South African and the EURO STOXX index futures registered partially offsetting losses.

 

Energy prices, which had plunged during the fourth quarter of 2018, continued a rebound that began after Christmas and short energy futures positions were unprofitable, particularly in January. Energy prices were supported by the production cuts that were previously announced by the Organization of the Petroleum Exporting Countries (“OPEC”) and were running above target in early 2019 and by tightening sanctions on Venezuelan and Iranian exports. While long energy futures positions did produce profits later in the quarter, the sector was still unprofitable overall. Trading of Brent crude, WTI crude, heating oil and London gas oil were each unprofitable, while trading of RBOB gasoline and natural gas were nearly flat.

 

The U.S. dollar traded in a volatile manner within a narrow 2% range during the quarter. Trading results were mixed and unprofitable. Short positions in the euro, Swiss franc, British pound, Aussie dollar and Canadian dollar versus the U.S. dollar were unprofitable. Long Korean won, Brazilian real, Colombian peso, Turkish lira and Russian ruble trades against the dollar and trading of the yen and Chilean peso were also unprofitable. Meanwhile, long Indian rupee and Mexican peso positions, and a short Swedish krona trade against the U.S. unit produced partially offsetting gains, as did trading of the euro against other European currencies.

 

Ample supplies weighed on grain prices and the profits from short corn and wheat trades outweighed the slight losses from trading soybeans and soy meal. The profit from a short coffee position marginally outdistanced the loss from a short sugar trade.

 

Small losses from short gold, copper and nickel positions were fractionally greater than the gain from a short silver trade.

  

 

OFF-BALANCE SHEET ARRANGEMENTS

 

Neither the Partnership nor the Master Fund engages in off-balance sheet arrangements with other entities.

 

CONTRACTUAL OBLIGATIONS

 

Neither the Partnership nor the Master Fund enters into any contractual obligations or commercial commitments to make future payments of a type that would be typical for an operating company or that would affect its liquidity or capital resources. The Partnership’s sole business, through its investment in the Master Fund, is trading futures, forward currency, spot and swap contracts, both long (contracts to buy) and short (contacts to sell). All such contracts are settled by offset, not delivery. Substantially all such contracts are for settlement within four months of the trade date and substantially all such contracts are held by the Master Fund for less than four months before being offset or rolled over into new contracts with similar maturities. The financial statements of the Master Fund present a condensed schedule of investments setting forth open futures, forward and other contracts at September 30, 2020 and December 31, 2019.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required.

 

ITEM 4. CONTROLS AND PROCEDURES

 

The General Partner, with the participation of the principal executive officers and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the period covered by this quarterly report, and, based on its evaluation, has concluded that these disclosure controls and procedures are effective. There were no changes in the General Partner’s internal controls over financial reporting during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, the General Partner’s internal controls over financial reporting with respect to the Partnership.

 

 

PART II. OTHER INFORMATION

 

ITEM 1. Legal Proceedings 

 

None.

  

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

(a) Pursuant to the Partnership’s Third Amended and Restated Limited Partnership Agreement (the “Partnership Agreement”), the Partnership may sell Units at the beginning of each calendar month. On July 1, 2020, August 1, 2020, and September 1, 2020, the Partnership sold Units to new and existing limited partners of $60,000, $200,000 and $16,000 respectively. There were no underwriting discounts or commissions in connection with the sales of the Units described above.

 

Each of the foregoing Interests were offered and sold only to “accredited investors” as defined in Rule 501(a) under the Securities Act of 1933 as amended (the “1933 Act”), in reliance on the exemption from registration provided by Rule 506(b) under the 1933 Act.

 

(b) Pursuant to the Partnership’s Partnership Agreement, investors may redeem their Units at the end of each calendar month at the then current month-end net asset value. The redemption of Units has no impact on the value of Units that remain outstanding, and Units are not reissued once redeemed.

 

The following table summarizes the redemptions by Series A, Series B, and Series D limited partners during the three months ended September 30, 2020. There were no Series C redemptions.

 

		Series A								Series B								Series D
		Units				NAV				Units				NAV				Units				NAV
Date of Withdrawal		Redeemed				per Unit				Redeemed				per Unit				Redeemed				per Unit
July 31, 2020			(4,074.7649	)		$	1,064.83				(64.4239	)		$	1,258.69				(58.6613	)		$	1,216.04
August 31, 2020			(3,523.5058	)			1,044.21				(64.8799	)			1,236.38				-				1,193.73
September 30, 2020			(7,133.0903	)			1,067.09				(129.6430	)			1,265.57				-				1,221.16
Total			(14,731.3610	)							(258.9468	)							(58.6613	)

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not Applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable. 

 

ITEM 5. OTHER INFORMATION

 

None.

 

 

ITEM 6. EXHIBITS

 

The following exhibits are included herewith:

 

31.01	Rule 13(a)-14(a)/15(d)-14(a) Certification of Co-Chief Executive Officer
31.02	Rule 13(a)-14(a)/15(d)-14(a) Certification of Co-Chief Executive Officer
31.03	Rule 13(a)-14(a)/15(d)-14(a) Certification of President and Chief Operating Officer
31.04	Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer
32.01	Section 1350 Certification of Co-Chief Executive Officer
32.02	Section 1350 Certification of Co-Chief Executive Officer
32.03	Section 1350 Certification of President and Chief Operating Officer
32.04	Section 1350 Certification of Chief Financial Officer
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

By:	Millburn Ridgefield Corporation,
	General Partner
Date: November 12, 2020
		/s/ Michael W. Carter
		Michael W. Carter
		Vice-President
		(Principal Accounting Officer)

 

 

 

47