UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended
Commission
file number:
Organized
in
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.
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).
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 definition 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 | ☐ | ||
| ☒ | 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
Securities registered pursuant to Section 12(b) of the Act: N/A
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Futures Portfolio Fund, Limited Partnership
Statements of Financial Condition
June 30, 2022 (Unaudited) and December 31, 2021
| June 30, | ||||||||
| 2022 | December 31, | |||||||
| (Unaudited) | 2021 | |||||||
| Assets | ||||||||
| Equity in broker trading accounts | ||||||||
| Cash | $ | $ | ||||||
| Net unrealized gain (loss) on open futures contracts | ( | ) | ( | ) | ||||
| Net unrealized gain (loss) on open forward currency contracts | ||||||||
| Net unrealized gain (loss) on swap contracts | ||||||||
| Total equity in broker trading accounts | ||||||||
| Cash and cash equivalents | ||||||||
| Investment in private investment company, at fair value (cost$ | ||||||||
| Investment in securities, at fair value (cost $ | ||||||||
| Exchange membership, at fair value (cost $ | ||||||||
| Dividend and interest receivable | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Partners’ Capital (Net Asset Value) | ||||||||
| Liabilities | ||||||||
| Trading Advisor management fees payable | $ | $ | ||||||
| Trading Advisor incentive fees payable | ||||||||
| Commissions and other trading fees payable on open contracts | ||||||||
| Cash Managers fees payable | ||||||||
| General Partner management and performance fees payable | ||||||||
| General Partner | ||||||||
| Selling Agent payable - General Partner | ||||||||
| Broker dealer servicing fees payable - General Partner | ||||||||
| Administrative fee payable - General Partner | ||||||||
| Dividend and interest payable | ||||||||
| Redemption payable | ||||||||
| Total liabilities | ||||||||
| Partners’ Capital (Net Asset Value) | ||||||||
| Class A Interests – and units outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Class A2 Interests – and units outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Class A3 Interests – and units outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Class B Interests – and units outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Class I Interests – and units outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Class R Interests – and units outstanding at June 30, 2022 and December 31, 2021, respectively | ||||||||
| Total partners’ capital (net asset value) | ||||||||
| Total liabilities and partners’ capital (net asset value) | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
1
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments
June 30, 2022 (Unaudited)
| Description | Fair Value | %
of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| INVESTMENTS IN SECURITIES | ||||||||||||||||||
| U.S. Treasury Securities | ||||||||||||||||||
| Face
Value | Maturity Date | Name | Yield1 | |||||||||||||||
| $ | 8/31/22 | U.S. Treasury | % | $ | % | |||||||||||||
| 2/15/23 | U.S. Treasury | % | % | |||||||||||||||
| 8/15/23 | U.S. Treasury | % | % | |||||||||||||||
| Total
U.S. Treasury securities (cost: $ | ||||||||||||||||||
| U.S. Commercial Paper | ||||||||||||||||||
| Face
Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Automotive | ||||||||||||||||||
| $ | 7/15/22 | PACCAR Financial Corp. | % | % | ||||||||||||||
| Banks | ||||||||||||||||||
| 7/18/22 | MUFG Bank - New York Branch | % | % | |||||||||||||||
| Diversified financial services | ||||||||||||||||||
| 7/22/22 | National Rural Utilities Cooperative Finance Corporation | % | % | |||||||||||||||
| 8/23/22 | Nieuw Amsterdam Receivables Corporation B.V. | % | % | |||||||||||||||
| 7/7/22 | DCAT, LLC | % | % | |||||||||||||||
| Food | ||||||||||||||||||
| 7/19/22 | Walmart Inc. | % | % | |||||||||||||||
| Machinery | ||||||||||||||||||
| 8/18/22 | John Deere Capital Corporation | % | % | |||||||||||||||
| Pharmaceuticals | ||||||||||||||||||
| 7/19/22 | Novartis Finance Corporation | % | % | |||||||||||||||
| Water | ||||||||||||||||||
| 7/14/22 | American Water Capital Corp. | % | % | |||||||||||||||
| Total
U.S. commercial paper (cost: $ | % | |||||||||||||||||
The accompanying notes are an integral part of these financial statements.
2
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
June 30, 2022 (Unaudited)
| Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| Foreign Commercial Paper | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Automotive | ||||||||||||||||||
| $ | 7/25/22 | Nationwide Building Society | % | $ | % | |||||||||||||
| Banks | ||||||||||||||||||
| 8/8/22 | KfW | % | % | |||||||||||||||
| 8/26/22 | National Bank of Canada | % | % | |||||||||||||||
| 7/27/22 | Sumitomo Mitsui Banking Corporation | % | % | |||||||||||||||
| Diversified financial services | ||||||||||||||||||
| 7/6/22 | Ontario Teachers’ Finance Trust | % | % | |||||||||||||||
| 7/8/22 | Glencove Funding DAC | % | % | |||||||||||||||
| 7/29/22 | Great Bear Funding Designated Activity Company | % | % | |||||||||||||||
| Total foreign commercial paper (cost: $ | % | |||||||||||||||||
| Total commercial paper (cost:
$ | % | |||||||||||||||||
| U.S. Corporate Notes | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Aerospace | ||||||||||||||||||
| $ | 5/1/25 | Boeing Company | % | % | ||||||||||||||
| 8/16/23 | Raytheon Technologies Corporation | % | % | |||||||||||||||
| Automotive | ||||||||||||||||||
| 6/14/24 | NVIDIA Corporation | % | % | |||||||||||||||
| Banks | ||||||||||||||||||
| 5/5/23 | Credit Suisse AG, New York Branch | % | % | |||||||||||||||
| 12/5/24 | JPMorgan Chase & Co. | % | % | |||||||||||||||
| 7/23/24 | Bank of America Corporation | % | % | |||||||||||||||
| 12/6/24 | Truist Bank | % | % | |||||||||||||||
| 1/24/24 | Wells Fargo & Company | % | % | |||||||||||||||
| Diversified financial services | ||||||||||||||||||
| 1/8/24 | Athene Global Funding | % | % | |||||||||||||||
| 4/1/24 | Brookfield Finance LLC | % | % | |||||||||||||||
| 3/8/24 | Goldman Sachs Group, Inc. | % | % | |||||||||||||||
| 12/7/23 | The Bank of New York Mellon Corporation | % | % | |||||||||||||||
| Machinery | ||||||||||||||||||
| 1/10/25 | John Deere Capital Corp Fxd | % | % | |||||||||||||||
| Media | ||||||||||||||||||
| 3/15/24 | Magallanes, Inc. | % | % | |||||||||||||||
| Pharmaceuticals | ||||||||||||||||||
| 2/1/23 | Zoetis Inc. | % | % | |||||||||||||||
| Telecommunications | ||||||||||||||||||
| 3/22/24 | Verizon Communications Inc. | % | % | |||||||||||||||
| Total U.S. corporate notes (cost:
$ | % | |||||||||||||||||
The accompanying notes are an integral part of these financial statements.
3
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
June 30, 2022 (Unaudited)
| Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| Foreign Corporate Notes | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Banks | ||||||||||||||||||
| $ | 6/9/23 | Nordea Bank Abp | % | $ | % | |||||||||||||
| Diversified financial services | ||||||||||||||||||
| $ | 1/13/25 | UBS AG (London Branch) | % | $ | % | |||||||||||||
| Total
foreign corporate notes (cost: $ | % | |||||||||||||||||
| Total
corporate notes (cost: $ | % | |||||||||||||||||
| U.S. Asset Backed Securities | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Automotive | ||||||||||||||||||
| 6/18/25 | Americredit Automobile Receivables Trust 2020-3 | % | % | |||||||||||||||
| $ | 12/16/24 | CarMax Auto Owner Trust 2019-2 | % | % | ||||||||||||||
| 6/9/25 | Carvana Auto Receivables Trust, Series 2020-P1 | % | % | |||||||||||||||
| 1/10/25 | Carvana Auto Receivables Trust 2021-P3 | % | % | |||||||||||||||
| 8/15/24 | Nissan Auto Lease Trust 2022-A | % | % | |||||||||||||||
| 8/15/24 | Santander Consumer Auto Receivables Trust 2020-B_1 | % | % | |||||||||||||||
| 4/15/25 | Santander Consumer Auto Receivables Trust 2020- B_1 | % | % | |||||||||||||||
| 10/15/26 | Santander Drive Auto Receivables Trust 2022-2 | % | % | |||||||||||||||
| 4/15/24 | Ford Credit Auto Lease Trust 2021-B | % | % | |||||||||||||||
| 3/20/25 | TESLA 2021-A A2 | % | % | |||||||||||||||
| Equipment | ||||||||||||||||||
| 10/20/23 | Dllmt 2021-1 Llc. | % | % | |||||||||||||||
| 10/22/24 | Dell Equipment Finance Trust 2019-2 | % | % | |||||||||||||||
| 5/22/26 | Dell Equipment Finance Trust 2021-1 | % | % | |||||||||||||||
| 1/21/25 | Dllst 2022-1 Llc | % | % | |||||||||||||||
| 7/22/30 | HPEFS Equipment Trust 2020-2 | % | % | |||||||||||||||
| 3/20/31 | HPEFS Equipment Trust 2021-1 | % | % | |||||||||||||||
| 3/20/31 | HPEFS Equipment Trust 2021-1 | % | % | |||||||||||||||
| 4/15/24 | MMAF Equipment Finance LLC Series 2021-A | % | % | |||||||||||||||
| 7/22/24 | Verizon Owner Trust 2020-A | % | % | |||||||||||||||
| 4/21/25 | Verizon Owner Trust 2020-C | % | % | |||||||||||||||
| Total
U.S. asset backed securities (cost: $ | % | |||||||||||||||||
| Total investments in securities (cost: $ | $ | % | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
4
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
June 30, 2022 (Unaudited)
| Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| OPEN FUTURES CONTRACTS | ||||||||||||||||||
| Long U.S. Futures Contracts | ||||||||||||||||||
| Agricultural commodities | $ | ( | ) | ( | )% | |||||||||||||
| Currencies | ( | ) | ( | )% | ||||||||||||||
| Energy | ( | ) | ( | )% | ||||||||||||||
| Equity indices | ( | ) | % | |||||||||||||||
| Interest rate instruments | % | |||||||||||||||||
| Metals2 | ( | ) | ( | )% | ||||||||||||||
| Net unrealized gain (loss) on open long U.S. futures contracts | ( | ) | ( | )% | ||||||||||||||
| Short U.S. Futures Contracts | ||||||||||||||||||
| Agricultural commodities | % | |||||||||||||||||
| Currencies | % | |||||||||||||||||
| Energy | % | |||||||||||||||||
| Equity indices | % | |||||||||||||||||
| Interest rate instruments | ( | ) | ( | )% | ||||||||||||||
| Metals2 | % | |||||||||||||||||
| Net unrealized gain (loss) on open short U.S. futures contracts | % | |||||||||||||||||
| Total U.S. Futures Contracts - net unrealized gain (loss) on open U.S. futures contracts | ( | ) | ( | )% | ||||||||||||||
| Long Foreign Futures Contracts | ||||||||||||||||||
| Agricultural commodities | ( | ) | ( | )% | ||||||||||||||
| Currencies | ( | ) | ( | )% | ||||||||||||||
| Energy | % | |||||||||||||||||
| Equity indices | ( | ) | ( | )% | ||||||||||||||
| Interest rate instruments | % | |||||||||||||||||
| Metals | % | |||||||||||||||||
| Net unrealized gain (loss) on open long foreign futures contracts | % | |||||||||||||||||
The accompanying notes are an integral part of these financial statements.
5
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
June 30, 2022 (Unaudited)
| Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| OPEN FUTURES CONTRACTS (continued) | ||||||||||||||||||
| Short Foreign Futures Contracts | ||||||||||||||||||
| Agricultural commodities | % | |||||||||||||||||
| Currencies | % | |||||||||||||||||
| Energy | — | % | ||||||||||||||||
| Equity indices | % | |||||||||||||||||
| Interest rate instruments | ( | ) | ( | )% | ||||||||||||||
| Net unrealized gain (loss) on open short foreign futures contracts | ( | ) | ( | )% | ||||||||||||||
| Total foreign futures contracts - net unrealized gain (loss) on open foreign futures contracts | ( | ) | ( | )% | ||||||||||||||
| Net unrealized gain (loss) on open futures contracts | $ | ( | ) | ( | )% | |||||||||||||
| OPEN FORWARD CURRENCY CONTRACTS | ||||||||||||||||||
| U.S. Forward Currency Contracts | ||||||||||||||||||
| Long2 | $ | ( | ) | ( | )% | |||||||||||||
| Short2 | % | |||||||||||||||||
| Net unrealized gain (loss) on open U.S. forward currency contracts | % | |||||||||||||||||
| Foreign Forward Currency Contracts | ||||||||||||||||||
| Long | % | |||||||||||||||||
| Short | ( | ) | ( | )% | ||||||||||||||
| Net unrealized gain (loss) on open foreign forward currency contracts | % | |||||||||||||||||
| Net unrealized gain (loss) on open forward currency contracts | $ | % | ||||||||||||||||
| TOTAL RETURN SWAP CONTRACTS | ||||||||||||||||||
| Long | $ | % | ||||||||||||||||
| INVESTMENT IN PRIVATE INVESTMENT COMPANY3 | ||||||||||||||||||
| Galaxy East Alpha (cost: $ | $ | % | ||||||||||||||||
| 1 |
| 2 |
| 3 |
The accompanying notes are an integral part of these financial statements.
6
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments
December 31, 2021
| Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| INVESTMENTS IN SECURITIES | ||||||||||||||||||
| U.S. Treasury Securities | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| 9/15/23 | U.S. Treasury | % | $ | % | ||||||||||||||
| 10/31/23 | U.S. Treasury | % | % | |||||||||||||||
| Total U.S. Treasury securities (cost: $ | % | |||||||||||||||||
| U.S. Commercial Paper | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Banks | ||||||||||||||||||
| 1/26/22 | Mitsubishi UFJ Trust and Banking Corporation (USA) | % | % | |||||||||||||||
| Diversified financial services | ||||||||||||||||||
| 1/6/22 | Citigroup Global Markets Inc. | % | % | |||||||||||||||
| 1/20/22 | DCAT, LLC | % | % | |||||||||||||||
| 1/5/22 | Gotham Funding Corporation | % | % | |||||||||||||||
| 2/18/22 | ING (U.S.) Funding LLC | % | % | |||||||||||||||
| 1/10/22 | J.P. Morgan Securities LLC | % | % | |||||||||||||||
| 4/1/22 | Liberty Street Funding LLC | % | % | |||||||||||||||
| 1/11/22 | Manhattan Asset Funding Company LLC | % | % | |||||||||||||||
| 1/11/22 | National Rural Utilities Cooperative Finance Corporation | % | % | |||||||||||||||
| Food | ||||||||||||||||||
| 1/12/22 | Archer-Daniels-Midland Company | % | % | |||||||||||||||
| Water | ||||||||||||||||||
| 1/4/22 | American Water Capital Corp. | % | % | |||||||||||||||
| Total
U.S. commercial paper (cost: $ | % | |||||||||||||||||
The accompanying notes are an integral part of these financial statements.
7
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
December 31, 2021
| Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| Foreign Commercial Paper | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Automotive | ||||||||||||||||||
| $ | 1/12/22 | Nationwide Building Society | % | $ | % | |||||||||||||
| Banks | ||||||||||||||||||
| 2/7/22 | DBS Bank Ltd. | % | % | |||||||||||||||
| 1/14/22 | DNB Bank ASA | % | % | |||||||||||||||
| 2/15/22 | KfW | % | % | |||||||||||||||
| Diversified financial services | ||||||||||||||||||
| 1/20/22 | Experian Finance plc | % | % | |||||||||||||||
| 3/8/22 | Glencove Funding DAC | % | % | |||||||||||||||
| Total foreign commercial paper (cost: $ | % | |||||||||||||||||
| Total commercial paper (cost: $ | % | |||||||||||||||||
| U.S. Corporate Notes | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Aerospace | ||||||||||||||||||
| $ | 5/1/22 | Boeing Company | % | % | ||||||||||||||
| 8/16/23 | Raytheon Technologies Corporation | % | % | |||||||||||||||
| Automotive | ||||||||||||||||||
| 6/14/24 | NVIDIA Corporation | % | % | |||||||||||||||
| Banks | ||||||||||||||||||
| 7/23/24 | Bank of America Corporation | % | % | |||||||||||||||
| 5/5/23 | Credit Suisse AG, New York Branch | % | % | |||||||||||||||
| 4/25/23 | JPMorgan Chase & Co. | % | % | |||||||||||||||
| 5/17/22 | Truist Bank | % | % | |||||||||||||||
| 1/24/24 | Wells Fargo & Company | % | % | |||||||||||||||
| Diversified financial services | ||||||||||||||||||
| 1/8/24 | Athene Global Funding | % | % | |||||||||||||||
| 4/1/24 | Brookfield Finance LLC | % | % | |||||||||||||||
| 3/8/24 | Goldman Sachs Group, Inc. | % | % | |||||||||||||||
| 12/7/23 | The Bank of New York Mellon Corporation | % | % | |||||||||||||||
| Pharmaceuticals | ||||||||||||||||||
| 5/16/22 | Bristol-Myers Squibb Company | % | % | |||||||||||||||
| 2/1/23 | Zoetis Inc. | % | % | |||||||||||||||
| Telecommunications | ||||||||||||||||||
| 2/9/22 | Apple Inc. | % | % | |||||||||||||||
| 6/30/22 | AT&T Inc. | % | % | |||||||||||||||
| 3/22/24 | Verizon Communications Inc. | % | % | |||||||||||||||
| Total
U.S. corporate notes (cost: $ | % | |||||||||||||||||
The accompanying notes are an integral part of these financial statements.
8
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
December 31, 2021
| Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| Foreign Corporate Notes | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Banks | ||||||||||||||||||
| $ | 6/9/23 | Nordea Bank Abp | % | $ | % | |||||||||||||
| Total foreign corporate notes (cost: $ |
% | |||||||||||||||||
| Total corporate notes (cost: $ | % | |||||||||||||||||
| U.S. Asset Backed Securities | ||||||||||||||||||
| Face Value | Maturity Date | Name | Yield1 | |||||||||||||||
| Automotive | ||||||||||||||||||
| 6/18/25 | Americredit Automobile Receivables Trust 2020-3 | % | % | |||||||||||||||
| 12/16/24 | CarMax Auto Owner Trust 2019-2 | % | % | |||||||||||||||
| 9/19/29 | Carvana Auto Receivables Trust 2021-P3 | % | % | |||||||||||||||
| 6/9/25 | Carvana Auto Receivables Trust, Series 2020-P1 | % | % | |||||||||||||||
| 12/15/23 | Drive Auto Receivables Trust 2021-1 | % | % | |||||||||||||||
| 4/15/24 | Ford Credit Auto Lease Trust 2021-B | % | % | |||||||||||||||
| 8/15/28 | Ford Credit Auto Owner Trust 2017-Rev1 | % | % | |||||||||||||||
| 8/15/24 | Santander Consumer Auto Receivables Trust 2020-B | % | % | |||||||||||||||
| 4/15/25 | Santander Consumer Auto Receivables Trust 2020-B | % | % | |||||||||||||||
| 4/15/24 | Santander Drive Auto Receivables Trust 2021-2 | % | % | |||||||||||||||
| 3/20/25 | TESLA 2021-A A2 | % | % | |||||||||||||||
| 12/15/23 | World Omni Auto Receivables Trust 2020-C | % | % | |||||||||||||||
| 6/17/24 | World Omni Select Auto Trust 2020-A | % | % | |||||||||||||||
| Equipment | ||||||||||||||||||
| 10/22/24 | Dell Equipment Finance Trust 2019-2 | % | % | |||||||||||||||
| 6/22/22 | Dell Equipment Finance Trust 2020-1 | % | % | |||||||||||||||
| 10/20/23 | Dllmt 2021-1 Llc. | % | % | |||||||||||||||
| 7/22/30 | HPEFS Equipment Trust 2020-2 | % | % | |||||||||||||||
| 3/20/31 | HPEFS Equipment Trust 2021-1_2 | % | % | |||||||||||||||
| 4/15/24 | MMAF Equipment Finance LLC Series 2021-A | % | % | |||||||||||||||
| 4/20/23 | Verizon Owner Trust 2018-A | % | % | |||||||||||||||
| 7/22/24 | Verizon Owner Trust 2020-A | % | % | |||||||||||||||
| Total
U.S. asset backed securities (cost: $ | % | |||||||||||||||||
| Total investments in securities (cost: $ | $ | % | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
9
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
December 31, 2021
| Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| OPEN FUTURES CONTRACTS | ||||||||||||||||||
| Long U.S. Futures Contracts | ||||||||||||||||||
| Agricultural commodities | $ | % | ||||||||||||||||
| Currencies | % | |||||||||||||||||
| Energy | % | |||||||||||||||||
| Equity indices | % | |||||||||||||||||
| Interest rate instruments | ( | ) | ( | )% | ||||||||||||||
| Metals | % | |||||||||||||||||
| Net unrealized gain (loss) on open long U.S. futures contracts | % | |||||||||||||||||
| Short U.S. Futures Contracts | ||||||||||||||||||
| Agricultural commodities | ( | ) | ( | )% | ||||||||||||||
| Currencies | ( | ) | ( | )% | ||||||||||||||
| Energy | % | |||||||||||||||||
| Equity indices | % | |||||||||||||||||
| Interest rate instruments | % | |||||||||||||||||
| Metals | ( | ) | ( | )% | ||||||||||||||
| Net unrealized gain (loss) on open short U.S. futures contracts | ( | ) | ( | )% | ||||||||||||||
| Total U.S. Futures Contracts - net unrealized gain (loss) on open U.S. futures contracts | % | |||||||||||||||||
| Long Foreign Futures Contracts | ||||||||||||||||||
| Agricultural commodities | % | |||||||||||||||||
| Currencies | % | |||||||||||||||||
| Energy | ( | ) | ( | )% | ||||||||||||||
| Equity indices | % | |||||||||||||||||
| Interest rate instruments | ( | ) | ( | )% | ||||||||||||||
| Metals | % | |||||||||||||||||
| Net unrealized gain (loss) on open long foreign futures contracts | ( | ) | ( | )% | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
10
Futures Portfolio Fund, Limited Partnership
Condensed Schedule of Investments (continued)
December 31, 2021
| Description | Fair Value | % of Partners’ Capital (Net Asset Value) | ||||||||||||||||
| OPEN FUTURES CONTRACTS (continued) | ||||||||||||||||||
| Short Foreign Futures Contracts | ||||||||||||||||||
| Agricultural commodities | $ | ( | ) | ( | )% | |||||||||||||
| Currencies | % | |||||||||||||||||
| Equity indices | ( | ) | ( | )% | ||||||||||||||
| Interest rate instruments | % | |||||||||||||||||
| Metals | ( | ) | % | |||||||||||||||
| Net unrealized gain (loss) on open short foreign futures contracts | ( | ) | ( | )% | ||||||||||||||
| Total foreign futures contracts - net unrealized gain (loss) on open foreign futures contracts | ( | ) | ( | )% | ||||||||||||||
| Net unrealized gain (loss) on open futures contracts | $ | ( | ) | ( | )% | |||||||||||||
| OPEN FORWARD CURRENCY CONTRACTS | ||||||||||||||||||
| U.S. Forward Currency Contracts | ||||||||||||||||||
| Long | $ | % | ||||||||||||||||
| Short | ( | ) | ( | )% | ||||||||||||||
| Net unrealized gain (loss) on open U.S. forward currency contracts | ( | ) | ( | )% | ||||||||||||||
| Foreign Forward Currency Contracts | ||||||||||||||||||
| Long | % | |||||||||||||||||
| Short | % | |||||||||||||||||
| Net unrealized gain (loss) on open foreign forward currency contracts | % | |||||||||||||||||
| Net unrealized gain (loss) on open forward currency contracts | $ | % | ||||||||||||||||
| TOTAL RETURN SWAP CONTRACTS | ||||||||||||||||||
| Long | % | |||||||||||||||||
| Short | % | |||||||||||||||||
| % | ||||||||||||||||||
| INVESTMENT IN PRIVATE INVESTMENT COMPANY3 | ||||||||||||||||||
| Galaxy East Alpha (cost: $ | $ | % | ||||||||||||||||
| 1 |
| 2 |
| 3 |
The accompanying notes are an integral part of these financial statements.
11
Futures Portfolio Fund, Limited Partnership
Statements of Operations
For the Three and Six Months Ended June 30, 2022 and 2021
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Realized and change in unrealized gain (loss) on investments | ||||||||||||||||
| Net realized gain (loss) on: | ||||||||||||||||
| Futures, swaps and forward contracts | $ | $ | $ | $ | ||||||||||||
| Investment in private investment company | ||||||||||||||||
| Investments in securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Net change in unrealized gain (loss) on: | ||||||||||||||||
| Futures, swaps and forward contracts | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Investment in private investment company | ( | ) | ||||||||||||||
| Investments in securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Exchange membership | ||||||||||||||||
| Brokerage commissions and trading expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net realized and change in unrealized gain (loss) on investments | ||||||||||||||||
| Net investment income (loss) | ||||||||||||||||
| Income | ||||||||||||||||
| Interest income (loss) | ||||||||||||||||
| Expenses | ||||||||||||||||
| Trading Advisor management fee | ||||||||||||||||
| Trading Advisor incentive fee | ||||||||||||||||
| Cash manager fees | ||||||||||||||||
| General Partner management and performance fees | ||||||||||||||||
| Selling agent fees – General Partner | ||||||||||||||||
| Broker dealer servicing fees – General Partner | ||||||||||||||||
| General Partner | ||||||||||||||||
| Administrative expenses – General Partner | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Net investment income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these financial statements.
12
Futures Portfolio Fund, Limited Partnership
Statements of Operations (continued)
For the Three and Six Months Ended June 30, 2022 and 2021 (unaudited)
Three Months Ended June 30, 2022 | ||||||||||||||||||||||||
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| Increase (decrease) in net asset value per unit | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net income (loss) per unit† | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Weighted average number of units outstanding | ||||||||||||||||||||||||
| Three Months Ended June 30, 2021 | ||||||||||||||||||||||||
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| Increase (decrease) in net asset value per unit | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net income (loss) per unit† | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Weighted average number of units outstanding | ||||||||||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| Increase (decrease) in net asset value per unit | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net income (loss) per unit† | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Weighted average number of units outstanding | ||||||||||||||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||||||||||
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| Increase (decrease) in net asset value per unit | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net income (loss) per unit† | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Weighted average number of units outstanding | ||||||||||||||||||||||||
| † |
The accompanying notes are an integral part of these financial statements.
13
Futures Portfolio Fund, Limited Partnership
Statements of Cash Flows
For the Six Months Ended June 30, 2022 and 2021
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | $ | ||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||||||||
| Net change in unrealized (gain) loss from futures, swaps and forwards trading | ||||||||
| Net realized and change in unrealized (gain) loss on private investment company and securities | ( | ) | ||||||
| Purchases of securities | ( | ) | ( | ) | ||||
| Proceeds from disposition of private investment company and securities | ||||||||
| Changes in | ||||||||
| Exchange membership | ( | ) | ( | ) | ||||
| Dividend and interest receivable | ( | ) | ( | ) | ||||
| Trading Advisor management fee payable | ( | ) | ||||||
| Trading Advisor incentive fee payable | ||||||||
| Commissions and other trading fees payable on open contracts | ( | ) | ( | ) | ||||
| Cash Manager fees payable | ( | ) | ( | ) | ||||
| General Partner management and performance fees payable | ( | ) | ||||||
| General Partner | ||||||||
| Selling agent fees payable – General Partner | ( | ) | ||||||
| Broker dealer servicing fees payable – General Partner | ( | ) | ||||||
| Administrative fee payable – General Partner | ( | ) | ||||||
| Dividend and interest payable | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ||||||||
| Cash flows from financing activities | ||||||||
| Subscriptions | ||||||||
| Subscriptions received in advance | ||||||||
| Redemptions | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| End of period cash and cash equivalents consists of | ||||||||
| Cash in broker trading accounts | $ | $ | ||||||
| Cash and cash equivalents not in broker trading accounts | ||||||||
| Total end of period cash and cash equivalents | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Prior period redemptions paid | $ | $ | ||||||
| Prior period subscriptions received in advance | $ | $ | ||||||
| Supplemental schedule of non-cash financing activities | ||||||||
| Redemptions payable | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
14
Futures Portfolio Fund, Limited Partnership
Statements of Changes in Partners’ Capital (Net Asset Value)
For the Six Months Ended June 30, 2022 and 2021
(Unaudited)
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | Total | ||||||||||||||||||||||
| 2022 | ||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Net income (loss) | ||||||||||||||||||||||||||||
| Subscriptions | ||||||||||||||||||||||||||||
| Redemptions | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Transfers | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2022 | ||||||||||||||||||||||||||||
| Net income (loss) | ||||||||||||||||||||||||||||
| Subscriptions | ||||||||||||||||||||||||||||
| Redemptions | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Transfers | ( | ) | ||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| 2021 | ||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Net income (loss) | ||||||||||||||||||||||||||||
| Subscriptions | ||||||||||||||||||||||||||||
| Redemptions | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Transfers | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2021 | ||||||||||||||||||||||||||||
| Net income (loss) | ||||||||||||||||||||||||||||
| Subscriptions | ||||||||||||||||||||||||||||
| Redemptions | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Transfers | ( | ) | ||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
15
Futures Portfolio Fund, Limited Partnership
Statements of Changes in Partners’ Capital (Net Asset Value)
For the Six Months Ended June 30, 2022 and 2021
(Unaudited)
Units
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| 2022 | ||||||||||||||||||||||||
| Balance at December 31, 2021 | ||||||||||||||||||||||||
| Subscriptions | — | — | — | — | — | |||||||||||||||||||
| Redemptions | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||
| Transfers | ( | ) | — | — | — | — | ||||||||||||||||||
| Balance at March 31, 2022 | ||||||||||||||||||||||||
| Subscriptions | — | — | — | — | — | |||||||||||||||||||
| Redemptions | ( | ) | — | ( | ) | ( | ) | — | ( | ) | ||||||||||||||
| Transfers | ( | ) | — | — | — | — | ||||||||||||||||||
| Balance at June 30, 2022 | — | |||||||||||||||||||||||
| 2021 | ||||||||||||||||||||||||
| Balance at December 31, 2020 | ||||||||||||||||||||||||
| Subscriptions | — | — | — | — | ||||||||||||||||||||
| Redemptions | ( | ) | ( | ) | ( | ) | ( | ) | — | ( | ) | |||||||||||||
| Transfers | ( | ) | — | — | — | — | ||||||||||||||||||
| Balance at March 31, 2021 | ||||||||||||||||||||||||
| Subscriptions | — | — | — | — | ||||||||||||||||||||
| Redemptions | ( | ) | — | — | ( | ) | — | ( | ) | |||||||||||||||
| Transfers | ( | ) | — | — | — | — | ||||||||||||||||||
| Balance at June 30, 2021 | ||||||||||||||||||||||||
Net Asset Value per Unit
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| June 30, 2022 | $ | $ | $ | — | $ | $ | $ | |||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||
| June 30, 2021 | ||||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||
16
Futures Portfolio Fund, Limited Partnership
Notes to Financial Statements
| 1. | Organization and Summary of Significant Accounting Policies |
Description of the Fund
Futures Portfolio Fund, Limited Partnership (“Fund”) is a Maryland limited partnership, which operates as a commodity investment pool that commenced trading operations on January 2, 1990. The Fund issues units of limited partner interests (“Units”) in six classes, Class A, A2, A3, B, I and R, which represent units of fractional undivided beneficial interest in and ownership of the Fund. As of June 30, 2022, there are no outstanding Class A3 units.
The Fund uses commodity trading advisors to engage in the speculative trading of futures contracts, forward currency contracts and other financial instruments traded in the United States (“U.S.”) and internationally.
The Fund is a registrant with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the U.S. Securities Exchange Act of 1934, as amended (“1934 Act”). As a registrant, the Fund is subject to the regulations of the SEC and the disclosure requirements of the 1934 Act. As a commodity pool, the Fund is subject to the regulations of the U.S. Commodity Futures Trading Commission (“CFTC”), an agency of the U.S. Government, which regulates most aspects of the commodity futures industry; rules of the National Futures Association (“NFA”), an industry self-regulatory organization; rules of Financial Industry Regulatory Authority (“FINRA”), an industry self-regulatory organization; and the requirements of commodity exchanges where the Fund executes transactions. Additionally, the Fund is subject to the requirements of the futures brokers and interbank market makers through which the Fund trades.
Steben & Company, LLC (“General Partner”), is the general partner of the Fund and a Maryland limited liability company registered with the CFTC as a commodity pool operator and a commodities introducing broker, and is also registered with the SEC as a registered investment advisor and a broker dealer. The General Partner is a member of the NFA. The General Partner manages all aspects of the Fund’s business and serves as one of the Fund’s selling agents.
The
six classes of Units in the Fund differ only in the fees applicable to each class. Class A Units are subject to a
Significant Accounting Policies
Accounting Principles
The Fund’s financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Under GAAP, the Fund is an investment company and follows accounting and reporting guidance under the Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 946, Financial Services – Investment Companies.
Use of Estimates
Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Futures, forward currency contracts, investments in securities, certificates of deposit, and the exchange membership are recorded on a trade date basis, and gains or losses are realized when contracts/positions are liquidated. Realized gains and losses on investments in securities and certificates of deposit are determined on a specific identification basis and are included in net realized gain (loss) in the statements of operations. Unrealized gains and losses on open contracts (the difference between contract trade price and fair value) are reported in the statements of financial condition as net unrealized gain or loss, as there exists a right of offset of any unrealized gains or losses. The difference between cost and the fair value of open investments in securities and certificates of deposit is reflected as unrealized gain or loss on investments in securities and certificates of deposit. Any change in net unrealized gain or loss from the preceding period is reported in the statements of operations. Interest income earned on investments in securities, certificates of deposit and other cash and cash equivalent balances is recorded on an accrual basis. Market discounts and premiums on fixed-income securities are amortized daily over the expected life of the security using the effective yield method.
17
Fair Value of Financial Instruments
Financial instruments are recorded at fair value, the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities recorded at fair value are classified within a fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value. This fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
| Level 1 – | Fair value is based on unadjusted quoted prices for identical instruments in active markets. Financial instruments utilizing Level 1 inputs include futures contracts, U.S. Treasury securities and mutual funds. |
| Level 2 – | Fair value is based on quoted prices for similar instruments in active markets and inputs other than quoted prices that are observable for the financial instrument, such as interest rates and yield curves that are observable at commonly quoted intervals using a market approach. Financial instruments utilizing Level 2 inputs include forward currency contracts, swaps, certificates of deposit, commercial paper, corporate notes, asset backed securities and the exchange membership. |
| Level 3 – | Fair value is based on valuation techniques in which one or more significant inputs are unobservable. The Fund has no financial instruments utilizing Level 3 inputs. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.
The Fund assesses the classification of the instruments at each measurement date, and any transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Fund’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. For the period ended June 30, 2022 and year ended December 31, 2021, there were no such transfers between levels.
A description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis follows.
U.S. Treasury securities are recorded at fair value based on bid and ask quotes for identical instruments. Commercial paper, certificates of deposit, corporate notes, asset backed securities and the exchange membership are recorded at fair value based on bid and ask quotes for similar, but not identical, instruments. Accordingly, U.S. Treasury securities are classified within Level 1, and commercial paper, certificates of deposit, corporate notes, asset backed securities and exchange memberships are classified within Level 2.
The investment in a money market fund and futures contracts are valued using quoted market prices for identical assets in active markets and are classified within Level 1. The money market fund is included in cash and cash equivalents in the statements of financial condition. The fair values of forward currency contracts are based upon third-party quoted dealer values on the interbank market and are classified within Level 2. The Fund’s valuation policy for swaps is that fair value is based on the terms of the contracts (such as the notional amount and the contract maturity) and current market data and counterparty credit risk. Swaps are generally categorized as level 2 in the fair value hierarchy. The Fund’s investment in a private investment company is valued at net asset value as provided by the private fund’s administrator. This use of net asset value as the practical expedient to approximate fair value under ASC 820 is advisable due to the investment not having a readily determinable fair value. Investments measured at fair value using the new asset value practical expedient are not categorized in the fair value hierarchy.
18
Cash and Cash Equivalents
Cash and cash equivalents may include cash, funds held in money market accounts and short-term investments with maturities of three months or less at the date of acquisition and that are not held for sale in the normal course of business. The Fund maintains deposits with financial institutions in amounts that are in excess of federally insured limits; however, the Fund does not believe it is exposed to any significant credit risk.
Exchange Membership
The Fund incurs reduced fees for transactions on the Chicago Mercantile Exchange (CME) due to a membership interest in the CME. The membership is accounted at its fair value and changes in fair value are reported in net change in unrealized gain (loss) in exchange membership on the statement of operations.
Brokerage Commissions and Trading Expenses
Brokerage commissions and trading expenses include brokerage and other trading fees and are charged to expense when contracts are opened and closed.
Redemptions Payable
Redemptions payable represent redemptions that meet the requirements of the Fund and have been approved by the General Partner prior to period-end. These redemptions have been recorded using the period-end net asset value per Unit.
Income Taxes
The Fund prepares calendar year U.S. and applicable state and local tax returns. The Fund is not subject to federal income taxes as each partner is individually liable for his or her allocable share of the Fund’s income, expenses and trading gains or losses. The Fund evaluates the tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are more-likely-than-not to be sustained when examined by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense and asset or liability in the current year. Management has determined there are no material uncertain income tax positions through June 30, 2022. With few exceptions, the Fund is no longer subject to U.S. federal, or state and local income tax examinations by tax authorities for the current and prior three years.
Foreign Currency Transactions
The Fund has certain investments denominated in foreign currencies. The purchase and sale of investments, and income and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of investments held. Such fluctuations are included with the net realized and change in unrealized gain or loss on such investments in the statements of operations.
Reclassification
Certain amounts reported in the 2021 financial statements may have been reclassified to conform to the 2022 presentation without affecting previously reported partners’ capital (net asset value) or net income (loss).
| 2. | Fair Value Disclosures |
The Fund’s assets and liabilities, measured at fair value on a recurring basis, are summarized in the following tables by the type of inputs applicable to the fair value measurements:
At June 30, 2022
| Level 1 | Level 2 | Practical Expedient | Total | |||||||||||||
| Equity in broker trading accounts: | ||||||||||||||||
| Net unrealized gain (loss) on open futures contracts* | $ | ( | ) | $ | — | $ | — | $ | ( | ) | ||||||
| Net unrealized gain (loss) on open forward currency contracts* | — | — | ||||||||||||||
| Net unrealized gain (loss) on swap contracts | — | — | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||||
| Money market fund | — | — | ||||||||||||||
| Investment in private investment company | — | — | ||||||||||||||
| Investments in securities: | ||||||||||||||||
| U.S. Treasury securities* | — | — | ||||||||||||||
| Asset backed securities* | — | — | ||||||||||||||
| Commercial paper* | — | — | ||||||||||||||
| Corporate notes* | — | — | ||||||||||||||
| Exchange membership | — | — | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| * |
19
| At December 31, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Valued at NAV | Total | |||||||||||||
| Equity in broker trading accounts: | ||||||||||||||||
| Net unrealized gain (loss) on open futures contracts* | $ | ( | ) | $ | — | $ | — | $ | ( | ) | ||||||
| Net unrealized gain (loss) on open forward currency contracts* | — | — | ||||||||||||||
| Net unrealized gain (loss) on swap contracts* | — | — | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||||
| Money market funds | — | — | ||||||||||||||
| Investment in private investment company | — | — | ||||||||||||||
| Investment in securities: | ||||||||||||||||
| U.S. Treasury securities* | — | — | ||||||||||||||
| Asset backed securities* | — | — | ||||||||||||||
| Commercial paper* | — | — | ||||||||||||||
| Corporate notes* | — | — | ||||||||||||||
| Exchange membership | — | — | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| * |
There were no Level 3 holdings at June 30, 2022 and December 31, 2021, or during the periods then ended.
In addition to the financial instruments listed above, substantially all of the Fund’s other assets and liabilities are considered financial instruments and are reflected at fair value, or at carrying amounts that approximate fair value because of the short maturity of the instruments.
| 3. | Derivative Instruments Disclosures |
The Fund’s derivative contracts are comprised of futures and forward currency contracts, none of which are designated as hedging instruments. At June 30, 2022, the Fund’s derivative contracts had the following impact on the statements of financial condition:
| June 30, 2022 | Derivative Assets and Liabilities, at fair value | |||||||||||
| Statements of Financial Condition Location | Gross
Amounts of Recognized Assets | Gross
Amounts Offset in the Statements of Financial Condition | Net
Amount of Assets Presented in the Statements of Financial Condition | |||||||||
| Equity in broker trading accounts: | ||||||||||||
| Net unrealized gain (loss) on open futures contracts | ||||||||||||
| Agricultural commodities | $ | $ | ( | ) | $ | ( | ) | |||||
| Currencies | ( | ) | ||||||||||
| Energy | ( | ) | ( | ) | ||||||||
| Equity indices | ( | ) | ||||||||||
| Interest rate instruments | ( | ) | ||||||||||
| Metals | ( | ) | ||||||||||
| Net unrealized gain (loss) on open futures contracts | $ | $ | ( | ) | $ | ( | ) | |||||
| Net unrealized gain (loss) on open forward currency contracts | $ | $ | ( | ) | $ | |||||||
| Net unrealized gain (loss) on swap contracts | $ | $ | — | $ | ||||||||
20
At
June 30, 2022, there were
The Fund’s financial assets, derivative assets, and cash collateral held by counterparties at June 30, 2022 were:
| Gross Amounts Not Offset in the Statements of Financial Condition | ||||||||||||||||
| Counterparty | Net
Amount of Assets in the Statements of Financial Condition | Financial
Instruments | Cash
Collateral Received | Net Amount | ||||||||||||
| Deutsche Bank AG | $ | $ | — | $ | — | $ | ||||||||||
| Deutsche Bank Securities, Inc. | — | — | ||||||||||||||
| Goldman Sachs & Co. LLC | ( | ) | — | — | ( | ) | ||||||||||
| SG Americas Securities, LLC | ( | ) | — | — | ( | ) | ||||||||||
| Total | $ | ( | ) | $ | — | $ | — | $ | ( | ) | ||||||
For the three and six months ended June 30, 2022, the Fund’s derivative contracts had the following impact on the statements of operations:
| Three
Months Ended June 30, 2022 | Six
Months Ended June 30, 2022 | |||||||||||||||
| Types of Exposure | Net
realized gain (loss) | Net
change in unrealized gain (loss) | Net
realized gain (loss) | Net
change in unrealized gain (loss) | ||||||||||||
| Futures contracts | ||||||||||||||||
| Agricultural commodities | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Currencies | ||||||||||||||||
| Energy | ( | ) | ( | ) | ||||||||||||
| Equity indices | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest rate instruments | ( | ) | ||||||||||||||
| Metals | ( | ) | ||||||||||||||
| Total futures contracts | ( | ) | ( | ) | ||||||||||||
| Forward currency contracts | ( | ) | ( | ) | ||||||||||||
| Net open futures contracts | — | — | ( | ) | ||||||||||||
| Swap contracts | ( | ) | ||||||||||||||
| Total futures and forward contracts | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
21
For
the three months ended June 30, 2022, the number of futures contracts closed was
At December 31, 2021, the Fund’s derivative contracts had the following impact on the statements of financial condition:
| December 31, 2021 | ||||||||||||
| Derivative Assets and Liabilities, at fair value | ||||||||||||
| Statements of Financial Condition Location | Gross
Amounts of Recognized Assets | Gross
Amounts Offset in the Statement of Financial Condition | Net
Amount of Assets Presented in the Statement of Financial Condition | |||||||||
| Equity in broker trading accounts: | ||||||||||||
| Net unrealized gain (loss) on open futures contracts | ||||||||||||
| Agricultural commodities | $ | $ | ( | ) | $ | |||||||
| Currencies | ( | ) | ( | ) | ||||||||
| Energy | ( | ) | ||||||||||
| Equity indices | ( | ) | ||||||||||
| Interest rate instruments | ( | ) | ( | ) | ||||||||
| Metals | ( | ) | ( | ) | ||||||||
| Single stock futures | ||||||||||||
| Net unrealized gain (loss) on open futures contracts | $ | $ | ( | ) | $ | ( | ) | |||||
| Net unrealized gain (loss) on open forward currency contracts | $ | $ | ( | ) | $ | |||||||
| Net unrealized gain (loss) on swap contracts | $ | $ | — | $ | ||||||||
At
December 31, 2021, there were
The Fund’s financial assets, derivative assets, and cash collateral held by counterparties at December 31, 2021 were:
| Gross
Amounts Not Offset in the Statements of Financial Condition | ||||||||||||||||
| Counterparty | Net
Amount of Assets in the Statements of Financial Condition | Financial
Instruments | Cash
Collateral Received | Net Amount | ||||||||||||
| Deutsche Bank, AG | $ | $ | — | $ | — | $ | ||||||||||
| Deutsche Bank Securities, Inc | — | — | ||||||||||||||
| SG Americas Securities, LLC | ( | ) | — | — | ( | ) | ||||||||||
| Goldman Sachs & Co. LLC | — | — | ||||||||||||||
| Total | $ | ( | ) | $ | — | $ | — | $ | ( | ) | ||||||
22
For the three and six months ended June 30, 2021, the Fund’s derivative contracts had the following impact on the statements of operations:
| Three
Months Ended June 30, 2021 | Six
Months Ended June 30, 2021 | |||||||||||||||
| Types of Exposure | Net
realized gain (loss) | Net
change in unrealized gain (loss) | Net
realized gain (loss) | Net
change in unrealized gain (loss) | ||||||||||||
| Futures contracts | ||||||||||||||||
| Agricultural commodities | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Currencies | ( | ) | ( | ) | ( | ) | ||||||||||
| Energy | ||||||||||||||||
| Equity indices | ( | ) | ( | ) | ||||||||||||
| Interest rate instruments | ( | ) | ( | ) | ( | ) | ||||||||||
| Metals | ( | ) | ( | ) | ||||||||||||
| Total futures contracts | ( | ) | ||||||||||||||
| Forward currency contracts | ( | ) | ( | ) | ( | ) | ||||||||||
| Net open futures contracts | ( | ) | — | ( | ) | |||||||||||
| Swap contracts | ||||||||||||||||
| Total futures and forward contracts | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
For
the three months ended June 30, 2021, the number of futures contracts closed was
| 4. | General Partner |
The
General Partner does not maintain a capital balance in the Fund. Pursuant to the terms of the Partnership Agreement,
At June 30, 2022 and December 31, 2021, the majority shareholder of the General Partner did not have an investment balance in the Fund.
The following fees are paid to the General Partner:
| ■ | General
Partner Management Fee – the Fund incurs a monthly fee on Class A, A2, A3, B and R
Units |
| ■ | General
Partner Performance Fee – the Fund incurs a monthly fee on Class I Units |
23
| ■ | Selling
Agent Fees – the Class A Units incur a monthly fee |
| ■ | Broker
Dealer Servicing Fees – the Class B Units incur a monthly fee |
| ■ | Administrative
Expenses – the Fund incurs a monthly fee |
| 5. | Trading Advisors and Cash Managers |
The
Fund has advisory agreements with various commodity trading advisors, pursuant to which the Fund incurs a monthly advisor management
fee that ranges from
Principal
Global Investors, LLC serves as the cash manager for the Fund. The Fund incurs monthly fees, payable in arrears to the Cash Manager,
equal to approximately 1/12th of
| 6. | Deposits with Brokers |
To
meet margin requirements, the Fund maintains assets, including cash, equity in futures and forward currency contracts, and investments
in securities, with brokers, subject to CFTC regulations and various exchange and broker requirements. At June 30, 2022 and December
31, 2021, the Fund had assets totaling $
| 7. | Subscriptions, Distributions and Redemptions |
Investments
in the Fund are made by subscription agreement and must be received within five business days of the end of the month, subject
to acceptance by the General Partner. The minimum investment is $
The Fund is not required to make distributions but may do so at the sole discretion of the General Partner. A limited partner may request and receive redemption of Class A, A2, A3, B, I or R Units owned at the end of any month, subject to five business days’ prior written notice to the General Partner, and in certain circumstances, restrictions in the Partnership Agreement.
The General Partner may require a limited partner to redeem from the Fund if the General Partner deems the redemption (a) necessary to prevent or correct the occurrence of a non-exempt prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code of 1986, as amended, (b) beneficial to the Fund, or (c) necessary to comply with applicable government or other self-regulatory organization regulations.
24
| 8. | Trading Activities and Related Risks |
The Fund engages in the speculative trading of futures, options and over-the-counter contracts, including forward currency contracts traded in the U.S. and internationally. Trading in derivatives exposes the Fund to both market risk, the risk arising from a change in the fair value of a contract, and credit risk, the risk of failure by another party to perform according to the terms of a contract.
The Portfolios are subject to investment and operational risks associated with financial, economic and other global market developments and disruptions, including those arising from war, terrorism, market manipulation, government interventions, defaults and shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics) and natural/environmental disasters, which can all negatively impact the securities markets and cause a Portfolio to lose value. These events can also impair the technology and other operational systems upon which the Portfolios’ service providers rely and could otherwise disrupt the ability of the Portfolios’ service providers to perform essential tasks.
The recent spread of an infectious respiratory illness caused by a novel strain of coronavirus (known as COVID-19) has caused volatility, severe market dislocations and liquidity constraints in many markets, including markets for the securities the Portfolios hold, and may adversely affect the Portfolios’ investments and operations. The transmission of COVID-19 and efforts to contain its spread have resulted in, among other things: quarantines and travel restrictions, including border closings, strained healthcare systems, event cancellations, disruptions to business operations and supply chains, and a reduction in consumer and business spending, as well as general concern and uncertainty that has negatively affected the economy. These disruptions have led to instability in the marketplace, including equity and debt market losses and overall volatility, and the jobs market. The impact of COVID-19, and other infectious illness outbreaks, epidemics or pandemics that may arise in the future, could adversely affect the economies of many nations or the entire global economy, the financial well-being and performance of individual issuers, borrowers and sectors and the health of the markets generally in potentially significant and unforeseen ways. In addition, the impact of infectious illnesses, such as COVID-19, in emerging market countries may be greater due to generally less established healthcare systems. This crisis or other public health crises may exacerbate other pre-existing political, social and economic risks in certain countries or globally.
The foregoing could lead to a significant economic downturn or recession, increased market volatility, a greater number of market closures, higher default rates and adverse effects on the values and liquidity of securities or other assets. Such impacts, which may vary across asset classes, may adversely affect the performance of the Portfolios. In certain cases, an exchange or market may close or issue trading halts on specific securities or even the entire market, which may result in the Portfolios being, among other things, unable to buy or sell certain securities or financial instruments or to accurately price their investments.
Purchase and sale of futures contracts requires margin deposits with the futures brokers. Additional deposits may be necessary for any loss of contract value. The Commodity Exchange Act (“CEAct”) requires a broker to segregate all customer transactions and assets from such broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury securities) deposited with a broker are considered commingled with all other customer funds subject to the broker’s segregation requirements. In the event of a broker’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than (or none of) the total cash and other property deposited. The Fund uses SG Americas Securities, LLC, Goldman Sachs and Co., LLC, and Deutsche Bank Securities, Inc. as its futures brokers. The Fund uses Deutsche Bank AG as its forward currency counterparty.
For futures contracts, risks arise from changes in the fair value of the contracts. Theoretically, the Fund is exposed to a market risk equal to the value of futures and forward currency contracts purchased, and unlimited liability on such contracts sold short.
In addition to market risk, upon entering into commodity interest contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Fund. The counterparty for futures and options on futures contracts traded in the U.S. and on most non-U.S. futures exchanges is the clearinghouse associated with such exchanges. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.
In the case of forward currency contracts, which are traded on the interbank or other institutional market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a clearinghouse backed by a group of financial institutions; thus, there likely will be greater counterparty credit risk. While the Fund trades only with those counterparties that it believes to be creditworthy, there can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund.
25
The Fund trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty non-performance. Accordingly, the risks associated with forward currency contracts are generally greater than those associated with exchange-traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward currency contracts typically involves delayed cash settlement.
The Fund has a portion of its assets on deposit with interbank market makers and other financial institutions in connection with its trading of forward currency contracts and its cash management activities. In the event of an interbank market maker’s or financial institution’s insolvency, recovery of Fund assets on deposit may be limited to account insurance or other protection afforded such deposits.
Entering into swap agreements involves, to varying degrees, credit, market, and counterparty risk in excess of the amounts recognized on the statement of financial condition.
The Cash Managers manage the Fund’s cash and excess margin through investments in fixed income instruments, pursuant to investment parameters established by the General Partner. Fluctuations in prevailing interest rates could cause mark-to-market losses on the Fund’s fixed income instruments.
Through its investments in debt securities and certificates of deposit, the Fund has exposure to U.S. and foreign enterprises. The following table presents the exposure at June 30, 2022.
| Country or Region | U.S.
Treasury Securities | Commercial
Paper | Corporate
Notes | Asset
Backed Securities | Total | %
of Partners' Capital (Net Asset Value) | ||||||||||||||||||
| United States | $ | $ | $ | $ | $ | % | ||||||||||||||||||
| Canada | — | — | — | % | ||||||||||||||||||||
| Ireland | — | — | — | % | ||||||||||||||||||||
| Germany | — | — | — | % | ||||||||||||||||||||
| United Kingdom | — | — | % | |||||||||||||||||||||
| Finland | — | — | — | % | ||||||||||||||||||||
| Japan | — | — | — | % | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | % | ||||||||||||||||||
The following table presents the exposure at December 31, 2021.
| Country or Region | U.S.
Treasury Securities | Commercial
Paper | Corporate
Notes | Asset
Backed Securities | Total | %
of Partners' Capital (Net Asset Value) | ||||||||||||||||||
| United States | $ | $ | $ | $ | $ | % | ||||||||||||||||||
| Ireland | — | — | — | % | ||||||||||||||||||||
| United Kingdom | — | — | — | % | ||||||||||||||||||||
| Finland | — | — | — | % | ||||||||||||||||||||
| Singapore | — | — | — | % | ||||||||||||||||||||
| Norway | — | — | — | % | ||||||||||||||||||||
| Germany | — | — | — | % | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | % | ||||||||||||||||||
26
| 9. | Indemnifications |
In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, and which provide general indemnifications. The Fund’s maximum exposure under these arrangements cannot be estimated. However, the Fund believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for such indemnifications.
| 10. | Interim Financial Statements |
The statements of financial condition, including the condensed schedule of investments, at June 30, 2022, the statements of operations for the three and six months ended June 30, 2022 and 2021, the statements of cash flows and statement of changes in partners’ capital (net asset value) for the six months ended June 30, 2022 and 2021, and the accompanying notes to the financial statements are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP may be omitted pursuant to such rules and regulations. In the opinion of management, such financial statements and accompanying disclosures reflect all adjustments, which were of a normal and recurring nature, necessary to present fairly the financial position at June 30, 2022, results of operations, cash flows and changes in partners’ capital (net asset value) for the three and six months ended June 30, 2022 and 2021. The results of operations for the three and six months ended June 30, 2022 and 2021 are not necessarily indicative of the results to be expected for the full year or any other period. These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Fund’s Form 10-K as filed with the SEC.
| 11. | Financial Highlights |
The following information presents per unit operating performance data and other ratios for the three and six months ended June 30, 2022 and 2021, assuming the unit was outstanding throughout the entire period:
| Three Months Ended June 30, 2022 | ||||||||||||||||||||||||
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| Per Unit Operating Performance | ||||||||||||||||||||||||
| Net asset value per unit, beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net realized and change in unrealized gain (loss) on investments (1) | ||||||||||||||||||||||||
| Net investment income (loss) (1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Total income (loss) from operations | ||||||||||||||||||||||||
| Redemption value per share | ( | ) | ||||||||||||||||||||||
| Net asset value per unit, end of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total return (4) | % | % | % | % | % | % | ||||||||||||||||||
| Other Financial Ratios | ||||||||||||||||||||||||
| Ratios to average net asset value | ||||||||||||||||||||||||
| Expenses prior to General Partner 1% allocation (2) (3) | % | % | % | % | % | % | ||||||||||||||||||
| General Partner 1% allocation | % | % | % | % | % | % | ||||||||||||||||||
| Net total expenses | % | % | % | % | % | % | ||||||||||||||||||
| Net investment income (loss) (2) (3) (5) | ( | )% | ( | )% | ( | )% | ( | )% | ( | )% | ( | )% | ||||||||||||
27
| Three Months Ended June 30, 2021 | ||||||||||||||||||||||||
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| Per Unit Operating Performance | ||||||||||||||||||||||||
| Net asset value per unit, beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net realized and change in unrealized gain (loss) on investments (1) | ||||||||||||||||||||||||
| Net investment income (loss) (1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Total income (loss) from operations | ||||||||||||||||||||||||
| Net asset value per unit, end of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total return (4) | % | % | % | % | % | % | ||||||||||||||||||
| Other Financial Ratios | ||||||||||||||||||||||||
| Ratios to average net asset value | ||||||||||||||||||||||||
| Expenses prior to General Partner 1% allocation (2) (3) | % | % | % | % | % | % | ||||||||||||||||||
| General Partner 1% allocation | % | % | % | % | % | % | ||||||||||||||||||
| Net total expenses | % | % | % | % | % | % | ||||||||||||||||||
| Net investment income (loss) (2) (3) (5) | ( | )% | ( | )% | ( | )% | ( | )% | ( | )% | ( | )% | ||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| Per Unit Operating Performance | ||||||||||||||||||||||||
| Net asset value per unit, beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net realized and change in unrealized gain (loss) on investments (1) | ||||||||||||||||||||||||
| Net investment income (loss) (1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Total income (loss) from operations | ||||||||||||||||||||||||
| Redemption value per share | ( | ) | ||||||||||||||||||||||
| Net asset value per unit, end of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total return (4) | % | % | % | % | % | % | ||||||||||||||||||
| Other Financial Ratios | ||||||||||||||||||||||||
| Ratios to average net asset value | ||||||||||||||||||||||||
| Expenses prior to General Partner 1% allocation (2) (3) | % | % | % | % | % | % | ||||||||||||||||||
| General Partner 1% allocation | % | % | % | % | % | % | ||||||||||||||||||
| Net total expenses | % | % | % | % | % | % | ||||||||||||||||||
| Net investment income (loss) (2) (3) (5) | ( | )% | ( | )% | ( | )% | ( | )% | ( | )% | ( | )% | ||||||||||||
28
| Six Months Ended June 30, 2021 | ||||||||||||||||||||||||
| Class A | Class A2 | Class A3 | Class B | Class I | Class R | |||||||||||||||||||
| Per Unit Operating Performance | ||||||||||||||||||||||||
| Net asset value per unit, beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net realized and change in unrealized gain (loss) on investments (1) | ||||||||||||||||||||||||
| Net investment income (loss) (1) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Total income (loss) from operations | ||||||||||||||||||||||||
| Net asset value per unit, end of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total return (4) | % | % | % | % | % | % | ||||||||||||||||||
| Other Financial Ratios | ||||||||||||||||||||||||
| Ratios to average net asset value | ||||||||||||||||||||||||
| Expenses prior to General Partner 1% allocation (2) (3) | % | % | % | % | % | % | ||||||||||||||||||
| General Partner 1% allocation | % | % | % | % | % | % | ||||||||||||||||||
| Net total expenses | % | % | % | % | % | % | ||||||||||||||||||
| Net investment income (loss) (2) (3) (5) | ( | )% | ( | )% | ( | )% | ( | )% | ( | )% | ( | )% | ||||||||||||
Total returns are calculated based on the change in value of a Class A, Class A2, Class A3, Class B, Class I or Class R Unit during the period. An individual partner’s total returns and ratios may vary from the above total returns and ratios based on the timing of subscriptions and redemptions.
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| 12. | Subsequent Events |
Subsequent
to June 30, 2022, there were $
29
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
Current Positioning
Sector risk allocations and net positioning as of June 30, 2022 were as follows:
| Sector | Risk Allocation | Net Position | ||||
| Agriculture | 7 | % | Long | |||
| Energy | 20 | % | Long | |||
| Metals | 7 | % | Short | |||
| Currencies | 35 | % | Long USD | |||
| Equity indices | 15 | % | Short | |||
| Interest rates | 16 | % | Short | |||
A prevalent strategy employed by the Fund’s trading advisors is trend-following. As such, the largest positions tend to reflect the strongest current market trends. Another prevalent strategy employed by the Fund is systematic macro, which tends to systematically trade positions based on non-price data or other fundamental data and factors. As of June 30, 2022, the Fund’s largest exposure was in commodity markets. Within this sector, positioning was long across energy, agricultural, and metal markets. Equity markets were also positioned long at the end of the second quarter, with the largest positions in U.S. indices. Currency exposure fluctuated during the quarter but finished June slightly short. Fixed income positions were long at the end of the period, both in U.S. and international markets.
Results of Operations
The returns for each Class of Units for the six months ended June 30, 20221 and 2021 were:
| Class of Units | 2022 | 2021 | ||||||
| Class A | 15.10 | % | 7.22 | % | ||||
| Class A2 | 15.90 | % | 7.97 | % | ||||
| Class A3 | 16.85 | % | 7.89 | % | ||||
| Class B | 16.13 | % | 8.19 | % | ||||
| Class I | 16.68 | % | 8.70 | % | ||||
| Class R | 16.25 | % | 8.29 | % | ||||
Results from past periods are not necessarily indicative of results that may be expected for any future period. Monthly analysis of the trading gains and losses is provided below.
2022
January
As the new COVID-19 variant’s control and impact on financial markets lessened, fears of an aggressive Federal Reserve and inflation took hold. These events drove the S&P 500 Index down by about -9.7% in the opening weeks of 2022. The January Federal Reserve meeting saw a continuation of the hawkish stance set forth by the central bank, indicating the need to begin raising interest rates and winding down its $9 billion balance sheet. This drove yields higher as investors rotated out of fixed income securities. The U.S. 10-Year Treasury rose 0.27% in January, to close the month at 1.78%. Much to the surprise of economists, the U.S. added half a million new jobs in the month, showing the resilience of the labor market through the Omicron variant wave. Against the backdrop of geopolitical tensions with Russia and Ukraine, along with rising global demand, oil prices continued their upward trend as West Texas Intermediate surged over +17% to start the year.
Futures Portfolio Fund’s modest negative returns in January were driven by interest rates and equity indices, while energy and agricultural commodities contributed positively to performance. Despite the overall negative return for the month, the Fund’s ability to go both long and short helped mitigate losses relative to major bond and equity indices. In fixed income, mixed bond positioning detracted as yields finished the month significantly higher. Also detracting was long equity positioning, as volatility in the U.S. and abroad proved difficult for the Fund’s managers. In energy trading, consistent long oil and oil product positioning contributed the most, as prices rose sharply due to the aforementioned reasons. The Fund finished with a net loss of (0.36)%, (0.25)%, (0.26)%, (0.21)%, (0.14)% and (0.20)% for Class A, A2, A3, B, I, and R Units, respectively.
30
February
COVID-19 related market shocks continue to fall by the wayside as rising interest rates and geopolitical tensions dominated the headlines in February. The combination of these events drove the S&P 500 Index down -2.99% in February, bringing year-to-date 2022 performance down to -8.01%. The continued hawkish stance by the Federal Reserve, coupled with persistent high inflation metrics drove bond yields higher for much of the month. This upward trend in bonds quickly shifted on reports of the invasion of Ukraine by Russia. The U.S. 10-Year Treasury fell from highs around 2% as investors quickly shifted to risk-off assets. This level of rates marks a new high since late 2019. Against the backdrop of geopolitical tensions with Russia and Ukraine, oil prices continued their blistering upward trend as West Texas Intermediate surged over +9% in February, bringing the year-to-date increase up over +28%.
Futures Portfolio Fund’s positive returns in February were driven by energy, agricultural commodities, and interest rates, while currencies and stock indices modestly detracted from performance. The strong month highlighted the Fund’s ability to be sizably invested in different themes, which has helped mitigate losses relative to major bond and equity indices. In energy, consistent long oil and oil product positioning contributed positively as supply fears stemmed from aforementioned reasons. Also contributing were long agricultural positioning which benefited from supply constraints. Detracting from performance was short dollar and long equity positioning, as volatility in those markets proved difficult for the Fund’s managers. The Fund finished with a net gain of 1.97%, 2.09%, 2.07%, 2.12%, 2.20% and 2.14% for Class A, A2, A3, B, I, and R Units, respectively.
March
Rising interest rates and the war in Ukraine dominated news headlines in March. While the S&P 500 Index finished the month up +3.71%, these events contributed to a significant amount of volatility, bringing year-to-date performance for the equity index down -4.60%. Renewed hawkish comments by the Federal Reserve, coupled with relentless higher inflation metrics drove bond yields up during the month. Most notably, on the last day of March, the U.S. 2-year Treasury yield briefly rose above the U.S. 10-year yield, also known as an “inversion”, which was last seen in 2019. Investors view this market phenomenon as a potential warning signal of a looming recession. Against the backdrop of Russia’s attack on Ukraine, oil prices continued their blistering upward trend as West Texas Intermediate surged over +7% in March, bringing the year-to-date increase up over +38%, reaching its highest level since 2008.
Futures Portfolio Fund’s strong return in March (+9.37%) received positive contributions from all sectors with energy, currencies, and interest rates leading the way. The strong month highlighted the Fund’s ability to be sizably invested in different themes, which has helped mitigate losses relative to major bond and equity indices in 2022. In energy, deceasing long positioning contributed positively as supply fears stemmed from the aforementioned reasons. Also contributing was long dollar/short foreign currency positioning, which benefited from a flight-to-quality early in the month. Consistent short bond positioning also contributed as yields rose across the globe on the back of rising inflation. While metals, agricultural commodities, and stock indices lagged the other sectors, we are still pleased with their contribution to overall portfolio performance and diversification. The Fund finished with a net gain of 9.12%, 9.25%, 9.24%, 9.29%, 9.37% and 9.30% for Class A, A2, A3, B, I, and R Units, respectively.
April
As Russia’s invasion of Ukraine entered its 3rd month, investors continued to size up daily news flow out of the region along with the increasing pressures of inflation. The S&P 500 Index added to its negative 2022 performance as April proved to be the worst month for the index since March of 2020, bringing the YTD return to down -12.92%. Continued hawkish comments by the Federal Reserve, coupled with relentless higher inflation metrics drove bond yields higher during the month. Most notably, the U.S. 10-year yield encroached on a critical 3% level, a point not seen since late 2018. Against the backdrop of Russia’s attack on Ukraine and the uncertainty of supply, oil prices continued their upward trend as West Texas Intermediate surged over +3% in April, bringing the year-to-date increase up over +43%.
Futures Portfolio Fund added to its strong start in 2022 with contributions from currencies, interest rates, energy products, and agricultural commodities, while equities modestly detracted. The strong month highlighted the Fund’s ability to be sizably invested in different themes, which has helped provide positive performance against the losses by major bond and equity indices in 2022. In currency trading, long U.S. dollar positioning throughout the month contributed positively as real yields moved into positive territory along with a boost from the flight to safety. Also contributing was consistent short bond positioning as yields rose across the globe on the back of rising inflation. Choppy equity markets (as opposed to more sustained trends) provided a difficult environment for the Fund’s managers to take advantage of. As we enter the second quarter of 2022, we are pleased with the portfolio performance and diversification it is providing investors. The Fund finished with a net gain of 5.88%, 6.00%, 5.99%, 6.04%, 6.12% and 6.06% for Class A, A2, A3, B, I, and R Units, respectively.
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May
Rising inflation and concerns surrounding China’s zero COVID policy drove financial markets in May as investors assessed their subsequent impact on global economic growth. The S&P 500 Index posted modestly positive performance in May, bringing year-to-date performance to down -12.76%. The Index’s slight gain did not come without its fair share of volatility as numerous companies issued cautious outlooks, raising questions about economic growth and health of the consumer. Additionally, U.S. 10-year yields encroached on a critical 3% level, a point not seen since late 2018. Against the backdrop of Russia’s attack on Ukraine and the uncertainty of supply, oil prices continued their upward trend as West Texas Intermediate surged over +11% in May, bringing the year-to-date increase up over +60%.
Futures Portfolio Fund (“the Fund”) had a small net loss in May, as currencies, interest rates, and agricultural commodities gave back some of their sizable gains from earlier in the year. In currency trading, long U.S. dollar positioning throughout the month detracted as the extended rally stalled on the back of slowing U.S. yield increases. Also detracting from performance was fixed income as range-bound markets provided a difficult trading environment for the Fund’s managers. Energy trading was a positive contributor during the month, however, as consistent long exposure was able to capture the general upward trend due to aforementioned reasons. The Fund finished with a net loss of (0.98)%, (0.86)%, (0.88)%, (0.83)%, (0.75)%, and (0.81)% for Class A, A2, A3, B, I, and R Units, respectively.
June
While the macro drivers from earlier in the year continued into June, market participants’ focus shifted to the Federal Reserve’s response to these events. The S&P 500 Index added to its negative year-to-date return as June, down -8.25%, proved to be the second worst month this year. This brought the 2022 return to down -19.96% for the Index. Continued hawkish comments by the Federal Reserve, coupled with relentless higher inflation metrics drove bond yields higher during the month. Most notably, the U.S. 10-year treasury yield rose to 3.49%, before retreating and closing the month below 3%.
Futures Portfolio Fund (“the Fund”) had a small net loss in June, as agricultural commodities and energy products gave back some of their sizable gains from earlier in the year. Gains in interest rates and currency trading were not enough to offset the aforementioned losses. Agricultural commodities, specifically grains markets, detracted most from performance as persistently long positions were hurt by better-than-expected news regarding weather, crop conditions, and exports from Ukraine. Contributing the most to performance was short fixed income positioning as volatile markets provided ample trading opportunities to the Fund’s trading advisors. The Fund finished with a net loss of (0.98)%, (0.87)%, (0.83)%, (0.76)%, and (0.82)% for Class A, A2, B, I, and R Units, respectively.
2021
January
Much of January was marked by increasing confidence in a post-pandemic global recovery along with ongoing accommodative monetary policy which helped lift equities for the greater part of the month. Ultimately global stocks finished down in January, however, as COVID variants and unusual retail activity in several highly shorted stocks rattled investor confidence late in the month. Global bond yields rose (prices fell) with the 10-year U.S. Treasury yield surging above 1%, buoyed by expectations for additional stimulus. Commodity prices also moved higher led by gains in energy and agricultural markets. In oil markets, Saudi Arabia unexpectedly cut production helping to boost prices. Finally, the U.S. Dollar strengthened on higher Treasury yields and expectations for fiscal stimulus.
The Fund was profitable for most of January, continuing to build on bullish trends in agricultural products and equities. However, the volatility of the markets in the last few days of the month (the VIX spiked 62% on Jan. 27th) worked to offset those gains, resulting in a loss for the Fund that could not recovered before month-end. Overall, during the month unprofitable trading in currency and fixed income markets more than offset positive contributions from positions in agricultural commodities and, to a lesser extent, equities. Long foreign currency positions including the Euro and Yen were hurt by the rallying dollar, which clawed back some of its losses from last year. In fixed income trading, long exposure in the U.S. and Europe were hurt by rising rates. Long positions in agricultural commodities provided a lift, particularly in corn and soybean. The Fund finished with a net loss of (2.02)%, (1.90)%, (1.92)%, (1.87)%, (1.80)% and (1.86)% for Class A, A2, A3, B, I, and R Units, respectively.
February
In February, the reflation trade remained the dominant theme for investors as encouraging economic data along with surging vaccination rates and declining COVID cases/hospitalization helped spur optimism. Against this backdrop, global equities moved higher with the rotation towards “re-opening stocks” continuing. Commodities prices soared as oil surged nearly 20% on the improving economic outlook along with constrained production. Copper moved above $4 per pound, its highest level since 2011. The bond market, as measured by the Bloomberg Barclay’s U.S. Aggregate Bond Index, was also impacted by the reflation trade and is now down -2.15% in 2021. These concerns led to a jump of approximately 50 basis-point in the 10-year U.S. Treasury yield, to 1.4%.
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The Fund had a positive return for February, bringing its YTD return back into the black. Profitable trading in equity and commodity markets were the largest contributors as long positions benefitted from the upward push in risk assets. Within commodities, the largest gains stemmed from long exposure in energy, notably oil, while trading in metals and agricultural markets was also profitable. Fixed income produced losses, as rates seemed to have found a bottom, and the uptick hurt the Fund’s long positions. Trading models responded accordingly, and as a result, long exposure fell sharply with long- and medium-term instruments shifting short by the end of the month. The Fund finished with a net gain of 2.91%, 3.03%, 3.02%, 3.07%, 3.15% and 3.08% for Class A, A2, A3, B, I, and R Units, respectively.
March
In March, the Fed communicated its intention to maintain easy monetary policy until the economy is further along in its recovery. Market participants, however, were increasingly concerned about building inflationary pressure in the U.S. from improving economic growth, the rapid acceleration in vaccinations, and implications of the massive proposed $2 trillion infrastructure package and the recently passed $1.9 trillion American Rescue Plan Act of 2021. Accordingly, the 10-Year U.S. Treasury yield climbed to 1.75% intramonth as investors fear the Fed may need to act sooner than it is currently communicating. Yields in Europe were little changed, however, as the increasing number of COVID cases and potential for further lockdowns weighed on economic growth expectations. Global equities moved higher as the rotation toward cyclical “recovery” stocks continued. Commodity prices retreated with oil correcting on demand worries from European lockdowns/vaccine rollout along with the stronger dollar.
The Fund had a positive return in March. Profitable trading in equity and foreign currency positions were the largest contributors. Long positions in equities were buoyed by the continued strength in stocks, led by gains in European markets and, to a lesser extent, in the United States. Rising yields in the U.S. contributed to USD strength, which benefitted long dollar/short foreign currency positions, particularly in the Yen. The largest losses during the month were from commodities, particularly long silver positions as precious metals were pressured by rising yields and the strengthening dollar. The Fund finished with a net gain of 0.07%, 0.19%, 0.17%, 0.22%, 0.30% and 0.24% for Class A, A2, A3, B, I, and R Units, respectively.
April
Investor apprehension toward building inflationary pressure seemed to relax in April as the Federal Reserve maintained its easy monetary policy and Chairman Powell indicated it was too early to taper. This helped foster a positive environment for risk assets as market participants instead focused on the continued improvement in global economic activity. Concurrently, the worsening COVID-19 situation in India coupled with Europe’s slow progress in their vaccine rollout tempered growth expectations and contributed to the view that growth/inflation would not spiral out-of-control to the upside. Against this backdrop, global stock prices continued to climb. U.S. Treasury yields and dollar declined in April after moving higher in the first quarter. Eurozone bond yields, however, climbed during the month. The improving economic growth outlook and the weak dollar helped fuel the continued rally in commodities which saw prices for many markets set new multi-year highs.
The Fund had a positive return in April, benefitting from the reflationary trade driving risk assets higher, especially in the commodity and equity markets. In commodities, long exposure benefitted from higher prices in agricultural, energy, and base metal markets with notable contributors including corn, brent crude, and copper. The Fund’s long equity positions were also profitable, particularly in the U.S. while in fixed income, long European exposure accounted for the bulk of the losses as rates pushed higher. Unprofitable trading in currency markets was led by short positions in the Euro and Yen which reversed course by moving higher versus the U.S. dollar in April. The Fund finished with a net gain of 3.98%, 4.10%, 4.09%, 4.13%, 4.22% and 4.15% for Class A, A2, A3, B, I, and R Units, respectively.
May
Strengthening economic conditions helped push global stock prices modestly higher in May as the ongoing vaccine roll-out and supportive fiscal/monetary policy fueled the recovery. Evidence of the improving economic environment included the strong April 60.7 U.S. Manufacturing Purchasing Manager’s Index reading. In Europe, the Eurozone Manufacturing PMI was 62.9, also indicative of an expanding economy. While the global growth outlook strengthened, inflationary pressure continued to build with the CPI rising a larger than expected +4.2% in April, its fastest pace since 2008 and raising concerns of Fed tapering. These fears were alleviated in part by the disappointing non-farm payroll numbers which fell well short of expectations and helped soften concerns that the economy may overheat. Against this backdrop, commodity prices were generally mixed, though oil (West Texas Intermediate crude) prices moved to their highest level since 2018. Global bond yields were little changed while the U.S. dollar weakened.
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The Fund’s positive return in May was driven by long positions in commodity markets. The largest gains in the sector were from long energy exposure, including oil and oil products along with power markets. Long exposure in metals was also profitable while long positions in agricultural commodities had losses, particularly grains where prices retreated from multi-year highs. Foreign currency trading was profitable, led by long positions in emerging market currencies which benefitted from rising commodity prices. The Fund also had gains from long positions in equities, particularly in the U.S. and Europe. Trading in fixed income produced small losses. The Fund finished with a gain loss of 2.05%, 2.17%, 2.15%, 2.20%, 2.28%, and 2.22%% for Class A, A2, A3, B, I, and R Units, respectively.
June
Economic conditions in the U.S. remain robust as recent data suggests the recovery continues to strengthen. The U.S. added a better-than-expected 850,000 jobs in June while wages were up +3.6% year-over-year. Consumer prices (CPI) jumped +5% in May, its fastest pace since August 2008 and higher-than-expected. The economic recovery outside the U.S. generally remains at a slower pace, with rising concerns regarding the spread of the delta variant, particularly in regions with lower vaccination rates. At the June meeting, the Fed’s stance shifted more hawkish as it projected two rate hikes in 2023. This contributed to the yield curve flattening as yields at the front end of the curve moved higher while longer duration yields moved lower as the Fed’s more hawkish comments tampered long-term inflation and growth expectations. Against this backdrop the U.S. dollar moved higher against other major currencies. Stocks and commodities also moved higher, with oil prices breaking out to the upside.
Futures Portfolio Fund returns were slightly positive in June, capping off a strong first half of the year. The Fund capitalized on rising oil prices as long exposure in oil and oil products boosted returns, led by gains from WTI positions. Trading elsewhere in commodities was slightly unprofitable with small losses in agricultural and metal markets. The largest losses were from currency trading as long foreign currency positions were hurt by the strengthening U.S. dollar. Trading in Fixed Income produced small losses as gains from long exposure in long-term instruments, where rates generally fell in June, were more than offset by losses from long positions in short-term fixed income where rates rose. Long equity exposure produced modest gains. The Fund finished with a net gain of 0.14%, 0.26%, 0.24%, 0.29%, 0.37% and 0.31% for Class A, A2, A3, B, I, and R Units, respectively.
Liquidity
There are no known material trends, demands, commitments, events, or uncertainties at the present time that are reasonably likely to result in the Fund’s liquidity increasing or decreasing in any material way.
Capital Resources
The Fund intends to raise additional capital through the continued sale of Units and does not intend to raise capital through borrowing. Due to the nature of the Fund’s business, the Fund does not contemplate making capital expenditures. The Fund does not have, nor does it expect to have, any capital assets. Redemptions, exchanges and sales of Units in the future will affect the amount of funds available for investment in futures contracts, etc. in subsequent periods. It is not possible to estimate the amount, and therefore the impact, of future inflows and outflows funds related to the sale and redemption of Units. There are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Fund’s capital resource arrangements at the present time.
Contractual Obligations
The Fund does not have any contractual obligations of the type contemplated by Item 303(a)(5) of Regulation S-K. The Fund’s sole business is trading futures and forward currency contracts, both long (contracts to buy) and short (contracts to sell).
Off-Balance Sheet Risk
The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Fund trades in futures and forward currency contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Fund that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interest positions of the Fund at the same time, and if the trading advisors were unable to offset futures interest positions of the Fund, the Fund could lose all of its assets and the limited partners would realize a 100% loss. The General Partner minimizes market risk through diversification of the portfolio allocations to multiple trading advisors, and maintenance of a margin-to-equity ratio that rarely exceeds 35%.
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In addition to subjecting the Fund to market risk, upon entering into futures and forward currency contracts there is a risk that the counterparty will not be able to meet its obligations to the Fund. The counterparty for futures contracts traded in the U.S. and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this risk. In cases where the clearinghouse is not backed by the clearing members, as is the case with some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.
In the case of forward currency contracts, which are traded on the interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions, thus there may be a greater counterparty risk. The General Partner utilized only those counterparties that it believes to be creditworthy for the Fund. All positions of the Fund are valued each day on a mark-to-market basis. There can be no assurance, however, that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Fund.
The Fund may invest in U.S. Treasury securities, U.S. and foreign government sponsored enterprise notes, certificates of deposit, commercial paper, asset backed securities and corporate notes. Should an issuing entity default on its obligation to the Fund and such entity is not backed by the full faith and credit of the U.S. government, the Fund bears the risk of loss of the amount expected to be received. The Fund minimizes this risk by only investing in securities and certificates of deposit of firms with high quality debt ratings.
Significant Accounting Policies
A summary of the Fund’s significant accounting policies is included in Note 1 to the financial statements.
The Fund’s most significant accounting policy is the valuation of its assets invested in U.S. and foreign futures and forward currency contracts, fixed income instruments and investments in private investment companies. The Fund’s futures contracts are exchange-traded, with the fair value of these contracts based on exchange settlement prices. The fair values of non-exchange-traded contracts, such as forward currency contracts, are based on third-party quoted dealer values on the interbank market. The fair value of money market funds is based on quoted market prices for identical shares. U.S. Treasury securities are stated at fair value based on quoted market prices for identical assets in an active market. Notes of U.S. and foreign government sponsored enterprises, as well as certificates of deposit, commercial paper, asset backed securities and corporate notes, are stated at fair value based on quoted market prices for similar assets in an active market. Given the valuation sources, there is little judgment or uncertainty involved in the valuation of these assets, and it is unlikely that materially different amounts would be reported under different valuation methodologies or assumptions. The Fund’s investment in a private investment company is valued at net asset value as provided by the private fund’s administrator. This use of net asset value as the practical expedient to approximate fair value under ASC 820 is advisable due to the investment not having a readily determinable fair value.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Introduction
The Fund is a speculative commodity pool. The market-sensitive instruments held by the Fund are acquired for speculative trading purposes, and all or substantially all of the Fund's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund's main line of business.
Market movements result in frequent changes in the fair market value of the Fund's open positions and, consequently, in its earnings and cash flow. The Fund's market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund's open positions and the liquidity of the markets in which it trades.
The Fund rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund's past performance cannot be relied on as indicative of its future results.
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Standard of Materiality
Materiality as used in this section, Quantitative and Qualitative Disclosures about Market Risk, is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, and multiplier features of the Fund's market sensitive instruments.
Quantifying the Fund’s Trading Value at Risk
The following quantitative disclosures regarding the Fund's market risk exposures contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.
Value at Risk is a measure of the maximum amount which the Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Fund's speculative trading and the recurrence in the markets traded by the Fund to market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Fund's experience to date (i.e., "risk of ruin"). Risk of ruin is defined to be no more than a 5% chance of losing 20% or more on a monthly basis. In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the Fund's losses in any market sector will be limited to Value at Risk or by the Fund's attempts to manage its market risk.
The Fund's risk exposure in the various market sectors traded by the Fund’s Trading Advisors is quantified below in terms of Value at Risk. Due to mark-to-market accounting, any loss in the fair value of the Fund's open positions is directly reflected in the Fund's earnings.
Exchange margin requirements have been used by the Fund as the measure of its Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95% - 99% of any one-day interval. The margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.
In the case of market sensitive instruments that are not exchange-traded (includes currencies, certain energy products and metals), the margin requirements required by the forward counterparty is used as Value at Risk.
In quantifying the Fund's Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine each trading category's aggregate Value at Risk. The diversification effects resulting from the fact that the Fund's positions are rarely, if ever, 100% positively correlated, have not been reflected.
Value at Risk as calculated herein may not be comparable to similarly titled measures used by others.
The Fund’s Trading Value at Risk in Different Market Sectors
The following table indicates the trading Value at Risk associated with the Fund's open positions by market sector at June 30, 2022 and December 31, 2021. All open position trading risk exposures of the Fund have been included in calculating the figures set forth below.
| June 30, 2022 | December 31, 2021 | |||||||||||||||
| Market Sector | Value at Risk | % of Total Capitalization | Value at Risk | % of Total Capitalization | ||||||||||||
| Agricultural commodities | $ | 414,699 | 0.24 | % | $ | 800,469 | 0.52 | % | ||||||||
| Currencies | 2,147,927 | 1.27 | 1,745,329 | 1.14 | ||||||||||||
| Energy | 1,253,893 | 0.74 | 1,903,360 | 1.24 | ||||||||||||
| Equity indices | 922,455 | 0.54 | 1,519,488 | 0.99 | ||||||||||||
| Interest rate instruments | 984,926 | 0.58 | 1,111,430 | 0.72 | ||||||||||||
| Metals | 414,555 | 0.24 | 558,355 | 0.36 | ||||||||||||
| Single stock futures | 0 | 0.00 | 0 | 0.00 | ||||||||||||
| Total | $ | 6,138,455 | 3.61 | % | $ | 7,638,431 | 4.97 | % | ||||||||
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Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Fund is typically many times the applicable margin requirement (margin requirements generally range between 1% and 10% of contract face value) as well as many times the capitalization of the Fund. The magnitude of the Fund's open positions creates a "risk of ruin" not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions - unusual, but historically recurring from time to time - could cause the Fund to incur severe losses over a short period of time. The foregoing Value at Risk table – as well as the past performance of the Fund – gives no indication of this "risk of ruin."
Non-Trading Risk
The Fund has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial. The Fund also has non-trading market risk as a result of investing a substantial portion of its available assets in U.S. Treasury securities, U.S. government sponsored enterprise notes, commercial paper, asset backed securities, corporate notes and certificates of deposit. Although these investments are considered to be high quality, some of the securities purchased are neither guaranteed by the U.S. government nor supported by the full faith and credit of the U.S. government. There is some risk that a security issuer may fail to pay the interest and principal in a timely manner, or that negative perceptions about the issuer’s ability to make such payments will cause the price of these instruments to decline in value.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Fund's market risk exposures - except for those disclosures that are statements of historical fact and the descriptions of how the Fund manages its primary market risk exposures - constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, (“1933 Act”) and Section 21E of the Securities Exchange Act of 1934, (“1934 Act”). The Fund's primary market risk exposures as well as the strategies used and to be used by the Fund’s Trading Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund's risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund's current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Fund.
The following were the primary trading risk exposures of the Fund as of June 30, 2022, by market sector.
Agricultural Commodities
The Fund takes positions in a broad range of agricultural futures, including soybeans, wheat, corn, sugar, and cotton among others. Prices in these markets can be affected by changes in demand, as well changes in supply factors such as weather and inventory levels.
Currencies
The Fund trades in foreign exchange markets by taking positions in currency futures and forward contracts for a large number of developed and emerging market currencies. Exposures may take the form of direct exchange rates against the U.S. dollar, or cross-rates between two foreign currencies. Exchange rates can be impacted by economic differences between regions (such as interest rate differentials or economic growth differentials), political events, as well as investor risk sentiment.
Energy
The Fund gains trading exposure in energy markets through oil and gas futures, which include WTI crude oil, Brent crude oil, distillates such as heating oil, and natural gas. Prices have historically been highly volatile, driven by demand side factors such as global economic growth and weather conditions, as well as supply side factors such as Middle East conflicts, OPEC production agreements, and shale production.
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Equity Indices
The Fund has exposure to major stock market indices around the world through equity index futures. Primary exposures are in developed markets such as the U.S., the UK, Germany, Japan, Hong Kong and Australia, but there can also be exposure to smaller developing market stock indices. Equity index price movements can be affected by microeconomic factors such as corporate earnings, by macroeconomic factors such as government fiscal and monetary policy, as well as by investor sentiment.
Interest Rate Instruments
The Fund has exposure to global fixed income markets through bond futures and interest rate futures in countries such as the U.S., the UK, Germany, Japan and Australia. The Fund has exposure across the yield curve with positions in the futures for both short-term and long-term instruments. The yield curve (and futures prices) can be affected by economic growth, inflation expectations, monetary policy and investor risk aversion.
Metals
The Fund has exposure to metals futures, including both precious metals such as gold, silver and platinum, as well as industrial metals such as copper, aluminum and zinc. Metals prices can be volatile. Precious metals prices are often driven by inflation expectations, risk aversion, and mining output. Industrial metals prices tend to be impacted by industrial demand relative to production.
Single Stock Futures
The Fund has had a small exposure to single stock futures, with positions primarily in companies that trade on U.S. exchanges. The price drivers here tend to be more microeconomic with corporate earnings and industry trends being important. However, macroeconomic and market-wide factors can also affect single stock futures prices.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following represent non-trading risk exposures of the Fund as of June 30, 2022.
Foreign Currency Balances
The Fund's primary foreign currency balances are in euros, Japanese yen, British pounds, Australian dollars, Hong Kong dollars and Canadian dollars. The Fund controls the non-trading risk of these balances by regularly converting these balances back into dollars (no less frequently than once a week).
U.S. Treasury Securities, U.S. and Foreign Government Sponsored Enterprise Notes, Commercial Paper, Corporate Notes, Asset Backed Securities and Certificates of Deposit
Monies in excess of margin requirements are invested in fixed income instruments, including U.S. Treasury securities, U.S. and foreign government sponsored enterprise notes, commercial paper, corporate notes, asset backed securities and certificates of deposit. Fluctuations in prevailing interest rates could cause mark-to-market gains or losses on the Fund's investments; although substantially all of these investments are held to maturity.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Fund and the Fund’s trading advisors, severally, attempt to manage the risk of the Fund's open positions is essentially the same in all market sectors traded. The Fund’s trading advisors apply risk management policies to their respective trading which generally limit the total exposure that may be taken. In addition, the trading advisors generally follow proprietary diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups).
The Fund is unaware of any (i) anticipated known demands, commitments or capital expenditures; (ii) material trends, favorable or unfavorable, in its capital resources; or (iii) trends or uncertainties that will have a material effect on operations. From time to time, certain regulatory agencies have proposed increased margin requirements on futures contracts. Because the Fund generally will use a small percentage of assets as margin, the Fund does not believe that any increase in margin requirements, as proposed, will have a material effect on the Fund's operations.
Item 4. Controls and Procedures
The General Partner, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Fund’s disclosure controls and procedures at June 30, 2022 (the “Evaluation Date”). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer of the General Partner concluded that, as of the Evaluation Date, the Fund’s disclosure controls and procedures were effective.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As mentioned in Note 8 in the Notes to the Financial Statements, we note the market disruption risk such as what has been experienced with the COVID virus outbreak. Other than that market disruption risk, there have been no material changes from risk factors disclosed in the Fund’s Form 10-K for year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of unregistered securities of the Fund during the three months ended June 30, 2022. Under the Fund’s Partnership Agreement, limited partners may redeem their Units at the end of each calendar month at the then current month-end net asset value per Unit. Redemptions of Units during the three months ended June 30, 2022 were as follows:
| April | May | June | Total | |||||||||||||
| A Units | ||||||||||||||||
| Units redeemed | (218.9610 | ) | (173.3474 | ) | (354.7346 | ) | (747.0429 | ) | ||||||||
| Average net asset value per unit | $ | 4,749.98 | $ | 5,040,95 | $ | 4,657.38 | $ | 4,773.52 | ||||||||
| A2 Units | ||||||||||||||||
| Units redeemed | — | — | — | — | ||||||||||||
| Average net asset value per unit | $ | — | $ | — | $ | — | $ | — | ||||||||
| A3 Units | ||||||||||||||||
| Units redeemed | — | (38.0000 | ) | — | (38.0000 | ) | ||||||||||
| Average net asset value per unit | $ | — | $ | 1,217.31 | $ | — | $ | 1,217.31 | ||||||||
| B Units | ||||||||||||||||
| Units redeemed | (45.7787 | ) | (26.7832 | ) | (86.3709 | ) | (158.9328 | ) | ||||||||
| Average net asset value per unit | $ | 7,755.89 | $ | 5,507.80 | $ | 7,627.35 | $ | 7,307.19 | ||||||||
| I Units | ||||||||||||||||
| Units redeemed | — | — | — | — | ||||||||||||
| Average net asset value per unit | $ | — | $ | — | $ | — | $ | — | ||||||||
| R Units | ||||||||||||||||
| Units redeemed | (19.2938 | ) | — | — | (19.2938 | ) | ||||||||||
| Average net asset value per unit | $ | 1,295.76 | $ | — | $ | — | $ | 1,295.76 | ||||||||
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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 filed herewith of incorporated by reference.
| (a) | Incorporated by reference to the corresponding exhibit to the Registrant’s registration statement (File no. 000-50728) filed on April 29, 2004 on Form 10 under the 1934 Act, as amended. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the General Partner of the Registrant in the capacities and on the date indicated.
| Dated: August 12, 2022 | Futures Portfolio Fund, Limited Partnership |
| By: | Steben & Company, LLC | |
| General Partner | ||
| By: | /s/ Kevin M. Kinzie | |
| Name: | Kevin M. Kinzie | |
| Title: | President, Chief Executive Officer and Director of the General Partner | |
| (Principal Executive Officer) | ||
| By: | /s/ Jon C. Essen | |
| Name: | Jon C. Essen | |
| Title: | Chief Financial Officer and Director of the General Partner | |
| (Principal Financial and Accounting Officer) |
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