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tdff:DerivativeInstrument iso4217:USD xbrli:shares
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
      
to
      
Commission File Number
000-50718
CERES TACTICAL SYSTEMATIC L.P.
 
 
(Exact name of registrant as specified in its charter)
 
New York
 
13-4224248
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
c/o Ceres Managed Futures LLC
1585 Broadway, 29th Floor
New York, New York 10036
 
(Address of principal executive offices) (Zip Code)
(855) 672-4468
 
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
 
Title of each class    Trading symbol(s)    Name of each exchange on which registered
N/A    N/A    N/A
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
X
 No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
X
  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer
  
    Accelerated filer
  
Non-accelerated
filer
X
  
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
 No
X
As of April 30, 2024, 58,481.7438 Limited Partnership Class A Redeemable Units were outstanding, 2,990.5000 Limited Partnership Class D Redeemable Units were outstanding, and 95.3870 Limited Partnership Class Z Redeemable Units were outstanding.


2020 2021 2022 2023
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
.
Ceres Tactical Systematic L.P.
Statements of Financial Condition
 
    
March 31,

2024

(Unaudited)
    
December 31,

2023
 
 
Assets:
     
Equity in trading account:
     
Unrestricted cash
    $ 44,952,458       $ 43,582,526  
Restricted cash
     10,245,004        9,285,004  
Foreign cash (cost $728,419 and $740,454 at March 31, 2024 and December 31, 2023, respectively)
     724,938        745,796  
Net unrealized appreciation on open futures contracts
     1,756,994        370,473  
Net unrealized appreciation on open forward contracts
     184,080       
-
  
 
  
 
 
    
 
 
 
Total equity in trading account
     57,863,474        53,983,799  
  
 
 
    
 
 
 
Interest receivable      208,012        206,971  
  
 
 
    
 
 
 
Total assets
    $   58,071,486       $   54,190,770  
  
 
 
    
 
 
 
Liabilities and Partners’ Capital:
     
Liabilities:
         
Net unrealized depreciation on open forward contracts
    $
-
  
      $ 337,766  
Accrued expenses:
     
Ongoing selling agent fees
     35,821        33,201  
Management fees
     30,825        28,091  
Incentive fees
     253,221       
-
  
 
General Partner fees
     42,202        39,144  
Professional fees
     159,203        137,196  
Redemptions payable to General Partner
    
-
  
       50,000  
Redemptions payable to Limited Partners
     1,095,129        520,465  
  
 
 
    
 
 
 
Total liabilities
     1,616,401        1,145,863  
  
 
 
    
 
 
 
Partners’ Capital:
     
General Partner, Class Z, 550.3190 Redeemable Units outstanding at March 31, 2024 and
December 31, 2023
     640,825        577,940  
Limited Partners, Class A, 59,020.9018 and 61,308.4508 Redeemable Units outstanding at March 31, 2024 and December 31, 2023, respectively
     52,381,586        49,165,031  
Limited Partners, Class D, 2,990.5000 and 3,190.2310 Redeemable Units outstanding at March 31, 2024 and December 31, 2023, respectively
     3,321,600        3,201,761  
Limited Partners, Class Z, 95.3870 Redeemable Units outstanding at March 31, 2024 and December 31, 2023
     111,074        100,175  
  
 
 
    
 
 
 
Total partners’ capital (net asset value)
     56,455,085        53,044,907  
  
 
 
    
 
 
 
Total liabilities and partners’ capital
    $ 58,071,486       $ 54,190,770  
  
 
 
    
 
 
 
Net asset value per Redeemable Unit:      
Class A     $ 887.51       $ 801.93  
  
 
 
    
 
 
 
Class D     $ 1,110.72       $ 1,003.61  
  
 
 
    
 
 
 
Class Z     $ 1,164.46       $ 1,050.19  
  
 
 
    
 
 
 
 
See accompanying notes to financial statements.
 
1

Table of Contents
Ceres Tactical Systematic L.P.
Condensed Schedule of Investments
March 31, 2024
(Unaudited)
 
    
Notional ($)/

Number of

Contracts
    
Fair Value
  
 % of Partners’ 

Capital
   
Futures Contracts Purchased
            
Currencies
     544         $ (497,864      (0.88   %
Energy
     294          902,355        1.60    
Grains
     240          6,278        0.01    
Indices
     652          144,567        0.25    
Interest Rates
Non-U.S.
     208          118,724        0.21    
Livestock
     1          (980      (0.00   *
Metals
     48          125,073        0.22    
Softs
     43          579,781        1.03    
       
 
 
 
  
 
 
 
 
Total futures contracts purchased
          1,377,934            2.44    
       
 
 
 
  
 
 
 
 
Futures Contracts Sold
            
Currencies
     434          611,480        1.08    
Energy
     180          (218,072      (0.39  
Grains
     461          (70,755      (0.13  
Indices
     464          202,683        0.36    
Interest Rates U.S.
     261          (47,593      (0.08  
Interest Rates
Non-U.S.
     865          (90,530      (0.16  
Livestock
     8          2,540        0.00     *
Metals
     11          3,195        0.01    
Softs
     37          (13,888      (0.02  
       
 
 
 
  
 
 
 
 
Total futures contracts sold
          379,060        0.67    
       
 
 
 
  
 
 
 
 
Net unrealized appreciation on open futures contracts
         $    1,756,994        3.11     %
       
 
 
 
  
 
 
 
 
Unrealized Appreciation on Open Forward Contracts
            
Currencies
    $    51,353,393         $ 622,654        1.10     %
Metals
     124          233,167        0.42    
       
 
 
 
  
 
 
 
 
Total unrealized appreciation on open forward contracts
          855,821        1.52    
       
 
 
 
  
 
 
 
 
Unrealized Depreciation on Open Forward Contracts
            
Currencies
    $ 37,857,673          (318,090      (0.56  
Metals
     161          (353,651      (0.63  
       
 
 
 
  
 
 
 
 
Total unrealized depreciation on open forward contracts
          (671,741      (1.19  
       
 
 
 
  
 
 
 
 
Net unrealized appreciation on open forward contracts
         $ 184,080        0.33     %
       
 
 
 
  
 
 
 
 
* Due to rounding.
 
See accompanying notes to financial statements.
 
2

Table of Contents
Ceres Tactical Systematic L.P.
Condensed Schedule of Investments
December 31, 2023
 
    
Notional ($)/

Number of

Contracts
    
 Fair Value 
  
  % of Partners’  

Capital
   
Futures Contracts Purchased
            
Currencies
     160         $ 138,274        0.26     %
Energy
     233          (875,142      (1.65  
Grains
     98          (156,597      (0.30  
Indices
     484          388,130        0.73    
Interest Rates U.S.
     62          126,367        0.24    
Interest Rates
Non-U.S.
     562          480,571        0.91    
Metals
     60          95,533        0.18    
Softs
     71          67,325        0.13    
       
 
 
 
  
 
 
 
 
Total futures contracts purchased
          264,461            0.50    
       
 
 
 
  
 
 
 
 
Futures Contracts Sold
            
Currencies
     89          (230,673      (0.43  
Energy
     188          361,970        0.68    
Grains
     212          208,689        0.39    
Indices
     324          99,982        0.19    
Interest Rates U.S.
     97          (109,061      (0.21  
Interest Rates
Non-U.S.
     327          (593,600      (1.12  
Livestock
     1          220        0.00     *
Metals
     66          (64,723      (0.12  
Softs
     108          433,208        0.82    
       
 
 
 
  
 
 
 
 
Total futures contracts sold
          106,012        0.20    
       
 
 
 
  
 
 
 
 
Net unrealized appreciation on open futures contracts
         $ 370,473        0.70     %
       
 
 
 
  
 
 
 
 
Unrealized Appreciation on Open Forward Contracts
            
Currencies
    $   41,258,458         $ 562,573        1.06     %
Metals
     121          326,349        0.61    
       
 
 
 
  
 
 
 
 
Total unrealized appreciation on open forward contracts
          888,922        1.67    
       
 
 
 
  
 
 
 
 
Unrealized Depreciation on Open Forward Contracts
            
Currencies
    $ 38,087,753          (691,946      (1.30  
Metals
     153          (534,742      (1.01  
       
 
 
 
  
 
 
 
 
Total unrealized depreciation on open forward contracts
          (1,226,688      (2.31  
       
 
 
 
  
 
 
 
 
Net unrealized depreciation on open forward contracts
         $    (337,766      (0.64   %
       
 
 
 
  
 
 
 
 
* Due to rounding.
 
See accompanying notes to financial statements.
 
3

Table of Contents
Ceres Tactical Systematic L.P.
Statements of Income and Expenses
(Unaudited)
 
    
Three Months Ended

March 31,
    
2024
        
2023
Investment Income:
       
Interest income
    $ 602,195         $ 534,100   
  
 
 
 
    
 
 
 
Expenses:
       
Clearing fees related to direct investments
     59,803           70,882  
Ongoing selling agent fees
     104,660          116,806  
General Partner fees
     123,276          137,622  
Management fees
     90,318          106,043  
Incentive fees
     253,221          -  
Professional fees
     78,861          95,145  
  
 
 
 
    
 
 
 
Total expenses
     710,139          526,498  
  
 
 
 
    
 
 
 
Net investment income (loss)
     (107,944        7,602  
  
 
 
 
    
 
 
 
Trading Results:
       
Net gains (losses) on trading of commodity interests:
       
Net realized gains (losses) on closed contracts
     3,812,478          (1,506,129
Net change in unrealized gains (losses) on open contracts
     1,899,544          (2,912,325
  
 
 
 
    
 
 
 
Total trading results
     5,712,022              (4,418,454
  
 
 
 
    
 
 
 
Net income (loss)
    $ 5,604,078         $ (4,410,852
  
 
 
 
    
 
 
 
Net income (loss) per Redeemable Unit*:
       
Class A
    $ 85.58         $ (61.33
  
 
 
 
    
 
 
 
Class D
    $ 107.11         $ (76.75
  
 
 
 
    
 
 
 
Class Z
    $ 114.27         $ (77.65
  
 
 
 
    
 
 
 
Weighted average Redeemable Units outstanding:
       
Class A
     60,649.7785          66,870.9268  
  
 
 
 
    
 
 
 
Class D
     3,190.2310          3,489.3280  
  
 
 
 
    
 
 
 
Class Z
     645.7060          693.3160  
  
 
 
 
    
 
 
 
 
*
Represents the change in net asset value per Redeemable Unit during the period.
 
 
See accompanying notes to financial statements.
 
4

Table of Contents
Ceres Tactical Systematic L.P.
Statements of Changes in Partners’ Capital
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
 
   
Class A
 
Class D
 
Class Z
 
Total
   
Amount
 
Redeemable

Units
 
Amount
 
Redeemable

Units
 
Amount
 
Redeemable
Units
 
Amount
 
Redeemable
Units
Partners’ Capital, December 31, 2022
   $ 60,636,182       67,227.6148      $ 3,938,734       3,489.3280      $ 812,782       693.3160      $ 65,387,698       71,410.2588  
Redemptions - Limited Partners
    (956,779     (1,097.8310     -         -         -         -         (956,779     (1,097.8310
Net income (loss)
    (4,089,188     -         (267,824     -         (53,840     -         (4,410,852     -    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partners’ Capital, March 31, 2023
   $ 55,590,215       66,129.7838      $ 3,670,910       3,489.3280      $ 758,942       693.3160      $ 60,020,067       70,312.4278  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
Class A
 
Class D
 
Class Z
 
Total
   
Amount
 
Redeemable

Units
 
Amount
 
Redeemable
Units
 
Amount
 
Redeemable
Units
 
Amount
 
Redeemable
Units
Partners’ Capital, December 31, 2023
   $ 49,165,031       61,308.4508      $ 3,201,761       3,190.2310      $ 678,115       645.7060      $ 53,044,907       65,144.3878  
Redemptions - Limited Partners
    (1,972,055     (2,287.5490     (221,845     (199.7310     -         -         (2,193,900     (2,487.2800
Net income (loss)
    5,188,610       -         341,684       -         73,784       -         5,604,078       -    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partners’ Capital, March 31, 2024
   $ 52,381,586       59,020.9018      $ 3,321,600       2,990.5000      $ 751,899       645.7060      $ 56,455,085       62,657.1078  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to financial statements.
 
5

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
1.
Organization:
Ceres Tactical Systematic L.P. (the “Partnership”) is a limited partnership organized under the partnership laws of the State of New York on December 3, 2002 to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests including futures, option, swap and forward contracts. The sectors traded include currencies, energy, grains, indices, U.S. and
non-U.S.
interest rates, livestock, metals and softs. The commodity interests that are traded by the Partnership are volatile and involve a high degree of market risk. The General Partner (as defined below) may also determine to invest up to all of the Partnership’s assets in United States (“U.S.”) Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates.
Between March 27, 2003 (commencement of the public offering period) and April 30, 2003, 36,616 redeemable units of limited partnership interest in the Partnership (“Redeemable Units”) were sold at $1,000 per Redeemable Unit. The proceeds of the initial public offering were held in an escrow account until April 30, 2003, at which time they were turned over to the Partnership for trading. The Partnership was authorized to publicly offer 300,000 Redeemable Units during the initial public offering period. As of December 4, 2003, the Partnership was authorized to publicly offer an additional 700,000 Redeemable Units. As of October 7, 2004, the Partnership was authorized to publicly offer an additional 1,000,000 Redeemable Units. As of June 30, 2005, the Partnership was authorized to publicly offer Redeemable Units previously registered. The public offering of Redeemable Units terminated on November 30, 2008. The Partnership currently privately and continuously offers Redeemable Units to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. The General Partner is a wholly-owned subsidiary of Morgan Stanley Capital Management LLC (“MSCM”). MSCM is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses.
During the reporting periods ended March 31, 2024 and 2023, the Partnership’s commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant.
As of January 1, 2018, the Partnership began offering three classes of limited partnership interests, Class A Redeemable Units, Class D Redeemable Units and Class Z Redeemable Units. All Redeemable Units issued prior to January 1, 2018 were deemed Class A Redeemable Units. The rights, liabilities, risks, and fees associated with investment in Class A Redeemable Units were not changed. Class A Redeemable Units are available to taxable U.S. individuals and institutions, U.S. tax exempt individuals and institutions, and
non-U.S.
investors. Class D Redeemable Units and Class Z Redeemable Units were first issued on January 1, 2018. Class A Redeemable Units, Class D Redeemable Units and Class Z Redeemable Units will each be referred to as a “Class” and collectively referred to as the “Classes.” The Class of Redeemable Units that a limited partner receives upon a subscription will generally depend upon the amount invested in the Partnership or the status of the limited partner, although the General Partner may determine to offer any Class of Redeemable Units to investors at its discretion. Class D Redeemable Units are available to taxable U.S. individuals and institutions, U.S. tax exempt individuals and institutions, and
non-U.S.
investors. Class Z Redeemable Units are offered to certain employees of Morgan Stanley and its subsidiaries (and their family members). In the future, Class Z Redeemable Units may also be offered to certain limited partners who receive advisory services from Morgan Stanley Smith Barney LLC, doing business as Morgan Stanley Wealth Management (“Morgan Stanley Wealth Management”). Class A Redeemable Units, Class D Redeemable Units and Class Z Redeemable Units are identical, except that they are subject to different monthly ongoing selling agent fees. Class A Redeemable Units are subject to a monthly ongoing selling agent fee equal to 1/12 of 0.75% (a 0.75% annual rate) of the net assets of Class A Redeemable Units as of the end of each month. Class D Redeemable Units are subject to a monthly ongoing selling agent fee equal to 1/12 of 0.75% (a 0.75% annual rate) of the net assets of Class D Redeemable Units as of the end of each month. Class Z Redeemable Units are not subject to a monthly ongoing selling agent fee.
 
6

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
As of March 31, 2024, all trading decisions were made for the Partnership by DCM Systematic Advisors SA (“DCM”), Drury Capital, Inc. (“Drury”), Episteme Capital Partners (UK) LLP, Episteme Capital Partners (US) LLC and Episteme Capital Partners (Cayman) LTD (collectively, “Episteme”), and Millburn Ridgefield Corporation (“Millburn”) (each an “Advisor” and, collectively, the “Advisors”), each of which is a registered commodity trading advisor. The Advisors are not affiliated with one another, are not affiliated with the General Partner or MS&Co., and are not responsible for the operation of the Partnership.
Effective January 1, 2020, Millburn trades the Partnership’s assets allocated to it through a managed account in the name of the Partnership pursuant to Millburn’s Multi-Markets Program. The General Partner and Millburn have agreed that Millburn will trade the Partnership’s assets allocated to Millburn at a level that is up to 1.5 times the amount of assets allocated. The amount of leverage may be increased or decreased in the future, but it may not exceed 2 times the amount of assets allocated. Effective November 1, 2020, Episteme trades the Partnership’s assets allocated to them through a managed account in the name of the Partnership pursuant to Episteme’s Systematic Quest Program. The General Partner and Episteme have agreed that Episteme will trade the Partnership’s assets allocated to Episteme at a level that is up to 1.5 times the amount of assets allocated. The amount of leverage may be increased or decreased in the future, but it may not exceed 2 times the amount of assets allocated. Effective January 1, 2021, DCM trades a portion of the Partnership’s assets allocated to it through a managed account in the name of the Partnership pursuant to DCM’s Diversified Alpha Program. The General Partner and DCM have agreed that DCM will trade the Partnership’s assets allocated to DCM at a level that is 1.75 times the amount of assets allocated. The amount of leverage may be increased or decreased in the future but may not exceed 2 times the amount of assets allocated. Effective February 1, 2023, Drury trades a portion of the Partnership’s assets allocated to it through a managed account in the name of the Partnership pursuant to Drury Diversified Trend-Following Program.
The Partnership entered into futures brokerage account agreements and foreign exchange prime brokerage account agreements with MS&Co. The Partnership pays MS&Co. (or will reimburse MS&Co. if previously paid) its allocable share of all trading fees for the clearing and, where applicable, execution of transactions, as well as exchange, user,
give-up,
floor brokerage and National Futures Association (“NFA”) fees (collectively, the “clearing fees”).
The Partnership has entered into a selling agreement with Morgan Stanley Wealth Management (the “Selling Agreement”). Under the Selling Agreement the Partnership pays Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to 0.75% per year of adjusted
month-end
net assets for Class A and Class D Redeemable Units. Morgan Stanley Wealth Management pays a portion of its ongoing selling agent fees to properly registered or exempted financial advisors who have sold Class A and Class D Redeemable Units. Class Z Redeemable Units are not subject to an ongoing selling agent fee.
The Partnership has entered into an alternative investment placement agent agreement (the “Harbor Selling Agreement”), by and among the Partnership, the General Partner, Morgan Stanley Distribution Inc. (“MSDI”) and Harbor Investment Advisory, LLC, a Maryland limited liability company (“Harbor”), which supersedes and replaces the alternative investment selling agent agreement, dated January 19, 2018, between the Partnership, the General Partner and Harbor. Pursuant to the Harbor Selling Agreement, MSDI and Harbor have been appointed as a
non-exclusive
selling agent and
sub-selling
agent, respectively, of the Partnership for the purpose of finding eligible investors for Redeemable Units through offerings that are exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder and for Harbor to serve as an investment advisor to its customers investing in one or more of the partnerships party to the Harbor Selling Agreement; provided, that, included within such appointment, Harbor will provide certain services to certain holders of Redeemable Units of the Partnership who had acquired such Redeemable Units prior to such holders becoming clients of Harbor. The Harbor Selling Agreement continues in effect until September 30, 2024 unless terminated in certain circumstances as set forth in the Harbor Selling Agreement, including by any party on thirty days’ prior written notice, after which the General Partner or the Partnership may, in its sole discretion, renew the Harbor Selling Agreement for additional
one-year
periods. Pursuant to the Harbor Selling Agreement, the Partnership pays Harbor an ongoing selling agent fee equal to 1/12 of 0.75% (a 0.75% annual rate) of the adjusted
month-end
net asset value per Redeemable Unit for certain holders of Class A and Class D Redeemable Units in the Partnership.
The General Partner fees, management fees, incentive fees and professional fees of the Partnership are allocated proportionally to each Class based on the net asset value of the Class.
 
7

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
The General Partner has delegated certain administrative functions to SS&C Technologies, Inc., a Delaware corporation, currently doing business as SS&C GlobeOp (the “Administrator”). Pursuant to a master services agreement, the Administrator furnishes certain administrative, accounting, regulatory reporting, tax and other services as agreed from time to time. In addition, the Administrator maintains certain books and records of the Partnership. The cost of retaining the Administrator is allocated among the pools operated by the General Partner, including the Partnership.
 
2.
Basis of Presentation and Summary of Significant Accounting Policies:
The accompanying financial statements and accompanying notes are unaudited but, in the opinion of the General Partner, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Partnership’s financial condition at March 31, 2024 and the results of its operations and changes in partners’ capital for the three months ended March 31, 2024 and 2023. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. These financial statements should be read together with the financial statements and notes included in the Partnership’s Annual Report on Form
10-K
(the “Form
10-K”)
filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2023. The December 31, 2023 information has been derived from the audited financial statements as of and for the year ended December 31, 2023.
Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.
Use of Estimates
. The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates, and those differences could be material.
Profit Allocation.
The General Partner and each limited partner of the Partnership share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each, except that no limited partner is liable for obligations of the Partnership in excess of its capital contribution and profits, if any, net of distributions, redemptions and losses, if any.
Statement of Cash Flows.
The Partnership has not provided a Statement of Cash Flows, as permitted by Accounting Standards Codification (“ASC”) 230,
“Statement of Cash Flows.”
The Statements of Changes in Partners’ Capital is included herein, and as of and for the periods ended March 31, 2024 and 2023, the Partnership carried no debt, and all of the Partnership’s investments were carried at fair value and classified as Level 1 and Level 2 measurements.
Partnership’s Derivative Investments.
All commodity interests held by the Partnership, including derivative financial instruments and derivative commodity instruments, are held for trading purposes. The commodity interests are recorded on the trade date, and open contracts are recorded at fair value (as described in Note 5, “Fair Value Measurements”) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated and are determined using the
first-in,
first-out
method. Unrealized gains or losses on open contracts are included as a component of equity in trading account in the Partnership’s Statements of Financial Condition. Net realized gains or losses and net change in unrealized gains or losses are included in the Partnership’s Statements of Income and Expenses.
The Partnership does not isolate the portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in total trading results in the Partnership’s Statements of Income and Expenses.
Partnership’s Cash.
The Partnership’s restricted cash is equal to the cash portion of assets on deposit to meet margin requirements, as determined by the exchange or counterparty, and required by MS&Co. At March 31, 2024 and December 31, 2023, the amount of cash held for margin requirements was $10,245,004 and $9,285,004, respectively. Cash that is not classified as restricted cash is therefore classified as unrestricted cash. The Partnership’s restricted and unrestricted cash includes cash denominated in foreign currencies of $724,938 (cost of $728,419) and $745,796 (cost of $740,454) as of March 31, 2024 and December 31, 2023, respectively.
 
8

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
Income Taxes.
Income taxes have not been recorded as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses. The Partnership follows the guidance of ASC 740,
“Income Taxes,”
which prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are
“more-likely-than-not”
of being sustained “when challenged” or “when examined” by the applicable tax authority. Tax positions determined not to meet the
more-likely-than-not
threshold would be recorded as a tax benefit or liability in the Partnership’s Statements of Financial Condition for the current year. If a tax position does not meet the minimum statutory threshold to avoid the incurring of penalties, an expense for the amount of the statutory penalty and interest, if applicable, shall be recognized in the Partnership’s Statements of Income and Expenses in the years in which the position is claimed or expected to be claimed. The General Partner has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The
2020 through 2023
tax years remain subject to examination by U.S. federal and most state tax authorities.
Investment Company Status.
The Partnership has been deemed to be an investment company since inception. Accordingly, the Partnership follows the investment company accounting and reporting guidance of Accounting Standards Update
2013-08
“Financial
Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements”
and reflects its investments at fair value with unrealized gains and losses resulting from changes in fair value reflected in the Statements of Income and Expenses.
Net Income (Loss) per Redeemable Unit.
Net income (loss) per Redeemable Unit is calculated in accordance with ASC 946, “
Financial Services-Investment Companies
.” See Note 3, “Financial Highlights.”
There have been no material changes with respect to the Partnership’s critical accounting policies as reported in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2023.
 
9

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
3.
Financial Highlights:
Financial highlights for the limited partner Classes as a whole for the three months ended March 31, 2024 and 2023 were as follows:
 
   
Three Months Ended

March 31, 2024
     
Three Months Ended

March 31, 2023
     
   
Class A
     
Class D
     
Class Z
     
Class A
     
Class D
       
Class Z
     
Per Redeemable Unit Performance (for a unit outstanding throughout the period):*
                       
Net realized and unrealized gains (losses)
   $ 87.25         $ 109.24         $ 114.38         $ (61.41      $ (76.86      $ (79.90  
Net investment income (loss)
    (1.67       (2.13       (0.11       0.08          0.11          2.25     
 
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
 
Increase (decrease) for the period
    85.58         107.11         114.27         (61.33       (76.75       (77.65  
Net asset value per Redeemable Unit, beginning of period
    801.93         1,003.61         1,050.19         901.95         1,128.79         1,172.31    
 
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
 
Net asset value per Redeemable Unit, end of period
   $ 887.51        $ 1,110.72        $ 1,164.46        $ 840.62        $ 1,052.04        $ 1,094.66    
 
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
 
 
    
Three Months Ended

March 31, 2024
      
Three Months Ended

March 31, 2023
   
    
Class A
      
Class D
      
Class Z
      
Class A
     
Class D
     
Class Z
   
Ratios to Average
                           
 Limited Partners’ Capital:**
                           
Net investment income (loss)***
     0.6      %      0.6      %      1.3      %      0.0      %****     0.0      %****     0.8      %
  
 
 
 
    
 
 
 
    
 
 
 
    
 
 
 
   
 
 
 
   
 
 
 
 
Operating expenses
     3.4     %      3.4     %      2.6     %      3.4     %     3.4     %     2.6     %
Incentive fees
     0.5     %      0.5     %      0.5     %      -     %     -     %     -     %
  
 
 
 
    
 
 
 
    
 
 
 
    
 
 
 
   
 
 
 
   
 
 
 
 
Total expenses
     3.9     %      3.9     %      3.1     %      3.4     %     3.4     %     2.6     %
  
 
 
 
    
 
 
 
    
 
 
 
    
 
 
 
   
 
 
 
   
 
 
 
 
Total return:
                           
Total return before incentive fees
     11.2     %      11.2     %      11.4     %      (6.8   %     (6.8   %     (6.6   %
Incentive fees
     (0.5   %      (0.5   %      (0.5   %      -     %     -     %     -     %
  
 
 
 
    
 
 
 
    
 
 
 
    
 
 
 
   
 
 
 
   
 
 
 
 
Total return after incentive fees
        10.7     %         10.7     %         10.9     %         (6.8   %        (6.8   %        (6.6   %
  
 
 
 
    
 
 
 
    
 
 
 
    
 
 
 
   
 
 
 
   
 
 
 
 
 
*
Net investment loss per Redeemable Unit is calculated by dividing the interest income less total expenses by the average number of Redeemable Units outstanding during the period. The net realized and unrealized gains (losses) per Redeemable Unit is a balancing amount necessary to reconcile the change in net asset value per Redeemable Unit with the other per unit information.
 
**
Annualized (except for incentive fees).
 
***
Interest income less total expenses.
 
****
Due to rounding.
The above ratios and total return may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class using the limited partners’ share of income, expenses and average partners’ capital of the Partnership.
 
4.
Trading Activities:
The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The results of the Partnership’s trading activities are shown in the Statements of Income and Expenses.
The Partnership’s customer agreement with MS&Co. and foreign exchange brokerage account agreements give the Partnership the legal right to net unrealized gains and losses on open futures contracts and open forward contracts in the Statements of Financial Condition. The Partnership nets, for financial reporting purposes, the unrealized gains and losses on open futures contracts and open forward contracts in the Statements of Financial Condition as the criteria under ASC
210-20,
Balance Sheet
,” have been met.
 
10

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
The Partnership’s trading of futures, forward and option contracts, as applicable, on commodities is done primarily on U.S. and foreign commodity exchanges. The Partnership engages in such trading through commodity brokerage accounts maintained with MS&Co.
All of the commodity interests owned by the Partnership are held for trading purposes. The monthly average number of futures contracts traded by the Partnership during the three months ended March 31, 2024 and 2023 were 4,309 and 3,571, respectively. The monthly average number of metals forward contracts traded by the Partnership during the three months ended March 31, 2024 and 2023 were 300 and 141, respectively. The monthly average notional value of currency forward contracts traded by the Partnership during the three months ended March 31, 2024 and 2023 were $85,007,642 and $148,928,137, respectively.
The following tables summarize the gross and net amounts recognized relating to assets and liabilities of the Partnership’s derivatives and their offsetting subject to master netting arrangements or similar agreements as of March 31, 2024 and December 31, 2023, respectively.
 
    
Gross

Amounts
Recognized
 
 Gross Amounts 

Offset in the

Statements of

Financial

Condition
 
Net Amounts

 Presented in the 

Statements of

Financial

Condition
 
Gross Amounts Not Offset in the

 Statements of Financial Condition 
        
March 31, 2024   
 
Financial

 Instruments 
  
Cash Collateral

Received/

Pledged*
  
Net

Amount
   
Assets
                
Futures
    $ 3,633,058       $ (1,876,064    $ 1,756,994      $ -       $ -       $ 1,756,994    
Forwards
     855,821       (671,741     184,080       -        -        184,080    
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
 
Total assets
    $ 4,488,879      $ (2,547,805    $ 1,941,074       $ -       $ -       $ 1,941,074     
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
 
Liabilities
                
Futures
    $ (1,876,064    $ 1,876,064       $ -      $ -       $ -       $ -    
Forwards
     (671,741     671,741       -       -        -        -    
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
 
Total liabilities
    $ (2,547,805    $ 2,547,805      $ -      $ -       $ -       $ -    
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
 
 
Net fair value
                $   1,941,074     *
              
 
 
 
 
 
    
Gross

Amounts

 Recognized 
 
 Gross Amounts 

Offset in the

Statements of

Financial

Condition
 
Net Amounts

 Presented in the 

Statements of

Financial

Condition
 
Gross Amounts Not Offset in the

 Statements of Financial Condition 
       
December 31, 2023   
 
Financial

 Instruments 
  
Cash Collateral

Received/

Pledged*
 
Net

Amount
   
Assets
               
Futures
    $ 2,995,671       $ (2,625,198    $ 370,473      $ -         $ -        $ 370,473     
Forwards
     888,922       (888,922     -         -          -         -      
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
Total assets
    $ 3,884,593      $ (3,514,120    $ 370,473       $ -         $ -        $ 370,473    
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
Liabilities
               
Futures
    $ (2,625,198    $ 2,625,198       $ -        $ -         $ -        $ -      
Forwards
     (1,226,688     888,922       (337,766     -          337,766        -      
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
Total liabilities
    $   (3,851,886    $   3,514,120      $ (337,766    $ -         $ 337,766      $ -      
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
Net fair value
               $   370,473     *
             
 
 
 
 
 
*
In the event of default by the Partnership, MS&Co., the Partnership’s commodity futures broker and the sole counterparty to the Partnership’s
non-exchange-traded
contracts, as applicable, has the right to offset the Partnership’s obligation with the Partnership’s cash and/or U.S. Treasury bills held by MS&Co., thereby minimizing MS&Co.’s risk of loss. In certain instances, MS&Co. may not post collateral and as such, in the event of default by MS&Co., the Partnership is exposed to the amount shown in the Statements of Financial Condition. In the case of exchange-traded contracts, the Partnership’s exposure to counterparty risk may be reduced since the exchange’s clearinghouse interposes its credit between buyer and seller and the clearinghouse’s guarantee funds may be available in the event of a default. In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization.
 
11

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
The following tables indicate the gross fair values of derivative instruments of futures and forward contracts held by the Partnership as separate assets and liabilities as of March 31, 2024 and December 31, 2023, respectively.
 
    
 March 31, 

2024
   
Assets
    
Futures Contracts
    
Currencies
    $ 619,605     
Energy
     983,947    
Grains
     282,595    
Indices
     753,247    
Interest Rates U.S.
     29,563    
Interest Rates
Non-U.S.
     227,783    
Livestock
     3,080    
Metals
     136,585    
Softs
     596,653    
  
 
 
 
 
Total unrealized appreciation on open futures contracts
     3,633,058    
  
 
 
 
 
Liabilities
    
Futures Contracts
    
Currencies
     (505,989  
Energy
     (299,664  
Grains
     (347,072  
Indices
     (405,997  
Interest Rates U.S.
     (77,156  
Interest Rates
Non-U.S.
     (199,589  
Livestock
     (1,520  
Metals
     (8,317  
Softs
     (30,760  
  
 
 
 
 
Total unrealized depreciation on open futures contracts
     (1,876,064  
  
 
 
 
 
Net unrealized appreciation on open futures contracts
    $     1,756,994     *
  
 
 
 
 
Assets
    
Forward Contracts
    
Currencies
    $ 622,654    
Metals
     233,167    
  
 
 
 
 
Total unrealized appreciation on open forward contracts
     855,821    
  
 
 
 
 
Liabilities
    
Forward Contracts
    
Currencies
     (318,090  
Metals
     (353,651  
  
 
 
 
 
Total unrealized depreciation on open forward contracts
     (671,741  
  
 
 
 
 
Net unrealized appreciation on open forward contracts
    $ 184,080     **
  
 
 
 
 
 
*
This amount is in “Net unrealized appreciation on open futures contracts” in the Statements of Financial Condition.
 
**
This amount is in “Net unrealized appreciation on open forward contracts” in the Statements of Financial Condition.
 
12

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
    
December 31,

2023
   
Assets
    
Futures Contracts
    
Currencies
    $ 146,769    
Energy
     482,993    
Grains
     236,801    
Indices
     733,965    
Interest Rates U.S.
     130,664    
Interest Rates
Non-U.S.
     559,490    
Livestock
     220    
Metals
     156,905    
Softs
     547,864    
  
 
 
 
 
Total unrealized appreciation on open futures contracts
         2,995,671    
  
 
 
 
 
Liabilities
    
Futures Contracts
    
Currencies
     (239,168  
Energy
     (996,165  
Grains
     (184,709  
Indices
     (245,853  
Interest Rates U.S.
     (113,358  
Interest Rates
Non-U.S.
     (672,519  
Metals
     (126,095  
Softs
     (47,331  
  
 
 
 
 
Total unrealized depreciation on open futures contracts
     (2,625,198  
  
 
 
 
 
Net unrealized appreciation on open futures contracts
    $ 370,473     *
  
 
 
 
 
Assets
    
Forward Contracts
    
Currencies
    $ 562,573    
Metals
     326,349    
  
 
 
 
 
Total unrealized appreciation on open forward contracts
     888,922    
  
 
 
 
 
Liabilities
    
Forward Contracts
    
Currencies
     (691,946  
Metals
     (534,742  
  
 
 
 
 
Total unrealized depreciation on open forward contracts
     (1,226,688  
  
 
 
 
 
Net unrealized depreciation on open forward contracts
    $ (337,766   **
  
 
 
 
 
 
*
This amount is in “Net unrealized appreciation on open futures contracts” in the Statements of Financial Condition.
 
**
This amount is in “Net unrealized depreciation on open forward contracts” in the Statements of Financial Condition.
 
13

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
The following table indicates the trading gains and losses, by market sector, on derivative instruments traded by the Partnership for the three months ended March 31, 2024 and 2023, respectively.
 
      
Three Months Ended

March 31,
   
Sector      
    
2024
        
2023
   
Currencies
      $ 715,336           $ (231,226  
Energy
       2,023,559            (1,934,525  
Grains
       545,769            233,564    
Indices
       1,470,096            358,660    
Interest Rates U.S.
       263,855            (1,316,475  
Interest Rates
Non-U.S.
       125,463            (1,870,647  
Livestock
       1,590            1,750    
Metals
       (241,096          229,949    
Softs
       807,450            110,496    
    
 
 
 
      
 
 
 
 
Total
      $    5,712,022     ***       $   (4,418,454   ***
    
 
 
 
      
 
 
 
 
 
***
This amount is included in “Total trading results” in the Statements of Income and Expenses.
 
5.
Fair Value Measurements:
Partnership’s Fair Value Measurements
. Fair value is defined as the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The fair value of exchange-traded futures, option and forward contracts is determined by the various exchanges, and reflects the settlement price for each contract as of the close of business on the last business day of the reporting period. The fair value of foreign currency forward contracts is extrapolated on a forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period from various exchanges. The fair value of
non-exchange-traded
foreign currency option contracts is calculated by applying an industry standard model application for options valuation of foreign currency options, using as inputs the spot prices, interest rates, and option implied volatilities quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period. U.S. Treasury bills are valued at the last available bid price received from independent pricing services as of the close of the last business day of the reporting period.
The Partnership considers prices for commodity futures, swap and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of U.S. Treasury bills,
non-exchange-traded
forward, swap and certain option contracts for which market quotations are not readily available are priced by pricing services that derive fair values for those assets and liabilities from observable inputs (Level 2). As of March 31, 2024 and December 31, 2023 and for the periods ended March 31, 2024 and 2023, the Partnership did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3).
 
14

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
March 31, 2024   
  
Total
 
Level 1
 
Level 2
 
Level 3
Assets
        
Futures
    $    3,633,058      $    3,633,058      $ -      $ -  
Forwards
     855,821       -       855,821       -  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
    $ 4,488,879      $ 3,633,058      $    855,821      $ -  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
        
Futures
    $ 1,876,064      $ 1,876,064      $ -      $ -  
Forwards
     671,741       -       671,741       -  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Liabilities
    $ 2,547,805       $ 1,876,064       $ 671,741       $ -   
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023  
  
Total
 
Level 1
 
Level 2
 
Level 3
Assets
        
Futures
    $ 2,995,671      $ 2,995,671      $ -      $ -   
Forwards
     888,922       -        888,922       -   
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
    $ 3,884,593      $ 2,995,671      $ 888,922      $
       -
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
        
Futures
    $ 2,625,198      $ 2,625,198      $ -      $ -  
Forwards
     1,226,688       -       1,226,688       -  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Liabilities
    $ 3,851,886      $ 2,625,198      $ 1,226,688      $ -  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.
Financial Instrument Risks:
In the normal course of business, the Partnership is party to financial instruments with
off-balance-sheet
risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures, options, and swaps, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange, a swap execution facility or
over-the-counter
(“OTC”). Exchange-traded instruments include futures and certain standardized forward, option and swap contracts. Certain swap contracts may also be traded on a swap execution facility or OTC. OTC contracts are negotiated between contracting parties and also include certain forward and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer or seller of an option has unlimited risk. Each of these instruments is subject to various risks similar to those relating to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. The General Partner estimates that at any given time approximately 0.0% to 1.5% of the Partnership’s contracts are traded OTC.
Futures Contracts.
The Partnership trades futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (“variation margin”) may be made or received by the Partnership each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Partnership. When the contract is closed, the Partnership records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and net change in unrealized gains (losses) on futures contracts are included in the Partnership’s Statements of Income and Expenses.
 
15

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
Forward Foreign Currency Contracts.
Forward foreign currency contracts are those contracts where the Partnership agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed-upon future date. Forward foreign currency contracts are valued daily, and the Partnership’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward foreign exchange rates at the reporting date, is included in the Partnership’s Statements of Financial Condition. Net realized gains (losses) and net change in unrealized gains (losses) on forward foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Partnership’s Statements of Income and Expenses.
London Metal Exchange Forward Contracts.
Metal contracts traded on the London Metal Exchange (“LME”) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead, nickel, tin, zinc and other metals. LME contracts traded by the Partnership are cash-settled based on prompt dates published by the LME. Variation margin may be made or received by the Partnership each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Partnership. A contract is considered offset when all long positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed at the prompt date, the Partnership records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in LME contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the broker, directly with the LME. Net realized gains (losses) and net change in unrealized gains (losses) on metal contracts are included in the Partnership’s Statements of Income and Expenses.
Market risk is the potential for changes in the value of the financial instruments traded by the Partnership due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Partnership is exposed to market risk equal to the value of the futures and forward contracts held and unlimited liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Partnership’s risk of loss in the event of counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is (was) not represented by the contract or notional amounts of the instruments. The Partnership’s risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership has credit risk and concentration risk, as MS&Co. or an MS&Co. affiliate are counterparties or brokers with respect to the Partnership’s assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through MS&Co. or an MS&Co. affiliate, the Partnership’s counterparty is or was an exchange or clearing organization.
The General Partner monitors and attempts to mitigate the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has or had effective procedures for evaluating and limiting the credit and market risks to which the Partnership may or may have been subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, exchange-cleared swaps, forward and option contracts by sector, margin requirements, gain and loss transactions and collateral positions.
The majority of these financial instruments mature within one year of the inception date. However, due to the nature of the Partnership’s business, these instruments may not be or have not been held to maturity.
The risk to the limited partners that have purchased Redeemable Units is limited to the amount of their share of the Partnership’s net assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
In the ordinary course of business, the Partnership enters into contracts and agreements that contain various representations and warranties and which provide or provided general indemnifications. The Partnership’s maximum exposure under these arrangements cannot be determined, as this could include future claims that have not yet been made against the Partnership. The General Partner consider the risk of any future obligation relating to these indemnifications to be remote.
 
16

Table of Contents
Ceres Tactical Systematic L.P.
Notes to Financial Statements
(Unaudited)
 
Beginning in February 2022, the United States, the United Kingdom, the European Union, and a number of other nations imposed sanctions against Russia in response to Russia’s invasion of Ukraine, and these and other governments around the world may impose additional sanctions in the future as the conflict develops. In addition, on October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets. Shortly following the attack, Israel’s security cabinet declared war against Hamas. These conflicts and subsequent sanctions have created volatility in the price of various commodities and may lead to a deterioration in the political and trade relationships that exist between the countries involved and have a negative impact on business activity globally, and therefore could affect the performance of the Partnership’s investments. Furthermore, uncertainties regarding these conflicts and the varying involvement of the United States and other countries preclude prediction as to the ultimate impact on global economic and market conditions, and, as a result, presents material uncertainty and risk with respect to the Partnership and the performance of its investments or operations, and the ability of the Partnership to achieve its investment objectives. Additionally, to the extent that investors, service providers and/or other third parties have material operations or assets in Russia, Belarus, Ukraine or Israel, they may have their operations disrupted and/or suffer adverse consequences related to the ongoing conflicts.
 
7.
Subsequent Events:
The General Partner evaluates events that occur after the balance sheet date but before and up until financial statements are available to be issued. The General Partner has assessed the subsequent events through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment to or disclosure in the financial statements.
 
 
17


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity and Capital Resources

The Partnership does not have, nor does it expect to have, any capital assets. The Partnership does not engage in sales of goods or services. Its assets are its (i) equity in trading account, consisting of unrestricted cash, restricted cash, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts and investment in U.S. Treasury bills at fair value, if applicable, and (ii) interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the first quarter of 2024.

The Partnership’s investment in futures, forwards and options may or could have been, from time to time, be illiquid. Most U.S. futures exchanges limit fluctuations in prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” Trades may not be executed at prices beyond the daily limit. If the price for a particular futures or option contract has increased or decreased by an amount equal to the daily limit, positions in that futures or option contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. These market conditions could prevent the Partnership from promptly liquidating their futures or option contracts and result in restrictions on redemptions.

There is no limitation on daily price movements in trading forward contracts on foreign currencies. The markets for some world currencies have low trading volume and are illiquid, which may prevent the Partnership from trading in potentially profitable markets or prevent the Partnership from promptly liquidating unfavorable positions in such markets, subjecting them to substantial losses. Either of these market conditions could result in restrictions on redemptions. For the periods covered by this report, illiquidity has not materially affected the Partnership’s assets.

Other than the risks inherent in commodity futures, forwards, options, swaps and other derivatives trading and U.S. Treasury bills and money market mutual fund securities, the Partnership knows of no trends, demands, commitments, events or uncertainties at the present time that are reasonably likely to result in the Partnership’s liquidity increasing or decreasing in any material way.

The Partnership’s capital consists of the capital contributions of the partners as increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, subscriptions, redemptions of Redeemable Units and distributions of profits, if any.

For the three months ended March 31, 2024, the Partnership’s capital increased 6.4% from $53,044,907 to $56,455,085. This increase was attributable to a net income of $5,604,078, which was partially offset by redemptions of 2,287.5490 Class A limited partner Redeemable Units totaling $1,972,055 and redemptions of 199.7310 Class D limited partner Redeemable Units totaling $221,845. Future redemptions can impact the amount of funds available for investment in subsequent periods.

Other than as discussed above, there are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Partnership’s capital resource arrangements at the present time.

Off-Balance Sheet Arrangements and Contractual Obligations

The Partnership does not have any off-balance sheet arrangements, nor does it have contractual obligations or commercial commitments to make future payments, that would affect its liquidity or capital resources.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. The General Partner believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Financial Statements.

The Partnership records all investments at fair value in their financial statements, with changes in fair value reported as a component of net realized gains (losses) and net change in unrealized gains (losses) in the Statements of Income and Expenses.

 

18


Results of Operations

During the Partnership’s first quarter of 2024, the Partnership’s net asset value per Class A Redeemable Unit increased 10.7% from $801.93 to $887.51 as compared to a decrease of 6.8% in the same period of 2023. During the Partnership’s first quarter of 2024, the Partnership’s net asset value per Class D Redeemable Unit increased 10.7% from $1,003.61 to $1,110.72 as compared to a decrease of 6.8% in the same period of 2023. During the Partnership’s first quarter of 2024, the Partnership’s net asset value per Class Z Redeemable Unit increased 10.9% from $1,050.19 to $1,164.46 as compared to a decrease of 6.6% in the same period of 2023. The Partnership experienced a net trading gain before fees and expenses in the first quarter of 2024 of $5,712,022. Gains were primarily attributable to the Partnership’s trading in currencies, energy, grains, indices, U.S. and non-U.S. interest rates, livestock and softs and were partially offset by losses in metals. The Partnership experienced a net trading loss before fees and expenses in the first quarter of 2023 of $4,418,454. Losses were primarily attributable to the Partnership’s trading in currencies, energy and U.S. and non-U.S. interest rates and were partially offset by gains in grains, indices, livestock, metals and softs.

During the first quarter of 2024, the Partnership’s largest gains were achieved within the energy sector throughout the quarter from long futures positions in Brent crude oil and unleaded gasoline as prices advanced amid growing global demand and on concerns conflict and geopolitical tensions in the Middle East could curtail oil exports. Smaller gains in the energies were recorded from short positions in natural gas futures during February and March. In the global stock index sector, gains were recorded throughout the quarter from long positions in Asian, European, and U.S. equity index futures as prices advanced amid an outlook global central banks, most notably the Fed, would be aggressive in cutting interest rates in the second half of 2024. Gains within the agricultural markets were primarily recorded during January, February and March from long positions in cocoa futures as cocoa prices surged as extremely hot weather in key West African growing regions threatened to severely damage crops. Further gains in the agricultural markets were experienced during January and February from short positions in soybean and wheat futures as prices declined. Within currencies, gains were achieved during January from short positions in the euro versus the U.S. dollar and during February and March from short positions in the Japanese yen versus the U.S. dollar as the relative value of the dollar strengthened against its counterparts. Additional gains were recorded within the global fixed income sector primarily during February from short positions in U.S. and European fixed income futures as interest rates moved higher and prices fell. A portion of the Partnership’s overall gains for the quarter was offset by losses incurred within the metals markets during February from long positions in gold futures as a strengthening U.S. dollar diminished demand for precious metals. Additional losses within the metals sector during February were recorded from positions in copper futures.

Commodity futures markets are highly volatile. Broad price fluctuations and rapid inflation increase not only the risks involved in commodity trading, but also the possibility of profit. The profitability of the Partnership depends on the existence of major price trends and the ability of the Advisors to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events, changes in interest rates, pandemics, epidemics and other public health crises. To the extent that market trends exist and the Advisors are able to identify them, the Partnership expects to increase capital through operations.

The Partnership receives monthly interest on 100% of the average daily equity maintained in cash in the Partnership’s brokerage account at MS&Co. during each month at a rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate. For the avoidance of doubt, the Partnership did not receive interest on amounts in the futures brokerage accounts that were committed to margin. Any interest earned on the Partnership’s cash account in excess of the amounts described above, if any, was retained by MS&Co. and/or shared with the General Partner. All interest earned on U.S. Treasury bills and money market mutual fund securities was retained by the Partnership as applicable. Interest income for the three months ended March 31, 2024 increased by $68,095 as compared to the corresponding period in 2023. The increase in interest income was primarily due to higher 4-week U.S. Treasury bill discount rates during the three months ended March 31, 2024 as compared to the corresponding period in 2023. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depended on (1) the average daily equity maintained in cash in the Partnership’s accounts, (2) the amount of U.S. Treasury bills and/or money market mutual fund securities held by the Partnership and (3) interest rates over which none of the Partnership or MS&Co. had control.

Certain clearing fees are based on the number of trades executed by the Advisors for the Partnership. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees related to direct investments for the three months ended March 31, 2024 decreased by $11,079 as compared to the corresponding period in 2023. The decrease in these clearing fees was primarily due to a decrease in the number of direct trades made by the Partnership during the three months ended March 31, 2024 as compared to the corresponding period in 2023.

 

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Ongoing selling agent fees are calculated as a percentage of the Partnership’s adjusted net asset value of Class A and Class D Redeemable Units on the last day of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Ongoing selling agent fees for the three months ended March 31, 2024 decreased by $12,146 as compared to the corresponding period in 2023. The decrease was primarily due to a decrease in average net assets attributable to Class A and Class D Redeemable Units during the three months ended March 31, 2024 as compared to the corresponding period in 2023.

General Partner fees are paid to the General Partner for administering the business and affairs of the Partnership. General Partner fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. General Partner fees for the three months ended March 31, 2024 decreased by $14,346 as compared to the corresponding period in 2023. The decrease was primarily due to a decrease in average net assets for the Partnership during the three months ended March 31, 2024 as compared to the corresponding period in 2023.

Management fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Management fees for the three months ended March 31, 2024 decreased by $15,725 as compared to the corresponding period in 2023. The decrease was primarily due to a decrease in average net assets for the Partnership during the three months ended March 31, 2024 as compared to the corresponding period in 2023.

Incentive fees are based on the new trading profits generated by each Advisor at the end of the quarter, half-year or year, as applicable, as defined in the respective management agreements between the Partnership, the General Partner and each Advisor. Trading performance for the three months ended March 31, 2024 and 2023 resulted in incentive fees of $253,221 and $0, respectively. To the extent an Advisor incurs a loss for the Partnership, the Advisor will not be paid incentive fees until such Advisor recovers any net loss incurred by the Advisor and earns additional new trading profits for the Partnership.

In allocating the assets of the Partnership among the Advisors, the General Partner considers, among other factors, each Advisor’s past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets among the Advisors and may allocate assets to additional advisors at any time.

As of March 31, 2024 and December 31, 2023, the Partnership’s assets were allocated among the Advisors in the following approximate percentages:

 

Advisor    

     March 31, 2024      March 31, 2024
(percentage of
 Partners’ Capital) 
          December 31, 2023     December 31, 2023
(percentage of
  Partners’ Capital)  
 

DCM

    $ 15,622,351        28%          $ 14,350,619        27%   

Drury

    $ 10,146,578        18%          $ 10,208,901        19%   

Episteme

    $ 14,518,854        26%          $ 13,316,369        25%   

Millburn

    $ 13,217,717        23%          $ 11,944,525        23%   

Unallocated

    $ 2,949,585        5%          $ 3,224,493        6%   

 

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Partnership is a speculative commodity pool. The market sensitive instruments held by the Partnership are acquired for speculative trading purposes, and all or substantially all of the Partnership’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 Partnership’s main line of business.

The limited partners will not be liable for losses exceeding the current net asset value of their investment.

Market movements result in frequent changes in the fair value of the Partnership’s open positions and, consequently, in its earnings and cash balances. The Partnership’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Partnership’s open positions and the liquidity of the markets in which they trade.

The Partnership 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 Partnership’s past performance is not necessarily indicative of their future results.

Quantifying the Partnership’s Trading Value at Risk

The following quantitative disclosures regarding the Partnership’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

The Partnership accounts for open positions on the basis of fair value accounting principles. Any loss in the market value of the Partnership’s open positions is directly reflected in the Partnership’s earnings and cash flow.

The Partnership’s risk exposure in the market sectors traded by the Advisors is estimated below in terms of Value at Risk. Please note that the Value at Risk model is used to numerically quantify market risk for historic reporting purposes only and is not utilized by either the General Partner or the Advisors in their daily risk management activities.

“Value at Risk” is a measure of the maximum amount which the Partnership could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s speculative trading and the recurrence in the markets traded by the Partnership of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Partnership’s losses in any market sector will be limited to Values at Risk or by the Partnership’s attempt to manage its market risk.

Exchange margin requirements have been used by the Partnership 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 (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. As of March 31, 2024, DCM, Drury, Episteme and Millburn each traded managed accounts in the name of the Partnership. The trading Value at Risk tables reflect the market sensitive instruments held by the Partnership as of March 31, 2024 and December 31, 2023. There have been no material changes in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2023.

 

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The following tables indicate the trading Value at Risk associated with the Partnership’s investments by market category as of March 31, 2024 and December 31, 2023, and the highest, lowest and average values during the three months ended March 31, 2024 and the twelve months ended December 31, 2023. All open contracts trading risk exposures have been included in calculating the figures set forth below.

As of March 31, 2024, the Partnership’s total capitalization was $56,455,085.

 

Market Sector    

    Value at Risk      March 31, 2024              
  % of Total
 Capitalization 
     Three Months Ended March 31, 2024   
  High
 Value at Risk 
    Low
 Value at Risk 
    Average
 Value at Risk* 
 

Currencies

    $ 1,250,041        2.21   %     $ 1,261,488       $ 349,834       $ 912,965   

Energy

     1,944,596        3.44         2,291,480        1,741,519        2,000,241   

Grains

     1,025,819        1.82         1,025,819        490,878        805,546   

Indices

     2,905,048        5.15         3,977,194        2,548,572        3,181,964   

Interest Rates U.S.

     706,832        1.25         895,813        293,760        579,356   

Interest Rates Non-U.S.

     1,754,757        3.11         2,386,809        1,231,885        1,722,957   

Livestock

     16,940        0.03         24,145        -        10,909   

Metals

     425,733        0.75         947,689        364,664        708,739   

Softs

     312,691        0.55         443,392         238,783         317,986   
  

 

 

   

 

 

       

Total

    $ 10,342,457         18.31   %       
  

 

 

   

 

 

       

 

*

Average of daily Values at Risk.

As of December 31, 2023, the Partnership’s total capitalization was $53,044,907.

 

Market Sector   

    Value at Risk      December 31, 2023              
  % of Total
 Capitalization 
    Twelve Months Ended December 31, 2023  
  High
 Value at Risk 
    Low
 Value at Risk 
    Average
 Value at Risk* 
 

Currencies

    $ 360,534        0.68      $ 4,391,514       $ 330,382       $ 1,628,951   

Energy

     1,919,269        3.62         3,554,367        975,590        2,338,606   

Grains

     498,429        0.94         984,221        136,835        523,764   

Indices

     3,372,873        6.36         5,970,138        1,942,323        3,465,639   

Interest Rates U.S.

     318,052        0.60         1,090,293        232,186        641,457   

Interest Rates Non-U.S.

     1,453,716        2.74         3,669,229        1,208,241        2,302,372   

Livestock

     2,695        0.01         11,440        -        4,212   

Metals

     882,644        1.66         1,653,272        386,729        935,313   

Softs

     443,392        0.84         619,237         176,895         437,031   
  

 

 

   

 

 

       

Total

    $ 9,251,604         17.45        
  

 

 

   

 

 

       

 

*

Annual average of daily Values at Risk.

 

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Item 4. Controls and Procedures.

The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to management, including the President and Chief Financial Officer (“CFO”) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.

The General Partner is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.

The General Partner’s President and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2024 and, based on that evaluation, the General Partner’s President and CFO have concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.

The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s President and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. These controls include policies and procedures that:

 

   

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;

 

   

provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and (ii) the Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and

 

   

provide reasonable assurance regarding prevention or timely detection and correction of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements.

There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended March 31, 2024 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which Morgan Stanley & Co. LLC or its subsidiaries is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.

On June 1, 2011, Morgan Stanley & Co. Incorporated converted from a Delaware corporation to a Delaware limited liability company. As a result of that conversion, Morgan Stanley & Co. Incorporated is now named Morgan Stanley & Co. LLC (“MS&Co.” or “the Company”).

The Company is a wholly-owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley files periodic reports with the SEC as required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) which include current descriptions of material litigation and material proceedings and investigations, if any, by governmental and/or regulatory agencies or self-regulatory organizations concerning Morgan Stanley and its subsidiaries, including the Company. As a consolidated subsidiary of Morgan Stanley, the Company does not file its own periodic reports with the SEC that contain descriptions of material litigation, proceedings and investigations. As a result, we refer you to the “Legal Proceedings” section of Morgan Stanley’s SEC 10-K filings for 2023, 2022, 2021, 2020, and 2019. In addition, the Company annually prepares an Audited, Consolidated Statement of Financial Condition (“Audited Financial Statement”) that is publicly available on Morgan Stanley’s website at www.morganstanley.com. We refer you to the Commitments, Guarantees and Contingencies – Legal section of the Company’s 2023 Audited Financial Statement.

In addition to the matters described in those filings, in the normal course of business, each of Morgan Stanley and the Company has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the third-party entities that are, or would otherwise be, the primary defendants in such cases are bankrupt, in financial distress, or may not honor applicable indemnification obligations. These actions have included, but are not limited to, antitrust claims, claims under various false claims act statutes, and matters arising from our sales and trading businesses and our activities in the capital markets.

Each of Morgan Stanley and the Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding the Company’s business and involving, among other matters, sales, trading, financing, prime brokerage, market-making activities, investment banking advisory services, capital market activities, financial products or offerings sponsored, underwritten, or sold by the Company, wealth and investment management services, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions, limitations on our ability to conduct certain business, or other relief.

The Company is a Delaware limited liability company with its main business office located at 1585 Broadway, New York, New York 10036. Among other registrations and memberships, the Company is registered as a futures commission merchant and is a member of the National Futures Association.

 

24


During the preceding five years, the following administrative, civil, or criminal actions pending, on appeal or concluded against the Company or any of its principals are material within the meaning of CFTC Rule 4.24(l)(2) or 4.34(k)(2):

Regulatory and Governmental Matters

On January 12, 2024, the U.S. Attorney’s Office for the Southern District of New York (“USAO”) and the SEC announced they had reached settlement agreements with the Company in connection with their investigations into the Company’s blocks business. Specifically, the Company entered into a three-year non-prosecution agreement (“NPA”) with the USAO that included the payment of forfeiture, restitution, and a criminal fine for making false statements in connection with the sale of certain block trades from 2018 through August 2021. The NPA required the Company to admit responsibility for certain acts of its employees and to continue to cooperate with and provide certain information to the USAO for the term of the agreement. Additionally, the SEC charged the Company with violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder for the disclosure of confidential information about block trades and also violations of Section 15(g) of the Exchange Act for the failure to enforce its policies concerning the misuse of material non-public information related to block trades. As part of the SEC agreement, the Company paid disgorgement and a civil penalty. After the agreed-upon credits were applied, the Company paid a total amount of approximately $249 million under both settlements. The Company also faces potential civil liability arising from claims that have been or may be asserted by, among others, block transaction participants who contend they were harmed or disadvantaged including, among other things, as a result of a share price decline allegedly caused by the activities of the Company and/or its employees, or as a result of the Company’s and/or its employees’ failure to adhere to applicable laws and regulations. In addition, the Company has responded to demands from shareholders under Section 220 of the Delaware General Corporation Law for books and records concerning the investigations.

On September 30, 2020, the SEC entered into a settlement order with the Company settling an administrative action which relates to the Company’s violations of the order marking requirements of Regulation SHO of the Exchange Act resulting from its improper use of aggregation units in structuring the Firm’s equity swaps business. The order found that the Company improperly operated its equity swaps business without netting certain “long” and “short” positions as required by Rule 200(c) of Regulation SHO. The order found that the long exposure to an equity security (the “Long Unit”) and the short exposure to an equity security (the “Short Unit”) were not independent from one another and did not have separate trading strategies or objectives without regard to each other, and that the Long and Short Units were not eligible for the exception in Rule 200(f) of Regulation SHO. The order found that the Company willfully violated Section 200(g) of Regulation SHO. The Company consented, without admitting or denying the findings and without adjudication of any issue of law or fact, to a censure; to cease and desist from committing or causing future violations; to pay a civil penalty of $5 million; and to comply with the undertaking enumerated in the order.

The Firm has reached agreements in principle with two regulatory agencies—the SEC for $125 million and the CFTC for $75 million—to resolve record-keeping related investigations by those agencies relating to business communications on messaging platforms that had not been approved by the Firm. The Company was one of the entities involved in these investigations, and has recognized a provision of $63 million in anticipation of concluding the settlement with the SEC. On September 27, 2022, the Firm’s settlements with the SEC and the CFTC became effective.

 

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Civil Litigation

On May 17, 2013, plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Company and certain affiliates in the Supreme Court of the State of New York, New York County (“Supreme Court of NY”). The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $133 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Company’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $116 million. On August 11, 2016, the Appellate Division, First Department affirmed the trial court’s decision denying in part the Company’s motion to dismiss the complaint. On July 15, 2022, the Company filed a motion for summary judgment. On March 1, 2023, the court granted in part and denied in part the Company’s motion for summary judgment, narrowing the alleged misrepresentations at issue in the case. On March 26, 2024, the Appellate Division affirmed the trial court’s summary judgment order. As of December 25, 2019, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $22 million, and the certificates had incurred actual losses of $58 million. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between the $22 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest, fees and costs. The Company may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

Beginning in February of 2016, the Company was named as a defendant in multiple purported antitrust actions now consolidated into a single proceeding in the United States District Court for the Southern District of New York (“SDNY”) styled In Re: Interest Rate Swaps Antitrust Litigation. Plaintiffs allege, inter alia, that the Company, together with a number of other financial institution defendants violated U.S. and New York state antitrust laws from 2008 through December of 2016 in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for interest rate swaps trading. Complaints were filed both on behalf of a purported class of investors who purchased interest rate swaps from defendants, as well as on behalf of three operators of swap execution facilities that allegedly were thwarted by the defendants in their efforts to develop such platforms. The consolidated complaints seek, among other relief, certification of the investor class of plaintiffs and treble damages. On July 28, 2017, the court granted in part and denied in part the defendants’ motion to dismiss the complaints. On December 15, 2023, the court denied the class plaintiffs’ motion for class certification. On December 29, 2023, the class plaintiffs petitioned the United States Court of Appeals for the Second Circuit for leave to appeal that decision. On February 28, 2024, the parties reached an agreement in principle to settle the class claims.

On August 13, 2021, the plaintiff in Camelot Event Driven Fund, a Series of Frank Funds Trust v. Morgan Stanley & Co. LLC, et al. filed in the Supreme Court of NY a purported class action complaint alleging violations of the federal securities laws against ViacomCBS (“Viacom”), certain of its officers and directors, and the underwriters, including the Company, of two March 2021 Viacom offerings: a $1,700 million Viacom Class B Common Stock offering and a $1,000 million offering of 5.75% Series A Mandatory Convertible Preferred Stock (collectively, the

 

26


“Offerings”). The complaint alleges, inter alia, that the Viacom offering documents for both issuances contained material omissions because they did not disclose that certain of the underwriters, including the Company, had prime brokerage relationships and/or served as counterparties to certain derivative transactions with Archegos Capital Management LP, (“Archegos”), a fund with significant exposure to Viacom securities across multiple prime brokers. The complaint, which seeks, among other things, unspecified compensatory damages, alleges that the offering documents did not adequately disclose the risks associated with Archegos’s concentrated Viacom positions at the various prime brokers, including that the unwind of those positions could have a deleterious impact on the stock price of Viacom. On November 5, 2021, the complaint was amended to add allegations that defendants failed to disclose that certain underwriters, including the Company, had intended to unwind Archegos’s Viacom positions while simultaneously distributing the Offerings. On February 6, 2023, the court issued a decision denying the motions to dismiss as to the Company and the other underwriters, but granted the motion to dismiss as to Viacom and the Viacom individual defendants. On February 15, 2023, the underwriters, including the Firm, filed their notices of appeal of the denial of their motions to dismiss. On March 10, 2023, the plaintiff appealed the dismissal of Viacom and the individual Viacom defendants. On April 4, 2024, the Appellate Division upheld the lower court’s decision as to the Firm and other underwriter defendants that had prime brokerage relationships and/or served as counterparties to certain derivative transactions with Archegos, dismissed the remaining underwriters, and upheld the dismissal of Viacom and its officers and directors. On January 4, 2024, the court granted the plaintiff’s motion for class certification. On February 14, 2024, the defendants filed their notice of appeal of the court’s grant of class certification.

Settled Civil Litigation

On August 18, 2009, Relators Roger Hayes and C. Talbot Heppenstall, Jr., filed a qui tam action in New Jersey state court styled State of New Jersey ex. rel. Hayes v. Bank of America Corp., et al. The complaint, filed under seal pursuant to the New Jersey False Claims Act, alleged that the Company and several other underwriters of municipal bonds had defrauded New Jersey issuers by misrepresenting that they would achieve the best price or lowest cost of capital in connection with certain municipal bond issuances. On March 17, 2016, the court entered an order unsealing the complaint. On November 17, 2017, Relators filed an amended complaint to allege the Company mispriced certain bonds issued in twenty-three bond offerings between 2008 and 2017, having a total par amount of $6,900 million. The complaint seeks, among other relief, treble damages. On February 22, 2018, the Company moved to dismiss the amended complaint, and on July 17, 2018, the court denied the Company’s motion. On October 13, 2021, following a series of voluntary and involuntary dismissals, Relators limited their claims to certain bonds issued in five offerings the Company underwrote between 2008 and 2011, having a total par amount of $3,900 million. On August 22, 2023, the Firm reached an agreement in principle to settle the litigation. The final agreement became effective on January 30, 2024.

On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Company, styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., in the Supreme Court of NY. The complaint related to a $275 million credit default swap (“CDS”) referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserted claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew that the assets backing the CDO were of poor quality when it entered into the CDS with CDIB. On March 22, 2021, the parties entered into a settlement agreement. On April 16, 2021, the court entered a stipulation of voluntary discontinuance, with prejudice.

 

27


On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company and other defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011, which alleged that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by the Company at issue in the action was approximately $203 million. The complaint sought, among other things, to rescind the plaintiff’s purchase of such certificates. On November 4, 2021, the Firm entered into an agreement to settle the litigation.

On April 1, 2016, the California Attorney General’s Office filed an action against the Company in California state court styled California v. Morgan Stanley, et al., on behalf of California investors, including the California Public Employees’ Retirement System and the California Teachers’ Retirement System. The complaint alleged that the Company made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV, and asserted violations of the California False Claims Act and other state laws and sought treble damages, civil penalties, disgorgement, and injunctive relief. On April 24, 2019, the parties reached an agreement to settle the litigation.

In August of 2017, the Company was named as a defendant in a purported antitrust class action in the United States District Court for the SDNY styled Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al. Plaintiffs allege, inter alia, that the Company, together with a number of other financial institution defendants, violated U.S. antitrust laws and New York state law in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for securities lending. The class action complaint was filed on behalf of a purported class of borrowers and lenders who entered into stock loan transactions with the defendants. The class action complaint seeks, among other relief, certification of the class of plaintiffs and treble damages. On September 27, 2018, the court denied the defendants’ motion to dismiss the class action complaint. Plaintiffs’ motion for class certification was referred by the District Court to a magistrate judge who, on June 30, 2022, issued a report and recommendation that the District Court certify a class. The motion for class certification and the parties’ objections to the report and recommendation are pending before the District Court. On May 20, 2023, the Firm reached an agreement in principle to settle the litigation. On September 1, 2023, the court granted preliminary approval of the settlement.

Beginning on March 25, 2019, the Company was named as a defendant in a series of putative class action complaints filed in the United States District Court for the SDNY, the first of which is styled Alaska Electrical Pension Fund v. BofA Secs., Inc., et al. Each complaint alleged a conspiracy to fix prices and restrain competition in the market for unsecured bonds issued by the following Government-Sponsored Enterprises: the Federal National Mortgage Association; the Federal Home Loan Mortgage Corporation; the Federal Farm Credit Banks Funding Corporation; and the Federal Home Loan Banks. The purported class period for each suit is from January 1, 2012 to June 1, 2018. Each complaint raised a claim under Section 1 of the Sherman Act and sought, among other things, injunctive relief and treble compensatory damages. On May 23, 2019, plaintiffs filed a consolidated amended class action complaint styled In re GSE Bonds Antitrust Litigation, with a purported class period from January 1, 2009 to January 1, 2016. On June 13, 2019, the defendants filed a joint motion to dismiss the consolidated amended complaint. On August 29, 2019, the court denied the Company’s motion to dismiss. On December 15, 2019, the Company and certain other defendants entered into a stipulation of settlement to resolve the action as against each of them in its entirety. On June 16, 2020, the court granted final approval of the settlement.

 

28


Additional lawsuits containing claims similar to those described above may be filed in the future. In the course of its business, the Company, as a major futures commission merchant, is party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of the Company. The Company may establish reserves from time to time in connections with such actions.

 

29


Item 1A.
Risk Factors
.
There have been no material changes to the risk factors set forth under Part I, Item 1A. “
Risk Factors
.” in the Partnership’s Annual Report on Form
10-K
for the fiscal year ended December 31, 2023 other than as disclosed in Note 6, “Financial Instrument Risks”, of the Financial Statements.
Item 2.
Unregistered Sales
of Equity Securities and Use of Proceeds
.
For the three months ended March 31, 2024, there were no additional subscriptions. Redeemable Units are issued in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act and Section 506 of Regulation D promulgated thereunder. Redeemable Units are purchased by accredited investors, as defined in Regulation D. In determining the applicability of the exemption, the General Partner relies on the fact that the Redeemable Units are purchased by accredited investors in a private offering.
Proceeds from the sale of Redeemable Units are used for the trading of commodity interests including
futures
and forward contracts.
The following chart sets forth the purchases of limited partner Redeemable Units for each Class by the Partnership.
 
Period
  
Class A 
(a) Total 
Number of 
Redeemable 
Units 
Purchased* 
    
Class A
(b) Average
Price Paid
per
Redeemable
Unit**
    
Class D 
(a) Total 
Number of 
Redeemable 
Units 
 Purchased*  
    
Class D
(b) Average
Price Paid
per
Redeemable
Unit**
    
(c) Total 
Number of 
Redeemable 
Units 
Purchased 
as Part of 
Publicly 
Announced 
Plans or 
Programs 
    
(d) Maximum 
Number (or 
Approximate 
Dollar Value) 
of Redeemable 
Units that 
May Yet Be 
Purchased 
Under the 
Plans or 
Programs 
 
         
January 1, 2024 - January 31, 2024
     672.4390      $    820.69        N/A             N/A         N/A          N/A   
         
February 1, 2024 -February 29, 2024
     631.1390      $ 866.54        N/A             N/A         N/A          N/A   
         
March 1, 2024 - March 31, 2024
     983.9710      $ 887.51         199.7310      $ 1,110.72         N/A          N/A   
         
 
     2,287.5490      $ 862.08         199.7310      $   1,110.72     
 
 
 
  
 
 
 
 
*
Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for limited partners.
 
**
Redemptions of Redeemable Units are effected as of the end of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions.
Item 3.
Defaults Upon Senior Securities
.
None.
Item 4.
Mine Safety Disclosures
.
Not applicable.
Item 5.
Other Information
.
None.
 
30


Item 6. Exhibits.

 

31.1 — Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director) (filed herewith).

31.2 — Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer) (filed herewith).

32.1 — Section 1350 Certification (Certification of President and Director) (filed herewith).

32.2 — Section 1350 Certification (Certification of Chief Financial Officer) (filed herewith).

101.INS Inline XBRL Instance Document.

101.SCH Inline XBRL Taxonomy Extension Schema Document.

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.

104. Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

31


SIGNATURES

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

 

CERES TACTICAL SYSTEMATIC L.P.

By:

 

Ceres Managed Futures LLC

 

(General Partner)

By:

 

/s/ Patrick T. Egan

 

Patrick T. Egan

 

President and Director

Date:  

 

May 9, 2024

By:

 

/s/ Brooke Lambert

 

Brooke Lambert

 

Chief Financial Officer

 

(Principal Accounting Officer)

Date:

 

May 9, 2024

The General Partner which signed the above is the only party authorized to act for the registrant. The registrant has no principal executive officer, principal financial officer, controller, or principal accounting officer and has no Board of Directors.

 

32


ATTACHMENTS / EXHIBITS

ATTACHMENTS / EXHIBITS

EX-31.1

EX-31.2

EX-32.1

EX-32.2

XBRL TAXONOMY EXTENSION SCHEMA

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

XBRL TAXONOMY EXTENSION LABEL LINKBASE

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

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