Ceres Tactical Macro L.P. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Ceres Tactical Macro L.P.	Financial_Report.xls
EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION (CERTIFICATION OF PRESIDENT AND DIRECTOR) - Ceres Tactical Macro L.P.	d337475dex311.htm
EX-32.1 - SECTION 1350 CERTIFICATION (CERTIFICATION OF PRESIDENT AND DIRECTOR) - Ceres Tactical Macro L.P.	d337475dex321.htm
EX-32.2 - SECTION 1350 CERTIFICATION (CERTIFICATION OF CFO) - Ceres Tactical Macro L.P.	d337475dex322.htm
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION (CERTIFICATION OF CFO) - Ceres Tactical Macro L.P.	d337475dex312.htm

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, 2012

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 000-54284

BHM DISCRETIONARY FUTURES FUND L.P.

(Exact name of registrant as specified in its charter)

Delaware

27-3371689

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

c/o Ceres Managed Futures LLC

522 Fifth Avenue -14^th Floor

New York, New York 10036

(Address of principal executive offices) (Zip Code)

(212) 296-1999

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, 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, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer		Accelerated filer		Non-accelerated filer X		Smaller reporting company

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

Yes No X

BHM DISCRETIONARY FUTURES FUND L.P.

FORM 10-Q

INDEX


	Page Number
PART I — Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at March 31, 2012 (unaudited) and December 31, 2011		3
Statements of Income and Expenses for the three months ended March 31, 2012 and 2011 (unaudited)		4
Statement of Changes in Partners’ Capital for the three months ended March 31, 2012 and 2011 (unaudited)		5
Notes to Financial Statements, including the Financial Statements of BHM I, LLC (unaudited)		6-21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22-23
Item 3. Quantitative and Qualitative Disclosures about Market Risk		24-26
Item 4. Controls and Procedures		27
PART II — Other Information		28-29
Exhibits
Exhibit 31.1 Certification
Exhibit 31.2 Certification
Exhibit 32.1 Certification
Exhibit 32.2 Certification



101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

PART I

Item 1. Financial Statements

BHM Discretionary Futures Fund L.P.

Statements of Financial Condition


	(Unaudited) March 31, 2012		December 31, 2011
Assets:
Investment in Trading Company, at fair value	$	302,816,640	$	270,589,333

Total assets	$	302,816,640	$	270,589,333

Liabilities and Partners’ Capital
Liabilities:
Redemptions payable	$	4,744,326	$	4,181,653

Total liabilities		4,744,326		4,181,653

Partners’ Capital:
General Partner, Class A, (0 units equivalents outstanding at March 31, 2012 and December 31, 2011)		—		—
General Partner, Class D, (0 units equivalents outstanding at March 31, 2012 and December 31, 2011)		—		—
General Partner, Class Z, (3,444.412 and 3,322.258 units equivalents outstanding at March 31, 2012 and December 31, 2011, respectively)		2,905,603		2,719,733
Limited Partner, Class A, (328,739.438 and 297,148.967 units outstanding at March 31, 2012 and December 31, 2011, respectively)		279,491,159		246,995,994
Limited Partner, Class D, (17,289.182 and 20,469.784 units outstanding at March 31, 2012 and December 31, 2011, respectively)		13,610,647		15,667,296
Limited Partner, Class Z, (2,447.802 and 1,251.675 units outstanding at March 31, 2012 and December 31, 2011, respectively)		2,064,905		1,024,657

Total Partners’ Capital		298,072,314		266,407,680

Total liabilities and Partners’ Capital	$	302,816,640	$	270,589,333

Net asset value per units:
Class A	$	850.19	$	831.22

Class D	$	787.24	$	765.39

Class Z	$	843.57	$	818.64

The accompanying notes are integral part of these financial statements.

BHM Discretionary Futures Fund L.P.

Statements of Income and Expenses

(Unaudited)


	Three Months Ended March 31,
	2012			2011
Investment income:
Interest income allocated from Trading Company	$	(8,212	)	$	383

Expenses:
Expenses allocated from Trading Company		1,685,219			548,614
Ongoing placement agent fees		2,099,587			708,119
Administrative fees		742,087			244,990
Other		79,152			61,247

Total expenses		4,606,045			1,562,970

Net investment income (loss)		(4,614,257	)		(1,562,587	)

Trading Results:
Net realized gains (losses) on closed contracts allocated from Trading Company		6,975,872			8,002,590
Change in net unrealized gains (losses) on open contracts allocated from Trading Company		3,807,526			(7,924,007	)

Total trading results allocated from Trading Company		10,783,398			78,583

Net income (loss)	$	6,169,141		$	(1,484,004	)


Net income (loss) allocation from Trading Company
Class A	$	5,609,893		$	(1,372,982	)

Class D	$	445,980		$	(111,022	)

Class Z	$	113,268		$	0

Net asset value per redeemable unit
Class A	$	850.19		$	1,087.16

Class D	$	787.24		$	983.71

Class Z	$	843.57		$	0

Net income (loss) per redeemable unit*
Class A	$	18.97		$	9.00

Class D	$	21.85		$	(16.29	)

Class Z	$	24.93		$	0

Weighted average units outstanding
Class A		322,057.041			84,197.378

Class D		20,690.126			7,127.494

Class Z		5,472.507			0

*	Based on change in net asset value per redeemable unit.

The accompanying notes are an integral part of these financial statements.

BHM Discretionary Futures Fund L.P.

Statements of Changes in Partners’ Capital

For the Three Months Ended March 31, 2012 and 2011

(Unaudited)


	Class A						Class D						Class Z						Total
	Amount			Units			Amount			Units			Amount			Units			Amount			Units
Partners’ Capital at December 31, 2011	$	246,995,994			297,148.967		$	15,667,296			20,469.784		$	3,744,390			4,573.933		$	266,407,680			322,192.684
Subscriptions — Limited Partners		32,342,376			37,909.356			271,571			343.355			1,012,850			1,196.127			33,626,797			39,448.838
Subscriptions — General Partner		—			—			—			—			100,000			122.154			100,000			122.154
Net income (loss)		5,609,893			—			445,980			—			113,268			—			6,169,141			—
Redemptions — Limited Partners		(5,457,104	)		(6,318.885	)		(2,774,200	)		(3,523.957	)		—			—			(8,231,304	)		(9,842.842	)

Partners’ Capital at March 31, 2012	$	279,491,159			328,739.438		$	13,610,647			17,289.182		$	4,970,508			5,892.214		$	298,072,314			351,920.834


	Class A						Class D						Total
	Amount			Units			Amount			Units			Amount			Units
Partners’ Capital at December 31, 2010	$	57,300,554			53,051.293		$	—			—		$	57,300,554			53,051.293
Subscriptions — Limited Partners		77,371,910			69,483.735			7,127,494			7,127.494			84,499,404			76,611.229
Subscriptions — General Partner		800,000			718.509			—			—			800,000			718.509
Net income (loss)		(1,372,982	)		—			(111,022	)		—			(1,484,004	)		—
Redemptions — Limited Partners		(5,375,996	)		(4,849.658	)		—			—			(5,375,996	)		(4,849.658	)

Partners’ Capital at March 31, 2011	$	128,723,486			118,403.879		$	7,016,472			7,127.494		$	135,739,958			125,531.373

The accompanying notes are an integral part of these financial statements.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

1. General:

BHM Discretionary Futures Fund L.P. (the “Partnership”) is a limited partnership organized on August 23, 2010 under the partnership laws of the State of Delaware to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests including futures contracts, options, swaps and forward contracts. The Partnership commenced trading on November 1, 2010. The commodity interests that are traded by the Partnership are volatile and involve a high degree of market risk. The Partnership is authorized to sell an unlimited number of redeemable units of limited partnership interest (“Units”) on a continuous basis.

In 2009 Morgan Stanley and Citigroup Inc. combined certain assets of the Global Wealth Management Group of Morgan Stanley & Co. Incorporated including Demeter Management LLC (“Demeter”), the former general partner of the Partnership and the Smith Barney division of Citigroup Global Markets Inc., into a new joint venture, Morgan Stanley Smith Barney Holdings LLC (“MSSBH”). As part of that transaction, Ceres Managed Futures LLC (“Ceres”) and Demeter were contributed to Morgan Stanley Smith Barney LLC (“MSSB” or the “Placement Agent”), and each became a wholly-owned subsidiary of MSSBH. MSSB is majority-owned indirectly by Morgan Stanley and minority-owned indirectly by Citigroup, Inc.

Effective December 1, 2010, Demeter and Ceres were merged into a single commodity pool operator, Ceres (the “General Partner”). Ceres will continue to be wholly-owned by MSSBH and will act as the general partner for the Partnership.

On November 1, 2010, the Partnership allocated substantially all of its capital to the Morgan Stanley Smith Barney BHM I, LLC (the “Trading Company”), a limited liability company organized under the Delaware Limited Liability Company Law. The Trading Company was formed in order to permit accounts managed by Blenheim Capital Management LLC (“Blenheim” or the “Advisor”) using Blenheim’s Global Markets Strategy-Futures/FX program, a proprietary, systematic trading program, to invest together in one trading vehicle. The General Partner is also the trading manager of the Trading Company. Individual and pooled accounts currently managed by the General Partner, including the Partnership, are permitted to be members of the Trading Company. The General Partner and the Advisor believe that trading through this master/feeder structure promotes efficiency and economy in the trading process.

On February 1, 2011, the Units offered pursuant to the Limited Partnership Agreement are deemed “Class A Units.” The rights, liabilities, risks, and fees associated with investment in the Class A Units were not changed. In addition, beginning on February 1, 2011, Class D Units were offered. Beginning August 1, 2011, Class Z units were offered to certain employees of Morgan Stanley Smith Barney and its affiliates (and their family members). Class A, Class D and Class Z will each be referred to as a “Class” and collectively referred to as the “Classes.” The Class of Units that a Limited Partner receives upon a subscription will generally depend upon the amount invested in the Partnership, although the General Partner may determine to offer Units to investors at its discretion.

The non-clearing broker for the Trading Company is MSSB. The clearing commodity brokers for the Trading Company are Morgan Stanley & Co. LLC (“MS&CO.”) and Morgan Stanley & Co. International plc (“MSIP”).

At March 31, 2012, the Partnership owned approximately 63.1% of the Trading Company. At December 31, 2011, the Partnership owned approximately 59.4% of the Trading Company. The Partnership intends to continue to invest substantially all of its assets in the Trading Company. The performance of the Partnership is directly affected by the performance of the Trading Company. The Trading Company’s trading of futures, forwards, and options contracts, as applicable, is done primarily on U.S. and foreign commodity exchanges. The Trading Company’s Statements of Financial Condition, including Condensed Schedules of Investments and Statements of Income and Expenses and Changes in Members’ Capital are included herein.

The General Partner and each limited partner of the Partnership (each a “Limited Partner”) 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 shall be liable for obligations of the Partnership in excess of its capital contribution and profits or losses, if any, net of distributions.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

The accompanying financial statements are unaudited but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Partnership’s financial condition at March 31, 2012 and December 31, 2011, and the results of its operations for the three months ended March 31, 2012 and 2011. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. You should read these financial statements together with the financial statements and notes included in the Partnership’s Annual Report on the Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2011.

The preparation of financial statements in accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. As a result, actual results could differ from these estimates.

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.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

The Trading Company’s Statements of Financial Condition and Condensed Schedules of Investments as of March 31, 2012 and December 31, 2011 and Statements of Income and Expenses and Changes in Members’ Capital for the three months ended March 31, 2012 and 2011 are presented below:

BHM I, LLC

Statements of Financial Condition


	(Unaudited) March 31, 2012			December 31, 2011
Assets:
Equity in trading account:
Unrestricted cash	$	445,897,257		$	431,008,463
Restricted cash		40,990,157			39,680,416

Total cash		486,887,414			470,688,879

Net unrealized gain (loss) on open contracts (MS&Co.)		(6,947,398	)		(2,733,968	)
Net unrealized gain (loss) on open contracts (MSIP)		1,216,507			(9,386,431	)

Total net unrealized gain (loss) on open contracts		(5,730,891	)		(12,120,399	)

Options purchased, (premiums paid $12,160,241 and $10,429,207, respectively)		7,404,529			12,753,218

Total trading equity		488,561,052			471,321,698
Expense reimbursements		19,288			15,406
Interest receivable (MSSB)		3,245			—

Total assets	$	488,583,585		$	471,337,104

Liabilities and Members’ Capital:
Liabilities:
Options written (premiums received $12,149,808 and $11,823,204, respectively)	$	7,885,030		$	15,280,523
Accrued management fees		661,245			592,596
Interest payable (MSSB)		—			7,910
Accrued administrative fees		1,921			1,947

Total liabilities		8,548,196			15,882,976

Members’ Capital:
Non-Managing Members		480,035,389			455,454,128

Total members’ capital		480,035,389			455,454,128

Total liabilities and members’ capital	$	488,583,585		$	471,337,104

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

BHM I, LLC

Condensed Schedule of Investments

March 31, 2012

(Unaudited)


	Fair Value			% of Members Capital
Futures and Forward Contracts Purchased
Commidity	$	562,818			0.12	%
Equity		519,228			0.11
Foreign currency		(2,892,264	)		(0.60	)

Total futures and forward contracts purchased		(1,810,218	)		(0.37	)


Futures and Forward Contracts Sold
Commodity		(4,213,293	)		(0.88	)
Foreign currency		(235,264	)		(0.05	)
Interest rate		1,173,667			0.24

Total futures and forward contracts sold		(3,274,890	)		(0.69	)

Unrealized currency loss		(645,783	)		(0.13	)

Net fair value	$	(5,730,891	)		(1.19	)%


Options Contracts
Options purchased on Futures Contracts	$	7,404,529			1.54	%
Options written on Futures Contracts	$	(7,885,030	)		(1.64	)%

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

BHM I, LLC

Condensed Schedule of Investments

December 31, 2011


	Fair Value			% of Members’ Capital
Futures and Forward Contracts Purchased
Commodity	$	(14,245,073	)		(3.13	)%
Foreign currency		(5,365,591	)		(1.17	)
Interest rate		19,224			0.00	*

Total futures and forward contracts purchased		(19,591,440	)		(4.30	)


Futures and Forward Contracts Sold
Commodity		8,637,143			1.89
Equity		(11,703	)		0.00	*
Foreign currency		(572,376	)		(0.13	)
Interest rate		(111,982	)		(0.02	)

Total futures and forward contracts sold		7,941,082			1.74

Unrealized currency loss		(470,041	)		(0.10	)

Net fair value	$	(12,120,399	)		(2.66	)%


Options Contracts
Options purchased on Futures Contracts	$	12,753,218			2.80	%
Options written on Futures Contracts	$	(15,280,523	)		(3.36	)%

*	Due to rounding.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

BHM I, LLC

Statements of Income and Expenses and Changes in Members’ Capital

(Unaudited)


	For the Three Months Ended March 31,
	2012			2011
Investment income:
Interest income (MSSB)	$	(10,662	)	$	649


Expenses:
Management fees		1,899,080			804,979
Brokerage, clearing and transaction fees		333,593			158,189
Administrative fees		5,778			55,420
Incentive fees		—			245,858

Total expenses		2,238,451			1,264,446
Expense reimbursements		(69,216	)		(57,623	)

Net expenses		2,169,235			1,206,823

Net investment loss		(2,179,897	)		(1,206,174	)

Trading results
Trading profit (loss):
Realized		11,118,750			23,799,553
Net change in unrealized		7,031,882			(19,586,786	)

Total trading results	$	18,150,632		$	4,212,767


Net income (loss)	$	15,970,735		$	3,006,593

Net income (loss) allocation
Non-managing members	$	15,970,735		$	3,006,593


	Managing Member		Non-Managing Members			Total
Members’ Capital, December 31, 2011	$	—	$	455,454,128		$	455,454,128
Capital contributions		—		23,137,340			23,137,340
Net loss		—		15,970,735			15,970,735
Capital withdrawals		—		(14,526,814	)		(14,526,814	)

Members’ Capital, March 31, 2012	$	—	$	480,035,389		$	480,035,389


Members’ Capital, December 31, 2010		—	$	208,652,878		$	208,652,878
Capital contributions		—		81,583,299			81,583,299
Net income		—		3,006,593			3,006,593
Capital withdrawals		—		(4,261,891	)		(4,261,891	)

Members’ Capital, March 31, 2011	$	—	$	288,980,879		$	288,980,879

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

2. Financial Highlights:

Changes in the net asset value per redeemable unit for each Class for the three months ended March 31, 2012 and 2011 were as follows:


	Three Months Ended March 31, 2012									Three Months Ended March 31, 2011			For the period February 1, 2011 (commencement of offering) to March 31, 2011
	Class A			Class D			Class Z			Class A			Class D
Net realized and unrealized gains (losses) *	$	25.63		$	27.99		$	31.51		$	20.72		$	(12.36	)
Net investment income (loss) **		(6.66	)		(6.14	)		(6.58	)		(11.72	)		(3.93	)

Increase (decrease) for the period		18.97			21.85			24.93			9.00			(16.29	)
Net asset value per Unit, beginning of period		831.22			765.39			818.64			1,078.16			1,000.00

Net asset value per Unit, end of period	$	850.19		$	787.24		$	843.57		$	1,087.16		$	983.71

Redemption/subscription value per Unit, end of period	$	850.19		$	787.24		$	843.57		$	1,087.64	***	$	984.28	***

*	Includes brokerage fees.

**	Excludes brokerage fees.

***	GAAP net asset value per unit adjusted for the remaining accrued liability for reimbursement of organizational costs (Note 3).


	Three Months Ended March 31, 2012									Three Months Ended March 31, 2011			For the period February 1, 2011 (commencement of offering) to March 31, 2011
	Class A			Class D			Class Z			Class A****			Class D****
Ratios to average net assets:*****
Net investment income (loss)		(6.6	)%		(4.4	)%		(4.2	)%		(7.4	)%		(4.4	)%
Incentive fees allocated from the Trading company		—	%		—	%		—	%		—	%		—	%

Net investment loss before incentive fees******		(6.6	)%		(4.4	)%		(4.2	)%		(7.4	)%		(4.4	)%


Operating expense		6.6	%		4.4	%		4.2	%		7.4	%		4.4	%
Incentive fees		—	%		—	%		—	%		—	%		—	%

Total expenses		6.6	%		4.4	%		4.2	%		7.4	%		4.4	%

Total return:
Total return before incentive fees		2.3	%		2.9	%		3.1	%		0.8	%		(1.6	)%
Incentive fees		—	%		—	%		—	%		—	%		—	%

Total return after incentive fees		2.3	%		2.9	%		3.1	%		0.8	%		(1.6	)%

**** The ratios are shown net and gross of incentive fees to conform to current period presention.

*****

Annualized (other than incentive fees).

******

Interest income less operating expenses which exclude incentive fees allocated from the Trading Company.

The above ratios 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 net assets.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

Financial Highlights of the Trading Company:


	For the Three Months Ended March 31,
	2012			2011
Ratios to average Members’ Capital: ⁽¹⁾
Net investment loss⁽²⁾		(1.83	)%		(1.64	)%
Expenses before incentive fees⁽²⁾		1.82	%		1.54	%
Expenses after incentive fees⁽²⁾		1.82	%		1.64	%
Net income (loss)		3.33	%		1.73	%
Total return before incentive fees		3.46	%		2.12	%
Total return after incentive fees		3.46	%		2.33	%

⁽¹⁾	The calculation is based on non-managing Members’ allocated income and expenses and average non-managing Members’ Capital.

⁽²⁾	Annualized except for incentive fees.

3. Organizational Costs:

Organizational costs of $96,931 relating to the issuance and marketing of the Partnership’s Units offered were initially paid by MS&Co. These costs were recorded as due to MS&Co. in its 2010 Statement of Financial Condition. These costs were reimbursed to MS&Co. by the Partnership in twelve monthly installments.

As of March 31, 2012, all of these costs have been reimbursed to MS&Co by the Partnership.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

4. Trading Activities:

The Partnership’s pro rata share of the results of the Trading Company’s trading activities are shown in the Statement of Income and Expenses.

The Partnership and Trading Company in the normal course of business, enter into various contracts with MSSB, MS&Co., and MSIP acting as their commodity brokers. The brokerage agreements with MSSB, MS&Co., give the Partnership and the Trading Company, respectively, the legal right to net unrealized gains and losses on open futures and forward contracts. The Trading Company nets, for financial reporting purposes, the unrealized gains and losses on open futures and forward contracts on its Statements of Financial Condition as the criteria under Accounting Standards Codification (“ASC”) 210-20, “Balance Sheet”, have been met.

The following tables summarize the valuation of the Trading Company’s investments as of March 31, 2012 and December 31, 2011, respectively.

March 31, 2012


Futures and Forward Contracts	Long Unrealized Gain		Long Unrealized Loss			Short Unrealized Gain		Short Unrealized Loss			Net Unrealized Gain/(Loss)			Average number of contracts outstanding for three months (absolute quantity)
Commodity	$	14,097,307	$	(13,534,489	)	$	4,398,471	$	(8,611,764	)	$	(3,650,475	)		17,289
Equity		519,228		—			—		—			519,228			156
Foreign currency		934,960		(3,827,224	)		74,330		(309,594	)		(3,127,528	)		1,736
Interest rate		274,250		(274,250	)		1,335,030		(161,363	)		1,173,667			1,973

Total	$	15,825,745	$	(17,635,963	)	$	5,807,831	$	(9,082,721	)	$	(5,085,108	)

Unrealized currency loss												(645,783	)

Total net unrealized loss on open contracts											$	(5,730,891	)*


				Average number of contracts outstanding for three months (absolute quantity)
Option Contracts at Fair Value
Options purchased	$	7,404,529	**		5,629
Options written	$	(7,885,030	)***		3,524

*	This amount is in “Net unrealized gain (loss) on open contracts” on the Trading Company’s Statements of Financial Condition.

**	This amount is in “Options purchased,” on the Trading Company’s Statements of Financial Condition.

***	This amount is in “Options written,” on the Trading Company’s Statements of Financial Condition.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

December 31, 2011


Futures and Forward Contracts	Long Unrealized Gain		Long Unrealized Loss			Short Unrealized Gain		Short Unrealized Loss			Net Unrealized Gain/(Loss)			Average number of contracts outstanding for the year (absolute quantity)
Commodity	$	13,170,302	$	(27,415,375	)	$	14,692,444	$	(6,055,301	)	$	(5,607,930	)		11,722
Equity		—		—			—		(11,703	)		(11,703	)		41
Foreign currency		28,585		(5,394,176	)		669,975		(1,242,351	)		(5,937,967	)		984
Interest rate		61,069		(41,845	)		—		(111,982	)		(92,758	)		2,514

Total	$	13,259,956	$	(32,851,396	)	$	15,362,419	$	(7,421,337	)	$	(11,650,358	)


Unrealized currency loss												(470,041	)


Total net unrealized gain on open contracts											$	(12,120,399	)*


Option Contracts at Fair Value				Average number of contracts outstanding for the year (absolute quantity)
Options purchased	$	12,753,218	**		3,558
Options written	$	(15,280,523	)***		2,886

*	This amount is in “Net unrealized gain on open contracts” on the Trading Company’s Statements of Financial Condition.

**	This amount is in “Options purchased,” on the Trading Company’s Statements of Financial Condition.

***	This amount is in “Options written,” on the Trading Company’s Statements of Financial Condition.

The following tables indicate the trading gains and losses, by market sector, on derivative instruments for the three months ended March 31, 2012 and 2011.


Sector	Three Months Ended March 31, 2012			Three Months Ended March 31, 2011
Commodity	$	15,231,435		$	5,084,378
Equity		2,415,152			27,274
Foreign currency		(1,154,985	)		2,200,956
Interest rate		1,834,772			(3,102,555	)
Unrealized currency loss		(175,742	)		2,714

Total	$	18,150,632	****	$	4,212,767	****

****	This amount is in “Total trading results” on the Trading Company’s Statements of Income and Expenses and Changes in Members’ Capital.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

5. Fair Value Measurements:

Partnership’s Investments. The Partnership values its investment in the Trading Company at its net asset value per unit as calculated by the Trading Company. The Trading Company values its investments as described in Note 2 of the Trading Company’s notes to the annual financial statements as of December 31, 2011.

Partnership’s Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date 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.

GAAP also requires the use of judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level of activity in the Partnership’s Level 2 assets.

The Partnership will separately present purchases, sales, issuances, and settlements in its reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.

Effective January 1, 2012, the Partnership adopted Accounting Standards update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards” (“IFRS”). The amendments within this ASU change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between GAAP and IFRS. However, some of the amendments clarify FASB’s intent about the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This new guidance did not have a significant impact on the Partnership’s financial statements.

The Partnership values investments in the Trading Company where there are no other rights or obligations inherent within the ownership interest held by the Partnership based on the end of the day net asset value of the Trading Company (Level 2). The value of the Partnership’s investment in the Trading Company reflects its proportional interest in the Trading Company. As of and for the periods ended March 31, 2012 and December 31, 2011, the Partnership did not hold any derivative instruments that were based on unadjusted quoted prices in active markets for identical assets (Level 1) or priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). There were no transfers of assets and liabilities between Level 1 and Level 2 during the quarter ended March 31, 2012.


	March 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Investment in Trading Company	$	302,816,640	$	—	$	302,816,640	$	—

Net fair value	$	302,816,640	$	—	$	302,816,640	$	—


	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Investment in Trading Company	$	270,589,333	$	—	$	270,589,333	$	—

Net fair value	$	270,589,333	$	—	$	270,589,333	$	—

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

Trading Company’s Investments. All commodity interests of the Trading Company (including derivative financial instruments and derivative commodity instruments) are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) 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. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statements of Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from the preceding period are reported in the Statements of Income and Expenses and Changes in Members’ Capital.

Trading Company’s Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date 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.

GAAP also requires the use of judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, the Trading Company’s Level 1 assets and liabilities are actively traded.

The Trading Company will separately present purchases, sales, issuances, and settlements in its reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.

The Trading Company considers prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of non-exchange traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended March 31, 2012 and December 31, 2011, the Trading Company did not hold any derivative instruments for which market quotations were not readily available and which were priced by broker-dealers who derive fair values for those assets from observable inputs (Level 2) or that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). During the period January 1, 2012 to March 31, 2012, there were no Level 3 assets and liabilities, and there were no transfers of assets or liabilities between Level 1 and Level 2.


	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		March 31, 2012
Assets
Futures	$	20,698,616		$	—			n/a	$	20,698,616
Forwards		—			934,960			n/a		934,960
Options purchased		7,404,529			—			n/a		7,404,529

Total assets		28,103,145			934,960			n/a		29,038,105

Liabilities
Futures	$	22,891,459		$	—			n/a	$	22,891,459
Forwards		—			3,827,225					3,827,225
Options written		7,885,030			—					7,885,030

Total liabilities		30,776,489			3,827,225			n/a		34,603,714

Unrealized currency loss									$	(645,783	)

*Net fair value	$	(2,673,344	)	$	(2,892,265	)		n/a	$	(6,211,392	)

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)


	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		December 31, 2011
Assets
Futures	$	28,622,375		$	—			n/a	$	28,622,375
Options purchased		12,753,218			—			n/a		12,753,218

Total assets		41,375,593			—			n/a		41,375,593

Liabilities
Futures	$	34,907,188		$	—			n/a	$	34,907,188
Forwards		—			5,365,545					5,365,545
Options written		15,280,523			—					15,280,523

Total liabilities		50,187,711			5,365,545			n/a		55,553,256

Unrealized currency loss									$	(470,041	)

*Net fair value	$	(8,812,118	)	$	(5,365,545	)		n/a	$	(14,647,704	)

*	This amount comprises of the net unrealized gain (loss) on open contracts, options purchased and options written on the Statement of Financial Condition.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

6. Financial Instrument Risks:

In the normal course of business, the Partnership, through its investment in the Trading Company, 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 or over-the-counter (“OTC”). Exchange-traded instruments are standardized and include futures and certain forwards and option contracts. OTC contracts are negotiated between contracting parties and include certain forwards and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchase 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 related 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 risk to the limited partners that have purchased Units in the Partnership is limited to the amount of their share of the Partnership’s assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under Delaware law.

Market risk is the potential for changes in the value of the financial instruments traded by the Trading Company 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 Trading Company is exposed to a market risk equal to the value of futures and forward contracts purchased 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/Trading Company’s risk of loss in the event of a counterparty default is typically limited to the asset amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s/Trading Company’s risk of loss is reduced through the use of legally enforceable Trading Company netting agreements with counterparties that permit the Partnership/Trading Company to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership/Trading Company has credit risk and concentration risk, as MSSB or a MSSB affiliate is the sole counterparty or broker with respect to the Partnership’s/Trading Company’s assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that, through MSSB, the Partnership’s/Trading Company’s counterparty is an exchange or clearing organization.

As both a buyer and seller of options, the Partnership/Trading Company pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership/Trading Company to potentially unlimited liability; for purchased options the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset.

The General Partner monitors and attempts to control the Partnership’s/Trading Company’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership/Trading Company may be 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, forwards and options positions 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/Trading Company’s business, these instruments may not be held to maturity.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

7. Critical Accounting Policies:

Use of Estimates. The preparation of financial statements and accompanying notes in conformity with GAAP requires management 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.

Partnership’s and the Trading Company’s Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date 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. Management has concluded that based on available information in the marketplace, the Trading Company Level 1 assets and liabilities are actively traded.

The Trading Company considers prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of non exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended March 31, 2012 and December 31, 2011, the Trading Company did not hold any derivative instruments for which market quotations were not readily available, and were priced by broker-dealers who derive fair values for those assets from observable inputs (Level 2) or that were priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).

Futures Contracts. The Trading Company 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 Trading Company 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 Trading Company. When the contract is closed, the Trading Company 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 changes in net unrealized gains (losses) on futures contracts are included in the Statements of Income and Expenses and Changes in Members’ Capital.

BHM Discretionary Futures Fund L.P.

Notes to Financial Statements

March 31, 2012

(Unaudited)

Forward Foreign Currency Contracts. Forward foreign currency contracts are those contracts where the Trading Company agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Forward foreign currency contracts are valued daily, and the Trading Company’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 rates at the reporting date, is included in the Statements of Financial Condition. Net realized gains (losses) and changes in net unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Statements of Income and Expenses and Changes in Members’ Capital.

The Trading Company 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 net gain (loss) on investments in the Statements of Income and Expenses and Changes in Members’ Capital.

Options. The Trading Company may purchase and write (sell) both exchange listed and OTC options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Trading Company writes an option, the premium received is recorded as a liability in the Statements of Financial Condition and marked to market daily. When the Trading Company purchases an option, the premium paid is recorded as an asset in the Statements of Financial Condition and marked to market daily. Net realized gains (losses) and changes in net unrealized gains (losses) on options contracts are included in the Statements of Income and Expenses and Changes in Members’ Capital.

Income Taxes. Income taxes have not been provided as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses.

GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements and requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s financial statements to determine whether the tax positions are “more-likely than- not” to be sustained by the applicable tax authority. Tax positions with respect to tax at the Partnership level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. The General Partner concluded that no provision for income tax is required in the Partnership’s financial statements.

The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. In general the statute of limitations of the Partnership’s U.S. federal tax returns remains open three years after a tax return is filed. The statutes of limitations on the Partnership’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe that there are any uncertain tax positions that require recognition of a tax liability.

Subsequent Events. The General Partner evaluates events that occur after the balance sheet date but before financial statements are filed. The General Partner has assessed the subsequent events through the date of filing and has determined that there were no subsequent events requiring adjustments of or disclosure in the financial statements.

Recent Accounting Pronouncements. In October 2011, FASB issued a proposed ASU intended to improve and converge financial reporting by setting forth consistent criteria for determining whether an entity is an investment company. Under longstanding GAAP, investment companies carry all of their investments at fair value, even if they hold a controlling interest in another company. The primary changes being proposed by FASB relate to which entities would be considered investment companies as well as certain disclosure and presentation requirements. In addition to the changes to the criteria for determining whether an entity is an investment company, FASB also proposes that an investment company consolidate another investment company if it holds a controlling financial interest in the entity. The Partnership will evaluate the impact that this proposed update would have on the financial statements once the pronouncement is issued.

In December 2011, FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities,” which creates a new disclosure requirement about the nature of an entity’s rights of setoff and the related arrangement associated with its financial instrument and derivative instrument. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparisons between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on the basis of IFRS. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Partnership should also provide the disclosures retrospectively for all comparative periods presented. The Partnership is currently evaluating the impact that the pronouncement would have on the financial statements.

Net Income (Loss) per Redeemable Unit. Net income (loss) per unit for each Class is calculated in accordance with investment company guidance. See Note 2, “Financial Highlights.”

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

Liquidity and Capital Resources

The Partnership does not engage in sales of goods or services. Its only assets are its investment in the Trading Company and cash. The Trading Company does not engage in the sale of goods or services. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investment in the Trading Company. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the first quarter of 2012.

There are no known 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 income (loss) from its investment in the Trading Company and by expenses, interest income, subscriptions, redemptions of Units and distributions of profits, if any.

For the three months ended March 31, 2012, Partnership capital increased 11.9% from $266,407,680 to $298,072,314. This increase was attributable by the subscriptions of 39,448.838 Units totaling $33,626,797 and 122.154 General Partner unit equivalents totaling $100,000, coupled with the net gain from operations of $6,169,141, which was partially offset by redemptions of 9,842.842 Units totaling $8,231,304. Future redemptions could impact the amount of funds available for investment in the Trading Company in subsequent periods.

The Trading Company’s capital consists of the capital contributions of the members as increased or decreased by realized and/or unrealized gains or losses on commodity futures trading and by expenses, interest income, redemptions of units and distributions of profits, if any.

For the three months ended March 31, 2012, the Trading Company’s capital increased 5.4% from $455,454,128 to $480,035,389. This increase was attributable to the contributions of $23,137,340, coupled by the net gain from operations of $15,970,735, which was partially offset by withdrawals of $14,526,814. Future withdrawals can impact the amount of funds available for investments in commodity contract positions in subsequent periods.

There are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Partnership’s capital resource arrangement at the present time.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management 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. Management believes that the estimates 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 7 of the Financial Statements.

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

Results of Operations

During the Partnership’s first quarter of 2012, the net asset value per Unit for Class A increased 2.3% from $831.22 to $850.19 as compared to an increase of 0.8% in the first quarter of 2011. During the Partnership’s first quarter of 2012, the net asset value per Unit for Class D increased 2.9% from $765.39 to $787.24 as compared to a decrease of 1.6% from February 1, 2011 to March 31, 2011. During the Partnership’s first quarter of 2012, the net asset value per Unit for Class Z increased 3.1% from $818.64 to $843.57 as compared to December 31, 2011. The Partnership, through its investment in the Trading Company, experienced a net trading gain in the first quarter of 2012 of $10,783,398. Gains were primarily attributable to the Trading Company’s trading in agricultural commodities, metals, global stock indices and interest rates and were partially offset by losses in currencies. The Partnership, for its own account, through its investment in the Trading Company, experienced a net trading gain in the first quarter of 2011 of $78,583. Gains were primarily attributable to the Trading Company’s trading in agricultural commodities, metals and currencies and were partially offset by losses in interest rates and energies.

The most significant gains were recorded within the metals complex in January from long futures positions in aluminum, tin, and palladium as the U.S. Federal Reserve announced it would keep U.S. borrowing costs low, thus weakening the value of the U.S. dollar and strengthening metals prices as investors sought “riskier” assets. Further gains were recorded from long futures positions in copper, while short positions in zinc put options were also profitable. Additional gains were recorded in February from long futures positions in aluminum, palladium, and platinum as a continued weakening U.S. dollar during the early part of the month pushed prices higher. Trading in global stock indices also benefited the Partnership during the quarter as long futures positions in the S&P 500 Index benefited from a strong price rally during February due to renewed optimism about the “health” of the U.S. economy. Further gains were recorded in global interest rate futures during March from short futures positions in the U.S. 30-year Treasury bonds and U.S. Treasury notes as prices declined as concerns over Greece’s debt continued to weigh on the markets. Trading in energies also benefited the Partnership as long futures positions in WTI crude oil recorded gains during January and February as concerns over Iranian nuclear ambitions and a potential future supply disruption from the Strait of Hormuz helped push prices higher. Additional gains in energies came from short futures positions in natural gas during February and March as the unseasonably warm end to the winter saw weaker demand for the commodity and thus forced prices lower. Lastly, trading in agricultural commodities recorded profits during February as long futures positions in soybeans benefited from supply shortages in South America.

A portion of the Partnership’s gains for the quarter was offset by losses incurred from currency trading. The Partnership incurred losses during March from currency trading as a long position in the Brazilian real was adversely impacted given concerns over earnings in China reduced demand for high-yielding currencies. Smaller losses were incurred in currencies from a long Euro versus U.S. dollar position as concerns over the broader European economy helped move the European currency lower.

Commodity futures markets are highly volatile. The potential for broad and rapid price fluctuations increases the risks involved in commodity trading, but also increases the possibility of profit. The profitability of the Partnership (and the Trading Company) depends on the Advisor’s ability to forecast price changes in energy and energy-related commodities. Such price changes 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 and changes in interest rates. To the extent that the Advisor correctly makes such forecasts, the Partnership (and the Trading Company) expects to increase capital through operations.

Interest income allocated from the Trading Company for the three months ended March 31, 2012 decreased $8,595, as compared to the corresponding period in 2011. The decrease in interest income is due to lower U.S. Treasury bill rates during the three months ended March 31, 2012, as compared to the corresponding period in 2011. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnership’s account and upon interest rates.

Placement agent fees are calculated on a monthly basis of the net assets (as defined in the Limited Partnership Agreement) of the Partnership as of the beginning of each month. The placement agent and fees for the three months ended March 31, 2012 increased $1,391,468, as compared to the corresponding period in 2011. The increase in placement agent and fees is due to higher average net assets during the three months ended March 31, 2012, as compared to the corresponding period in 2011.

Administrative fees are calculated on a monthly basis of the net assets (as defined in the Limited Partnership Agreement) of the Partnership as of the beginning of each month. Administrative fees for the three months ended March 31, 2012 increased $497,097, as compared to the corresponding period in 2011. The increase in administrative fees in due to higher average net assets during the three months ended March 31, 2012, as compared to the corresponding period in 2011.

Management and incentive fees are borne by the Trading Company.

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

All of the Partnership’s assets are subject to the risk of trading loss through its investment in the Trading Company. The Trading Company is a speculative commodity pool. The market sensitive instruments held by the Trading Company are acquired for speculative trading purposes, and all or substantially all of the Partnership’s assets are subject to the risk of trading loss, through its investment in the Trading Company. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Trading Company’s and 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 Trading Company’s open positions and, consequently, in their earnings and cash balances. The Trading Company’s and 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 value of financial instruments and contracts, the diversification results among the Trading Company’s open positions and the liquidity of the markets in which it trades.

The Trading Company rapidly acquires and liquidates both long and short positions in a range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Trading Company’s past performance is not necessarily indicative of its future results.

Quantifying the Trading Company Trading Value at Risk

The following quantitative disclosures regarding the Trading Company market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purpose of the safe harbor, except for the statements of historical fact.

The Trading Company accounts for open positions on the basis of mark to market accounting principles. Any loss in the market value of the Trading Company open positions is directly reflected in the Trading Company earnings and cash balance.

The Trading Company Value at Risk computation is based on the risk representation of the underlying benchmark for each instrument or contract and do not distinguish between exchange and non-exchange dealer-based instruments. Its also not based on exchange and/or dealer-based maintenance margin requirements. Value at Risk models, including the models used by Morgan Stanley and Ceres, are continually evolving as trading portfolios become more diverse and modeling techniques and systesms capabilities improve. Please note that the Value at Risk model is used to quantify market risk for historic reporting purposes only and is not utilized by either Ceres or the Advisor in its daily risk management activities. Please further note that Value at Risk as described above may not be comparable to similarly-titled measures used by other entities.

Limitations on Value at Risk as an Assessment of Market Risk

Value at Risk models permit estimation of a portfolio’s aggregate market risk exposure, incorporating a range of Value at Riskied market risks, reflect risk reduction due to portfolio diversification or hedging activities, and can cover a wide range of portfolio assets. However, Value at Risk risk measures should be viewed in light of the methodology’s limitations, which include, but may not be limited to the following:

•

past changes in market risk factors will not always result in accurate predictions of the distributions and correlations of future market movements;

•

changes in portfolio value caused by market movements may differ from those of the Value at Risk model;

•

Value at Risk results reflect past market fluctuations applied to current trading positions while future risk depends on future positions;

•

Value at Risk using a one-day time horizon does not fully capture the market risk of positions that cannot be liquidated or hedged within one day; and

•

the historical market risk factor data used for Value at Risk estimation may provide only limited insight into losses that could be incurred under certain unusual market movements.

In addition, the Value at Risk tables above, as well as the past performance of the Partnership and the Trading Companies, give no indication of the Partnership’s potential “risk of ruin.”

The Value at Risk tables provided present the results of the Partnership’s Value at Risk for each of the Trading Companies’ market risk exposures and on an aggregate basis at March 31, 2012 and December 31, 2011.

Value at Risk is not necessarily representative of the Trading Companies’ historic risk, nor should it be used to predict the Partnership or the Trading Companies’ future financial performance or their ability to manage or monitor risk. There can be no assurance that the Trading Companies’ actual losses on a particular day will not exceed the Value at Risk amounts indicated above or that such losses will not occur more than once in 100 trading days.

“Value at Risk” is a measure of the maximum amount which the Trading Company could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Trading Company’s speculative trading and the recurrence in the markets traded by the Trading Company of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Trading Company’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 Trading Company’s losses in any market sector will be limited to Value at Risk or by the Trading Company’s attempts to manage its market risk.

Exchange maintenance margin requirements have been used by the Trading Company as the measure of its Value at Risk. Maintenance 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. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to Value at Risk.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. There has been no material change in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on the Form 10-K filed with the SEC for the year ended December 31, 2011.

As of March 31, 2012, the Trading Company’s total capitalization was $480,035,389, and the Partnership owned approximately 63.1% of the Trading Company. The Partnership invests substantially all of its assets in the Trading Company. The Trading Company’s Value at Risk as of March 31, 2012 was as follows:

March 31, 2012


						Three months ended March 31, 2012
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Commodity	$	31,110,541		6.48	%	$	37,860,223	$	25,497,107	$	31,621,999
Currency		11,561,208		2.41	%		12,642,384		4,678,482		9,920,070
Equity		1,036,875		0.22	%		3,650,000		100,000		1,836,646
Interest Rate		4,580,715		0.95	%		6,131,189		182,760		2,679,754

Total	$	48,289,339		10.06	%

*	Average of month-end Values at Risk.

As of December 31, 2011, the Trading Company’s total capitalization was $455,454,128 and the Partnership owned approximately 59.4% of the Trading Company. The Partnership invests substantially all of its assets in the Trading Company. The Trading Company’s Value at Risk as of December 31, 2011 was as follows:

December 31, 2011



						Twelve months ended December 31, 2011
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Commodity	$	21,344,468		4.69	%	$	35,677,615	$	10,694,579	$	23,741,783
Currency		11,805,110		2.59	%		11,968,638		37,598		2,182,917
Equity		135,000		0.03	%		3,312,598		135,000		337,667
Interest Rate		354,263		0.08	%		6,674,377		77,306		2,622,385

Total	$	33,638,841		7.39	%

*	Annual average month-end Values at Risk.

**	Due to rounding.

Non-Trading Risk

The Trading Company has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as any market risk they represent) are immaterial.

Qualitative Disclosures Regarding Primary Trading Risk Exposures

The following qualitative disclosures regarding the Partnership’s market risk exposures — except for (A) those disclosures that are statements of historical fact and (B) the descriptions of how the Partnership manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Partnership’s primary market risk exposures, as well as the strategies used and to be used by Ceres and the Trading Advisor for managing such exposures, are subject to numerous uncertainties, contingencies and risks, any one of these could cause the actual results of the Partnership’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation, and many other factors could result in material losses, as well as in material changes to the risk exposures and the risk management strategies of the Partnership.

Investors must be prepared to lose all or substantially all of their investment in the Partnership.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

The General Partner monitors and attempts to control the Partnership’s, through its investment in the Trading Company, risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Trading Company may be subject.

The General Partner monitors the Trading Company’s performance and the concentration of open positions, and consults with the Advisor concerning the Trading Company’s overall risk profile. If the General Partner felt it necessary to do so, the General Partner could require the Advisor to close out positions as well as enter positions traded on behalf of the Trading Company. However, any such intervention would be a highly unusual event. The General Partner primarily relies on the Advisor’s own risk control policies while maintaining a general supervisory overview of the Trading Company’s market risk exposures.

The Advisor applies its own risk management policies to its trading. The Advisor often follows diversification guidelines, margin limits and stop loss points to exit a position. The Advisor’s research of risk management often suggests ongoing modifications to its trading programs.

As part of the General Partner’s risk management, the General Partner periodically meets with the Advisor to discuss its risk management and to look for any material changes to the Advisor’s portfolio balance and trading techniques. The Advisor is required to notify the General Partner of any material changes to its programs.

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 Securities Exchange Act of 1934, as amended (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 Chief Executive Officer (“CEO”) 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 CEO 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, 2012 and, based on that evaluation, the General Partners CEO 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 CEO 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 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, 2012 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Limitations on the Effectiveness of Controls

Any control system, no matter how well designed and operated, can provide reasonable (not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There were no additional information to supplement or amend the discussion set forth under Part I, Item 3. “Legal Proceedings” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

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 the Form 10-K for the fiscal year ended December 31, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

For the three months ended March 31, 2012, there were subscriptions of 37,909.356 Units of Class A totaling $32,342,376, 343.355 Units of Class D totaling $271,571, 1,196.127 Units of Class Z totaling $1,012,850 and 122.154 General Partner units of Class Z totaling $100,000. The Units were issued in reliance upon applicable exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and Section 506 of Regulation D promulgated thereunder. The Units were purchased by accredited investors as described in Regulation D.

Proceeds from the sale of Units are used in the trading of commodity interests including futures contracts, swaps, options and forward contracts.

The following chart sets forth the purchases of Units for each Class by the Partnership.


Period	Class A (a) Total Number of Units Purchased*		Class A (b) Average Price Paid per Unit**		Class D (a) Total Number of Units Purchased*		Class D (b) Average Price Paid per Unit**		(c) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Units that May Yet Be Purchased Under the Plans or Programs
January 1, 2012 — January 31, 2012		1,488.549	$	857.49		—	$	791.01	N/A	N/A
February 1, 2012 — February 29, 2012		2,513.059	$	879.63		—	$	812.92	N/A	N/A
March 1, 2012 — March 31, 2012		2,317.277	$	850.19		3,523.957	$	787.24	N/A	N/A
		6,318.885	$	863.62		3,523.957	$	787.24	N/A	N/A

Generally, limited partners are permitted to redeem their Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner may compel redemption but to date the General Partner has not exercised this right. Purchases of 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 Units are effected as of the last day of each month at the net asset value per Unit as of that day.

Item 6. Exhibits

Exhibits:

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

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

32.1 Section 1350 Certification (Certification of President and Director).

32.2 Section 1350 Certification (Certification of Chief Financial Officer).


101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

Notes to Exhibits List

* Submitted electronically herewith.

Pursuant to applicable securities laws and regulations, the Partnership is deemed to have complied with the reporting obligation relating to the submission of interactive data files in Exhibit 101 to this report and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Partnership has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.

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.


BHM Discretionary Futures Fund L.P.

By:		Ceres Managed Futures LLC (General Partner)



By:		/s/ Walter Davis
		Walter Davis
		President and Director

Date: May 15, 2012



By:		/s/ Brian Centner
		Brian Centner
		Chief Financial Officer (Principal Accounting Officer)

Date: May 15, 2012

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Ceres Tactical Macro L.P. Reports

Ceres Tactical Macro L.P. - FORM 10-Q - May 15, 2012

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Ceres Tactical Macro L.P. Reports