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EX-32.01 - EX-32.01 - MAN FRM MANAGED FUTURES STRATEGIES LLCa17-20618_1ex32d01.htm
EX-32.02 - EX-32.02 - MAN FRM MANAGED FUTURES STRATEGIES LLCa17-20618_1ex32d02.htm
EX-31.02 - EX-31.02 - MAN FRM MANAGED FUTURES STRATEGIES LLCa17-20618_1ex31d02.htm
EX-31.01 - EX-31.01 - MAN FRM MANAGED FUTURES STRATEGIES LLCa17-20618_1ex31d01.htm

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2017

 

OR

 

o         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 0-52505

 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Exact name of registrant as specified in its charter)

 

Delaware

 

30-0408280

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

c/o FRM Investment Management (USA) LLC

452 Fifth Avenue, 26th Floor

New York, New York 10018

(Address of principal executive offices)

(Zip Code)

 

212-649-6600

(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  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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  o

 

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.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

 

Emerging growth company o

 

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. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  o  No  x

 

As of September 30, 2017, 78,727,014 units of limited liability company interest were outstanding.

 

 

 



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

 

QUARTERLY REPORT FOR September 30, 2017 ON FORM 10-Q

 

Table of Contents

 

 

 

 

PAGE

 

 

 

 

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

1

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

27

 

 

 

 

Item 4.

Controls and Procedures

 

33

 

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

 

33

 

 

 

 

Item 1A.

Risk Factors

 

33

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

34

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

34

 

 

 

 

Item 4.

Mine Safety Disclosures

 

34

 

 

 

 

Item 5.

Other Information

 

34

 

 

 

 

Item 6.

Exhibits

 

34

 



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Formerly Systematic Momentum FuturesAccess LLC)

(a Delaware Limited Liability Company)

 

STATEMENTS OF FINANCIAL CONDITION

 

 

 

September 30, 
2017
(unaudited)

 

December 31, 
2016

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

30,117,712

 

$

48,971,063

 

Investment in Affiliated Funds (Cost: $51,383,318 and $77,057,266 at September 30, 2017 and December 31, 2016, respectively)

 

46,043,329

 

68,779,867

 

Receivable from Affiliated Funds

 

1,295,154

 

100,000

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

77,456,195

 

$

117,850,930

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ CAPITAL:

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Management fee payable

 

375,697

 

606,974

 

Redemptions payable

 

486,938

 

1,846,095

 

Professional fees payable

 

194,074

 

194,639

 

Administrative fee payable

 

30,909

 

46,954

 

Other liabilities

 

95,170

 

217,974

 

 

 

 

 

 

 

Total liabilities

 

1,182,788

 

2,912,636

 

 

 

 

 

 

 

MEMBERS’ CAPITAL:

 

 

 

 

 

Members’ Capital (78,727,014 Units and 113,650,916 Units outstanding at September 30, 2017 and December 31, 2016, respectively; unlimited Units authorized)

 

76,273,407

 

114,938,294

 

Total Members’ Capital

 

76,273,407

 

114,938,294

 

 

 

 

 

 

 

TOTAL LIABILITIES AND MEMBERS’ CAPITAL

 

$

77,456,195

 

$

117,850,930

 

 

 

 

 

 

 

NET ASSET VALUE PER UNIT:

 

 

 

 

 

 

 

 

 

 

 

Class A

 

$

0.9945

 

$

1.0385

 

Class C

 

$

0.9363

 

$

0.9851

 

Class D

 

$

1.2998

 

$

1.3421

 

Class I

 

$

1.0822

 

$

1.1267

 

Class M

 

$

0.9601

 

$

0.9915

 

Class AA

 

$

0.8679

 

$

0.9133

 

Class II

 

$

0.8994

 

$

0.9382

 

Class MM

 

$

0.8779

 

$

0.9106

 

 

See notes to financial statements.

 

1



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Formerly Systematic Momentum FuturesAccess LLC)

(a Delaware Limited Liability Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

For the three 
months ended 
September 30, 
2017

 

For the three 
months ended 
September 30, 
2016

 

For the nine 
months ended 
September 30, 
2017

 

For the nine 
months ended 
September 30, 
2016

 

TRADING PROFIT (LOSS), NET:

 

 

 

 

 

 

 

 

 

Realized from Affiliated Funds, net

 

$

(2,683,074

)

$

(549,793

)

$

(5,036,189

)

$

(5,860,482

)

Change in unrealized from Affiliated Funds, net

 

4,308,864

 

(3,618,364

)

2,937,410

 

8,464,432

 

 

 

 

 

 

 

 

 

 

 

Total trading profit (loss), net

 

1,625,790

 

(4,168,157

)

(2,098,779

)

2,603,950

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Management fee

 

375,697

 

716,380

 

1,338,012

 

2,269,013

 

Professional fees

 

68,350

 

190,254

 

221,450

 

435,857

 

Administrative fee

 

45,682

 

74,821

 

155,897

 

238,651

 

Other expenses

 

64,250

 

216,646

 

190,318

 

502,589

 

Total expenses

 

553,979

 

1,198,101

 

1,905,677

 

3,446,110

 

 

 

 

 

 

 

 

 

 

 

NET INVESTMENT INCOME (LOSS)

 

(553,979

)

(1,198,101

)

(1,905,677

)

(3,446,110

)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

1,071,811

 

$

(5,366,258

)

$

(4,004,456

)

$

(842,160

)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER UNIT:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of Units outstanding

 

 

 

 

 

 

 

 

 

Class A

 

12,486,794

 

19,584,467

 

14,297,556

 

21,080,766

 

Class C

 

43,932,389

 

80,382,688

 

52,224,327

 

87,669,669

 

Class D

 

2,073,311

 

2,966,509

 

2,321,967

 

2,857,902

 

Class I

 

10,419,241

 

12,657,014

 

10,982,881

 

13,087,581

 

Class M

 

3,750,588

 

6,186,553

 

4,169,104

 

6,779,281

 

Class AA

 

856,740

 

5,507,337

 

2,349,667

 

3,568,664

 

Class II

 

10,097,392

 

2,130,937

 

8,845,064

 

2,107,504

 

Class MM

 

28,831

 

36,870

 

28,831

 

39,399

*

 

 

 

 

 

 

 

 

 

 

Net income (loss) per weighted average Unit

 

 

 

 

 

 

 

 

 

Class A

 

$

0.0128

 

$

(0.0411

)

$

(0.0408

)

$

(0.0021

)

Class C

 

$

0.0115

 

$

(0.0418

)

$

(0.0446

)

$

(0.0087

)

Class D

 

$

0.0215

 

$

(0.0481

)

$

(0.0291

)

$

0.0161

 

Class I

 

$

0.0165

 

$

(0.0438

)

$

(0.0415

)

$

(0.0008

)

Class M

 

$

0.0161

 

$

(0.0327

)

$

(0.0306

)

$

0.0153

 

Class AA

 

$

0.0104

 

$

(0.0410

)

$

0.0058

 

$

(0.0399

)

Class II

 

$

0.0119

 

$

(0.0356

)

$

(0.0515

)

$

(0.0129

)

Class MM

 

$

0.0132

 

$

(0.0305

)

$

(0.0327

)

$

(0.0380

)*

 


*Units issued on January 25, 2016.  Amounts presented reflect the period from January 25, 2016 through September 30, 2016.

 

See notes to financial statements.

 

2



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Formerly Systematic Momentum FuturesAccess LLC)

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017

(unaudited) (in Units)

 

 

 

Members’ Units 
December 31, 2015

 

Subscriptions

 

Redemptions

 

Members’ Units 
September 30, 2016

 

Members’ Units 
December 31, 2016

 

Subscriptions#

 

Redemptions#

 

Members’ Units 
September 30, 2017

 

Class A

 

22,965,118

 

 

(4,231,484

)

18,733,634

 

16,241,456

 

 

(4,445,257

)

11,796,199

 

Class C

 

97,914,221

 

 

(20,727,554

)

77,186,667

 

65,856,570

 

 

(25,576,188

)

40,280,382

 

Class D

 

2,949,004

 

893,199

 

(875,694

)

2,966,509

 

2,966,509

 

 

(893,198

)

2,073,311

 

Class I

 

13,589,522

 

 

(1,290,023

)

12,299,499

 

12,172,207

 

 

(2,134,987

)

10,037,220

 

Class M

 

7,623,525

 

 

(2,070,768

)

5,552,757

 

4,766,784

 

 

(1,151,550

)

3,615,234

 

Class AA

 

1,187,288

 

4,667,786

 

(141,723

)

5,713,351

 

6,086,052

 

57,527

 

(5,345,134

)

798,445

 

Class II

 

1,584,229

 

617,046

 

(126,389

)

2,074,886

 

5,532,507

 

4,912,626

 

(347,741

)

10,097,392

 

Class MM

 

 

43,497

 

(14,666

)

28,831

 

28,831

 

 

 

28,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Units

 

147,812,907

 

6,221,528

 

(29,478,301

)

124,556,134

 

113,650,916

 

4,970,153

 

(39,894,055

)

78,727,014

 

 


# Includes transfer of 5,058,851 units out of Class AA for 4,912,626 units of Class II, on March 20, 2017.

 

Amounts have been rounded to the nearest whole unit.

 

See notes to financial statements.

 

3



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Formerly Systematic Momentum FuturesAccess LLC)

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017

(unaudited) (in Dollars)

 

 

 

Members’ 
Capital 
December 31, 
2015

 

Subscriptions

 

Redemptions

 

Net Income
(Loss)

 

Members’ 
Capital
September 30, 
2016

 

Members’ 
Capital 
December 31, 
2016

 

Subscriptions#

 

Redemptions#

 

Net Income
(Loss)

 

Members’ 
Capital
September 30, 
2017

 

Class A

 

$

25,487,679

 

$

 

$

(4,780,507

)

$

(44,205

)

$

20,662,967

 

$

16,866,886

 

$

 

$

(4,552,730

)

$

(583,043

)

$

11,731,113

 

Class C

 

104,115,262

 

 

(22,389,585

)

(766,506

)

80,959,171

 

64,874,067

 

 

(24,832,615

)

(2,327,573

)

37,713,879

 

Class D

 

4,166,825

 

1,237,616

 

(1,237,617

)

45,958

 

4,212,782

 

3,981,497

 

 

(1,219,037

)

(67,658

)

2,694,802

 

Class I

 

16,298,259

 

 

(1,584,372

)

(9,961

)

14,703,926

 

13,714,872

 

 

(2,396,908

)

(455,678

)

10,862,286

 

Class M

 

7,957,252

 

 

(2,236,037

)

103,853

 

5,825,068

 

4,726,041

 

 

(1,127,423

)

(127,505

)

3,471,113

 

Class AA

 

1,170,463

 

4,667,420

 

(139,627

)

(142,545

)

5,555,711

 

5,558,184

 

52,000

 

(4,930,785

)

13,569

 

692,968

 

Class II

 

1,585,992

 

640,000

 

(132,064

)

(27,259

)

2,066,669

 

5,190,493

 

4,673,872

 

(326,805

)

(455,625

)

9,081,935

 

Class MM

 

 

43,831

 

(14,515

)

(1,495

)

27,821

 

26,254

 

 

 

(943

)

25,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Members’ Capital

 

$

160,781,732

 

$

6,588,867

 

$

(32,514,324

)

$

(842,160

)

$

134,014,115

 

$

114,938,294

 

$

4,725,872

 

$

(39,386,303

)

$

(4,004,456

)

$

76,273,407

 

 


# Includes transfers in to Class II, from Class AA, of $4,673,872 on March 20, 2017.

 

Amounts have been rounded to the nearest dollar.

 

See notes to financial statements.

 

4



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Formerly Systematic Momentum FuturesAccess LLC)

(a Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class M

 

Class AA

 

Class II

 

Class MM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Unit Operating Performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

0.9817

 

$

0.9266

 

$

1.2783

 

$

1.0673

 

$

0.9443

 

$

0.8589

 

$

0.8876

 

$

0.8647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit (loss)

 

0.0188

 

0.0177

 

0.0244

 

0.0203

 

0.0179

 

0.0164

 

0.0169

 

0.0165

 

Net investment loss (b)

 

(0.0060

)

(0.0080

)

(0.0029

)

(0.0054

)

(0.0021

)

(0.0074

)

(0.0051

)

(0.0033

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

0.9945

 

$

0.9363

 

$

1.2998

 

$

1.0822

 

$

0.9601

 

$

0.8679

 

$

0.8994

 

$

0.8779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return

 

1.30

%

1.05

%

1.68

%

1.40

%

1.67

%

1.05

%

1.33

%

1.53

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Members’ Capital: (b)(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

0.60

%

0.85

%

0.22

%

0.50

%

0.22

%

0.85

%

0.56

%

0.37

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

(0.60

)%

(0.85

)%

(0.22

)%

(0.50

)%

(0.22

)%

(0.85

)%

(0.56

)%

(0.37

)%

 


(a)           The total return is calculated for each class taken as a whole based on the change in net asset value. An individual member’s return may vary from these returns based on the timing of the capital transactions.

(b)          The amounts do not reflect the proportionate share of expense from the Affiliated Funds.

(c)           The ratios and total return are not annualized.

 

See notes to financial statements.

 

5



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Formerly Systematic Momentum FuturesAccess LLC)

(a Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class M

 

Class AA

 

Class II

 

Class MM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Unit Operating Performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.0385

 

$

0.9851

 

$

1.3421

 

$

1.1267

 

$

0.9915

 

$

0.9133

 

$

0.9382

 

$

0.9106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit (loss)

 

(0.0263

)

(0.0249

)

(0.0343

)

(0.0286

)

(0.0255

)

(0.0232

)

(0.0239

)

(0.0232

)

Net investment loss (b)

 

(0.0177

)

(0.0239

)

(0.0080

)

(0.0159

)

(0.0059

)

(0.0222

)

(0.0149

)

(0.0095

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

0.9945

 

$

0.9363

 

$

1.2998

 

$

1.0822

 

$

0.9601

 

$

0.8679

 

$

0.8994

 

$

0.8779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return

 

(4.24

)%

(4.95

)%

(3.15

)%

(3.95

)%

(3.17

)%

(4.97

)%

(4.14

)%

(3.59

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Members’ Capital: (b)(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

1.72

%

2.47

%

0.60

%

1.42

%

0.60

%

2.47

%

1.61

%

1.05

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

(1.72

)%

(2.47

)%

(0.60

)%

(1.42

)%

(0.60

)%

(2.47

)%

(1.61

)%

(1.05

)%

 


(a)           The total return is calculated for each class taken as a whole based on the change in net asset value. An individual member’s return may vary from these returns based on the timing of the capital transactions.

(b)          The amounts do not reflect the proportionate share of expense from the Affiliated Funds.

(c)           The ratios and total return are not annualized.

 

See notes to financial statements.

 

6



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Formerly Systematic Momentum FuturesAccess LLC)

(a Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class M

 

Class AA

 

Class II

 

Class MM*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Unit Operating Performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.1446

 

$

1.0912

 

$

1.4682

 

$

1.2394

 

$

1.0846

 

$

1.0117

 

$

1.0333

 

$

0.9991

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit (loss)

 

(0.0334

)

(0.0319

)

(0.0431

)

(0.0363

)

(0.0319

)

(0.0296

)

(0.0303

)

(0.0292

)

Net investment loss (b)

 

(0.0082

)

(0.0104

)

(0.0050

)

(0.0076

)

(0.0037

)

(0.0097

)

(0.0070

)

(0.0049

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.1030

 

$

1.0489

 

$

1.4201

 

$

1.1955

 

$

1.0490

 

$

0.9724

 

$

0.9960

 

$

0.9650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return

 

(3.63

)%

(3.88

)%

(3.28

)%

(3.54

)%

(3.28

)%

(3.88

)%

(3.61

)%

(3.41

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Members’ Capital: (b)(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

0.71

%

0.96

%

0.33

%

0.61

%

0.33

%

0.96

%

0.67

%

0.48

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

(0.71

)%

(0.96

)%

(0.33

)%

(0.61

)%

(0.33

)%

(0.96

)%

(0.67

)%

(0.48

)%

 


(a)           The total return is calculated for each class taken as a whole based on the change in net asset value. An individual member’s return may vary from these returns based on the timing of the capital transactions.

(b)          The amounts do not reflect the proportionate share of expense from the Underlying Funds.

(c)           The ratios and total return are not annualized.

 

*Class MM units issued on January 25, 2016.

 

See notes to financial statements.

 

7



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Formerly Systematic Momentum FuturesAccess LLC)

(a Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 

 

 

Class A

 

Class C

 

Class D

 

Class I

 

Class M

 

Class AA

 

Class II

 

Class MM*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Unit Operating Performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

$

1.1098

 

$

1.0633

 

$

1.4130

 

$

1.1993

 

$

1.0438

 

$

0.9858

 

$

1.0011

 

$

1.0000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and net change in unrealized trading profit (loss)

 

0.0147

 

0.0142

 

0.0185

 

0.0158

 

0.0135

 

0.0132

 

0.0132

 

(0.0236

)

Net investment loss (b)

 

(0.0215

)

(0.0286

)

(0.0114

)

(0.0196

)

(0.0083

)

(0.0266

)

(0.0183

)

(0.0114

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, end of period

 

$

1.1030

 

$

1.0489

 

$

1.4201

 

$

1.1955

 

$

1.0490

 

$

0.9724

 

$

0.9960

 

$

0.9650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return: (a)(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total return

 

(0.61

)%

(1.35

)%

0.50

%

(0.32

)%

0.50

%

(1.36

)%

(0.51

)%

(3.50

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Members’ Capital: (b)(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

1.90

%

2.65

%

0.77

%

1.60

%

0.77

%

2.64

%

1.78

%

1.15

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

(1.90

)%

(2.65

)%

(0.77

)%

(1.60

)%

(0.77

)%

(2.64

)%

(1.78

)%

(1.15

)%

 


(a)           The total return is calculated for each class taken as a whole based on the change in net asset value. An individual member’s return may vary from these returns based on the timing of the capital transactions.

(b)          The amounts do not reflect the proportionate share of expense from the Underlying Funds.

(c)           The ratios and total return are not annualized.

 

*Class MM units issued on January 25, 2016.

 

See notes to financial statements.

 

8



 

MAN FRM MANAGED FUTURES STRATEGIES LLC

(Formerly Systematic Momentum FuturesAccess LLC)

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.                          ORGANIZATION

 

Man FRM Managed Futures Strategies LLC (the “Fund”), a Delaware limited liability company, is a managed futures fund of funds managed by FRM Investment Management (USA) LLC (the “Manager” or “FRM”). FRM is registered as a commodity pool operator (“CPO”) and commodity trading adviser (“CTA”) with the Commodity Futures Trading Commission (“CFTC”) under the Commodity Exchange Act.  FRM is also registered as an investment adviser under the Investment Advisers Act of 1940. FRM is an indirect wholly-owned subsidiary of Man Group plc (“Man Group”). The Fund was organized under the Delaware Limited Liability Company Act in March 2007 and commenced operations in April 2007. The Fund is an investment company as defined by Accounting Standards Codification (“ASC”) guidance. The Fund was previously known as “Systematic Momentum FuturesAccess LLC” through April 30, 2015.

 

Under the direction of the Manager, the Fund allocates its capital among a group of underlying related party funds (each an “Affiliated Fund”, and collectively the “Affiliated Funds”) which, in turn, allocate capital to related party master funds (each a “Master Fund” and collectively the “Master Funds”) that implement a systematic-based managed futures strategy under the direction of related party commodity trading advisors (each a “Trading Advisor” and collectively, the “Trading Advisors”).

 

The Manager invests the Fund’s assets in Affiliated Funds that are on the FRM platform. The Affiliated Funds invested in by the Fund are established as Delaware limited liability companies, each of which engages the Manager as the risk manager and each of which further invests in a Master Fund, established as a Cayman Islands exempted company, which engages a single Trading Advisor (see Note 3). As of September 30, 2017 and December 31, 2016, there are five and six Affiliated Funds (see Note 3), respectively, held by the Fund. The Manager serves as CPO of the Affiliated Funds and Master Funds.

 

Unless the context requires otherwise, references to the Fund in these financial statements notes, also refer to the Affiliated Funds and the Master Funds in which the Affiliated Funds invest. Reference to the investment process, strategies, objectives or activities of the Fund and the Affiliated Funds refer to the investment activities of the Master Funds through which the Affiliated Funds and Fund indirectly conduct their investment processes, strategies, objectives and activities.

 

Interests in the Fund are not insured or otherwise protected by the Federal Deposit Insurance Corporation or any other government authority. Interests are not deposits or other obligations of, and are not guaranteed by any bank. Interests are subject to investment risks, including the possible loss of the full amount invested.

 

In the opinion of management, these unaudited interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial condition of the Fund as of September 30, 2017 and December 31, 2016 and the results of its operations for the three and nine month periods ended September 30, 2017 and 2016. However, the operating results for the interim periods may not be indicative of the results for the full year.

 

9



 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund’s report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2016.

 

2.                          SIGNIFICANT ACCOUNTING POLICIES

 

The Fund prepares its financial statements in conformity with U.S. GAAP. These financial statements have applied the guidance as set forth in the Financial Accounting Standards Board (“FASB”) ASC 946, Financial Services - Investment Companies. The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.

 

Cash and Cash Equivalents

 

The Fund considers all highly liquid investments, with a maturity of three months or less when acquired, to be cash equivalents. As of September 30, 2017 and December 31, 2016, the Fund does not hold any cash equivalents. Cash is held at a nationally recognized financial institution.

 

Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates and such differences could be material.

 

Income Taxes

 

No provision for income taxes has been made in the accompanying financial statements as each member is individually responsible for reporting income or loss based on such member’s share of the Fund’s income and expenses as reported for income tax purposes.

 

The Fund follows the ASC guidance on accounting for uncertain tax positions.  This guidance provides how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’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 Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. A prospective investor should be aware that, among other things, income taxes could have a material adverse effect on the periodic calculations of the net asset value (“NAV”) of the Fund, including reducing the NAV of the Fund to reflect reserves for income taxes, such as foreign withholding taxes, that may be payable by the Fund or the Affiliated Funds. This could cause benefits or detriments to certain investors, depending upon the timing of their entry and exit from the Fund. The Manager has analyzed the Fund’s tax positions and has concluded that no provision for income tax is required in the Fund’s financial statements. The following is the major tax jurisdiction for the Fund and the earliest tax year subject to examination: United States — 2014.

 

10



 

Distributions

 

Each investor is entitled to receive, equally per unit, any distributions which may be made by the Fund. No such distributions have been declared for the periods ended September 30, 2017 and 2016.

 

Subscriptions

 

The Fund generally offers units (“Units”) for investment each Monday (or, where such day is not a business day, the immediately following business day) and/or such other days as the Manager may determine in its sole discretion (each a “Subscription Day”). Investors must submit their executed subscription agreement five business days prior to the Subscription Day.  Investors’ subscriptions will be used to purchase a number of Units, including fractional Units, with an aggregate NAV, equal to the dollar amount invested.

 

Each member shares in the profits and losses of the Fund in proportion to the number of Units held by each member. However, no member is liable for obligations of the Fund in excess of its capital subscription and net profits or losses, if any. Except as noted above in respect to sales commissions and in Notes 6 below in respect of fees, the classes of units are identical.

 

Redemptions

 

Investors in the Fund generally may redeem any or all of their Units at NAV, in whole or fractional Units, effective as of (i) each Friday (or, where such day is not a business day, the immediate following business day) and/or (ii) such other days as the Manager may determine in its sole discretion (each a “Redemption Day”), upon providing notice to the Fund in writing (or in such other manner as the Manager may determine in its sole discretion) not less than four business days prior to the Redemption Day. The NAV of redeemed Units is determined as of the Redemption Date. Investors will remain exposed to fluctuations in NAV during the period between submission of their redemption requests and the applicable Redemption Date.

 

3.                          INVESTMENTS IN AFFILIATED FUNDS

 

During the period ended September 30, 2017, the Fund held investments in the following six Affiliated Funds, and the respective Master Funds: (i) Blakeney Delaware Feeder LLC (“Blakeney”) which invests in Blakeney Fund Limited, (ii) Campbell Delaware Feeder LLC (“Campbell”) which invests in Campbell MAC Cayman Fund Limited, (iii) CCP Core Macro Delaware Feeder LLC (“CCP Core Macro”) which invests in CCP Core Macro Cayman Fund Limited, (iv) Century CAT MAC Delaware Feeder LLC (“Century CAT”) which invests in Century CAT MAC Cayman Fund Limited, (v) Quantica MF Delaware Feeder LLC (“Quantica MF”) which invests in Quantica MF Cayman Fund Limited, and (vi) Silver Delaware Feeder LLC (“Silver”) which invests in Silver MAC Limited.  As used herein, Trading Advisor in respect of an Affiliated Fund refers to the Trading Advisor of its related Master Fund. FRM, in its discretion, may change the Affiliated Funds at any time. FRM, also at its discretion, may vary the percentage of the Fund’s total portfolio allocated to the different Affiliated Funds. In the process of rebalancing, the Fund’s allocation to any individual Affiliated Fund may range between 3% - 25% of the Fund’s NAV.

 

11



 

During the period, the Fund had purchases of $14,850,000 and sales of $35,487,759 of investments in Affiliated Funds. The investment transactions were accounted for on trade date. The investments in the Affiliated Funds are valued at fair value and are reflected in the Statements of Financial Condition. In determining fair value, FRM utilized the NAV of the Affiliated Funds which approximates fair value. The fair value was net of all fees relating to the Affiliated Funds, paid or accrued. Additionally, FRM monitored the performance of the Affiliated Funds. The fair value of the Fund’s assets and liabilities which qualify as financial instruments approximates the carrying amounts presented on the Statements of Financial Condition.

 

The details of investments in Affiliated Funds at and for the period ended September 30, 2017 are as follows:

 

 

 

Percentage of
Members’
Capital

 

Fair Value

 

Profit (Loss)

 

Cost @
9/30/17

 

Redemptions
Permitted

 

Blakeney

 

15.83

%

$

12,075,646

 

$

(333,249

)

$

12,947,824

 

Weekly

 

Campbell

 

10.59

%

8,076,796

 

(104,487

)

9,368,978

 

Weekly

 

CCP Core Macro*

 

 

 

289,313

 

 

Weekly

 

Century CAT

 

12.41

%

9,462,769

 

(540,923

)

10,273,290

 

Weekly

 

Quantica MF

 

12.13

%

9,252,916

 

493,122

 

9,305,338

 

Weekly

 

Silver

 

9.41

%

7,175,202

 

(1,902,555

)

9,487,888

 

Weekly

 

 

 

60.37

%

$

46,043,329

 

$

(2,098,779

)

$

51,383,318

 

 

 

 


* Affiliated Fund was redeemed in July 2017 and the Fund received proceeds of $11,922,759.

 

The details of investments in Affiliated Funds at and for the year ended December 31, 2016 are as follows:

 

 

 

Percentage of
Members’
Capital

 

Fair Value

 

Profit (Loss)

 

Cost @
12/31/16

 

Redemptions
Permitted

 

Blakeney

 

11.13

%

$

12,788,895

 

$

(15,627

)

$

13,427,752

 

Weekly

 

Campbell

 

9.33

%

10,721,283

 

(3,135,990

)

13,028,816

 

Weekly

 

Carlisle*

 

 

 

713,644

 

 

Weekly

 

CCP Core Macro

 

10.12

%

11,633,446

 

(425,212

)

12,743,445

 

Weekly

 

Century CAT**

 

12.32

%

14,163,692

 

(2,881,308

)

16,787,646

 

Weekly

 

Quantica MF

 

8.64

%

9,934,794

 

1,510,060

 

10,088,625

 

Weekly

 

Silver

 

8.30

%

9,537,757

 

17,504

 

10,980,982

 

Weekly

 

 

 

59.84

%

$

68,779,867

 

$

(4,216,929

)

$

77,057,266

 

 

 

 


* Affiliated Fund was redeemed in April 2016 and the Fund received proceeds of $8,826,829.

** Affiliated Fund purchased in March 2016.

 

12



 

The details of investments in Affiliated Funds at and for the period ended September 30, 2016 are as follows:

 

 

 

Percentage of
Members’
Capital

 

Fair Value

 

Profit (Loss)

 

Cost @
9/30/2016

 

Redemptions
Permitted

 

Blakeney

 

11.42

%

$

15,305,289

 

$

920,767

 

$

15,012,428

 

Weekly

 

Campbell

 

9.85

%

13,195,274

 

(2,306,999

)

15,305,273

 

Weekly

 

Carlisle*

 

 

 

656,058

 

 

Weekly

 

CCP Core Macro

 

10.46

%

14,011,365

 

432,707

 

14,576,111

 

Weekly

 

Century CAT**

 

12.92

%

17,314,786

 

(750,214

)

18,003,194

 

Weekly

 

Quantica MF

 

8.82

%

11,817,405

 

1,932,671

 

11,762,269

 

Weekly

 

Silver

 

7.41

%

9,949,213

 

1,718,960

 

9,899,205

 

Weekly

 

 

 

60.88

%

$

81,593,332

 

$

2,603,950

 

$

84,558,480

 

 

 

 


* Affiliated Fund was redeemed in April 2016 and the Fund received proceeds of $8,826,829.

** Affiliated Fund purchased in March 2016.

 

As of September 30, 2017, December 31, 2016 and September 30, 2016, there are no investments held by the Affiliated Funds and the Affiliated Funds’ Master Funds that in the aggregate exceed 5% of the Fund’s members’ capital.

 

The following is summarized financial information as required by Regulation S-X, for each of the Affiliated Funds:

 

 

 

As of September 30, 2017

 

 

 

Total Assets

 

Total Liabilities

 

Total Capital

 

Blakeney

 

$

12,236,197

 

$

151,437

 

$

12,084,760

 

Campbell

 

8,222,663

 

138,327

 

8,084,336

 

CCP Core Macro

 

47,271

 

47,271

 

 

Century CAT

 

9,568,957

 

98,356

 

9,470,601

 

Quantica MF

 

9,403,998

 

143,582

 

9,260,416

 

Silver

 

7,318,772

 

138,054

 

7,180,718

 

Total

 

$

46,750,587

 

$

669,756

 

$

46,080,831

 

 

 

 

As of December 31, 2016

 

 

 

Total Assets

 

Total Liabilities

 

Total Capital

 

Blakeney

 

$

12,939,371

 

$

141,001

 

$

12,798,370

 

Campbell

 

10,859,354

 

130,341

 

10,729,013

 

CCP Core Macro

 

11,744,051

 

98,433

 

11,645,618

 

Century CAT

 

14,247,902

 

75,923

 

14,171,979

 

Quantica MF

 

10,069,651

 

127,622

 

9,942,029

 

Silver

 

9,670,349

 

125,495

 

9,544,854

 

Total

 

$

69,530,678

 

$

698,815

 

$

68,831,863

 

 

13



 

 

 

For the nine months ended September 30, 2017

 

 

 

Income (Loss)

 

Commissions

 

Expenses

 

Net
Income (Loss)

 

Blakeney

 

$

(170,321

)

$

 

$

(163,288

)

$

(333,609

)

Campbell

 

30,417

 

 

(135,094

)

(104,677

)

CCP Core Macro#

 

703,735

 

 

(462,658

)

241,077

 

Century CAT

 

(396,185

)

 

(145,190

)

(541,375

)

Quantica MF

 

634,416

 

 

(141,027

)

493,389

 

Silver

 

(1,769,261

)

 

(134,870

)

(1,904,131

)

Total

 

$

(967,199

)

$

 

$

(1,182,127

)

$

(2,149,326

)

 

 

 

For the nine months ended September 30, 2016

 

 

 

Income (Loss)

 

Commissions

 

Expenses

 

Net
Income (Loss)

 

Blakeney

 

$

1,152,474

 

$

 

$

(231,424

)

$

921,050

 

Campbell

 

(2,094,662

)

 

(213,503

)

(2,308,165

)

Carlisle##

 

776,008

 

 

(115,102

)

660,906

 

CCP Core Macro

 

861,020

 

 

(420,957

)

440,063

 

Century CAT###

 

(626,473

)

 

(120,840

)

(747,313

)

Quantica MF

 

2,098,484

 

 

(164,906

)

1,933,578

 

Silver

 

1,881,345

 

 

(161,636

)

1,719,709

 

Total

 

$

4,048,196

 

$

 

$

(1,428,368

)

$

2,619,828

 

 


# Affiliated Fund was redeemed in July 2017 and the Fund received proceeds of $11,922,759.

## Affiliated Fund was redeemed in April 2016 and the Fund received proceeds of $8,826,829.

### Affiliated Fund purchased in March 2016.

 

4.                          FAIR VALUE OF INVESTMENTS

 

Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price).

 

The fair value measurement guidance established by U.S. GAAP is a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

 

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

 

Level I — Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded investments. As required by the fair market value measurement guidance in U.S. GAAP, the Fund does not adjust the quoted price for these investments even in situations where the Fund holds a large position and a sale could reasonably impact the quoted price.

 

Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies.

 

14



 

Level III — Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. FRM’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

 

FASB ASC 820 - Fair Value Measurement and Disclosures no longer requires investments for which fair value is determined based on practical expedient reliance to be reported utilizing the fair value hierarchy. As of September 30, 2017 and December 31, 2016, all of the investments were fair valued using the NAV as practical expedient of the Affiliated Funds.

 

5.                          MARKET, CREDIT AND CONCENTRATION RISKS

 

The nature of this Fund has certain risks, which cannot all be presented in the financial statements.  The following summarizes certain of those risks.

 

Market Risk

 

Derivative instruments involve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Master Funds’ financial assets (liabilities) at fair value through profit or loss on such derivative instruments as reflected in the Statements of Financial Condition of the Master Funds. The Fund’s exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Master Funds as well as the volatility and liquidity of the markets in which the derivative instruments are traded.  Investments in foreign markets may also entail legal and political risks.

 

Credit Risk

 

The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange/clearinghouse is pledged to support the financial integrity of the exchange/clearinghouse.  In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange traded contracts, and in the over-the-counter markets counterparties may also require margin.

 

The credit risk associated with these instruments from counterparty nonperformance is the derivatives, at fair value, if any, included in the Master Funds’ Statements of Financial Condition.

 

15



 

As of September 30, 2017 and December 31, 2016, the Affiliated Funds held by the Fund do not invest directly in positions other than their related Master Funds. The Master Funds enter into contracts with various futures clearing brokers. These brokers may encounter financial difficulties that can impair the operating capabilities or the capital position of the Master Funds, and in turn, the Affiliated Funds. The Trading Advisors of the Master Funds will attempt to limit transactions to well-capitalized and established brokers in an effort to mitigate such risk.

 

Credit risk is the possibility that a loss may occur from the failure of a counterparty to make payments according to the terms of a contract. The Fund’s exposure to credit risk is contingent upon the Affiliated Funds and the brokers and counterparties which the Affiliated Funds transact business with as well as amounts recorded as assets in the Statements of Financial Condition.

 

Cash held as deposits may exceed the amount of federal insurance provided on such deposits and are therefore subject to credit risk.

 

Concentration Risk

 

The Fund’s investments in the Affiliated Funds are subject to the market and credit risk of the Affiliated Funds. Because the majority of the Fund’s capital is invested in the Affiliated Funds, any changes in the market conditions that would adversely affect the Affiliated Funds could significantly impact the solvency of the Fund.

 

Currency Risk

 

The Fund’s investments in the Affiliated Funds are subject to currency risk to the extent that the fair value or future cash flow of a financial instrument held by any Affiliated Fund will fluctuate because of changes in foreign exchange rates.

 

Liquidity Risk

 

Liquidity risk is the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities. Redemption requests for Units are the main liquidity risk for the Fund. The Units are redeemable as outlined in Note 2. The exposure to liquidity risk through redemption requests for Units is managed by specifically setting the redemption notice period to accommodate the expected liquidity of the Affiliated Funds as agreed by the Investment Manager.

 

Indemnifications

 

The Fund enters into administrative and other professional service contracts that contain a variety of indemnifications.  The Fund’s maximum exposure under these arrangements is not known; however, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

 

6.                          RELATED PARTY TRANSACTIONS

 

The Manager receives monthly management fees (“Management Fees”) based on the aggregate NAV of the Class of Units. The respective Management Fee rates are: Class A Units 1.5% per annum; Class C Units 2.5% per annum, Class I Units 1.1% per annum, Class AA units 2.5% per annum; Class II units

 

16



 

1.35% per annum; Class MM units 0.60% per annum. Class D Units and Class M Units are not charged Management Fees.

 

7.                          WEIGHTED AVERAGE UNITS

 

The weighted average number of Units outstanding for each Class is computed for purposes of disclosing net income (loss) per weighted average Unit. The weighted average number of Units outstanding for each Class for the periods ended September 30, 2017 and 2016 equals the Units outstanding as of such date, adjusted proportionately for Units sold or redeemed based on the respective length of time each was outstanding during the period.

 

8.                          SUBSEQUENT EVENTS

 

For the period October 1, 2017 to November 9, 2017, the Fund has recorded redemptions of approximately $4,263,148.

 

Management has evaluated the impact of subsequent events on the Fund through the date the financial statements were issued and has determined that there were no additional subsequent events that require adjustment to, or disclosure in, the financial statements.

 

Item 2:  Management’s Discussion and Analysis and Results of Operations

 

Unless the context requires otherwise, references in this Form 10-Q to the Fund also refer to the Affiliated Funds and the Master Funds in which the Affiliated Funds invest.  Reference to the investment process, strategies, objectives and activities of the Fund and the Affiliated Funds refer to the investment activities of the Master Funds through which the Affiliated Funds and Fund indirectly conduct their investment processes, strategies, objectives and activities.

 

NET ASSET VALUE PER UNIT

 

The NAV of the Fund is equivalent to its total assets less its total liabilities as of any valuation day.  Appreciation or depreciation in the NAV of the Fund is based upon appreciation or depreciation in the value of investments in Affiliated Funds that are held by the Fund, with appropriate adjustments for assets and liabilities of the Fund. The different Classes of Units will have a different NAV due to the different Management Fees charged to these Classes.  The NAV is calculated on the last calendar day of each month and/or last business day of each week as the Manager may determine in its sole discretion.

 

FRM believes that the NAV used to calculate subscription and redemption value and to report performance to investors is a useful performance measure for the investors of the Fund.

 

Liquidity and Capital Resources

 

The Fund and the Affiliated Funds through their related Master Funds borrow only to a limited extent and only on a strictly short-term basis in order to finance losses on non-U.S. dollar denominated trading positions pending the conversion of the Fund’s and Affiliated Funds’ U.S. dollar deposits. These borrowings are at a prevailing short-term rate in the relevant currency.

 

An Affiliated Fund through its Master Fund should be able to close out its open trading positions and liquidate its holdings relatively quickly and at market prices, except in unusual circumstances. This

 

17



 

typically permits the Affiliated Fund to limit losses as well as reduce market exposure on short notice should its strategies indicate doing so.

 

As a commodity pool, the Fund maintains a large percentage of its assets in cash directly and indirectly through the Affiliated Master Funds, which they must have available to post initial and variation margin on futures contracts.  This cash is also used to fund redemptions.  While the Affiliated Funds have the ability to fund redemption proceeds from liquidating the Master Funds’ positions, as a practical matter positions are not liquidated to fund redemptions.  In the event that positions were liquidated to fund redemptions, FRM has the ability to override decisions of the Trading Advisor to fund redemptions if necessary, but in practice the Trading Advisor would determine, in its discretion which investments should be liquidated.

 

For the nine months ended September 30, 2017 the Fund’s capital decreased 33.64% from $114,938,294 to $76,273,407.  This decrease was attributable to the net loss from operations of $4,004,456 coupled with the redemption of 34,835,204 Units resulting in an outflow of $34,712,431.  The cash outflow was offset with cash inflow of $52,000 due to subscriptions of 57,527 Units. Future redemptions could impact the amount of funds available for investment in the Affiliated Funds in subsequent months.

 

Critical Accounting Policies

 

Statement of Cash Flows

 

The Fund is not required to provide a Statement of Cash Flows.

 

Investments

 

Purchase and sale of investments are recorded on a trade date basis. Realized profits and losses on investments are recognized when the investments are sold. Any change in net unrealized profit or loss from the preceding period is reported in the respective Statements of Operations.

 

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.  For more information on the Fund’s treatment of fair value, see Financial Statements Note 4, Fair Value of Investments.

 

Reform Act

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the definition of “eligible contract participant” and each Master Fund expects to meet the amended definition as it applies to trading in “retail forex” transactions so long as its total assets exceed $10 million.  If the Master Fund does not meet the definition of “eligible contract participant” for purposes of trading in “retail forex” transactions, it could lead to the Master Fund being unable to trade such transactions in the interbank market and bearing higher upfront and mark-to-market margin, less favorable trade pricing, and the possible imposition of new or increased fees.  “Retail forex” markets available to parties that do not meet the definition of “eligible contract participant” could also be significantly less liquid than the interbank market.  Moreover, the creditworthiness of the counterparties with whom the Master Fund may be required to trade in such circumstances could be significantly weaker than the creditworthiness of the

 

18



 

currency forward counterparties with which the Master Fund would otherwise engage for its currency forward transactions.

 

Results of Operations

 

January 1, 2017 to September 30, 2017

 

January 1, 2017 to March 31, 2017

 

The following table is an allocation by sector as a percentage of net unrealized profit and loss on open positions for the Fund as a whole taking into account the positions at the Affiliated Master Fund level and the allocation to each Master Fund as of March 31, 2017:

 

March 31, 2017

 

 

 

 

 

Percent of

 

 

 

Net Unrealized

 

Net Unrealized

 

Commodity Industry

 

Profit (Loss)

 

Profit (Loss)

 

Sector

 

on Open Positions

 

on Open Positions

 

 

 

 

 

 

 

Agricultural Commodities

 

$

376,765

 

327.23

%

Energy

 

(379,974

)

(330.01

)%

Interest Rates

 

85,172

 

73.97

%

Metals

 

95,261

 

82.74

%

Stock Indices

 

692,426

 

601.38

%

Currencies - Future

 

(313,168

)

(271.99

)%

Currencies - Forward

 

(441,343

)

(383.31

)%

 

 

 

 

 

 

Total

 

$

115,140

 

100

%

 

The Fund experienced a net trading profit for the first quarter ended March 31, 2017 of $1,033,719.

 

Returns were varied with yields negative at start and end of the quarter, while mid-quarter was brighter. Positive returns were generated with gains from equity positions, and smaller gains from FX and fixed income offsetting losses from commodities.

 

References herein to the Fund’s trading and portfolio refer to such trading and portfolios through the Master Funds generally.

 

The beginning of the quarter was positive for risk assets overall amid rising bond yields, a continued pickup in inflation expectations and resilient fundamental macro data. A notable driver was a retracement in the dollar, which sold off against most other currencies as the Federal Open Market Committee minutes and members of the incoming Administration highlighted concerns about the implications of a stronger dollar for the U.S. economy. Mid-quarter saw a continuation of risk seeking behavior across U.S., European and Asian markets. The U.S. Dollar rallied against the Euro as investors focused on yield differentials and the divergence in growth prospects.  Quarter-end provided a well signaled rate increase from the Federal Reserve (Fed) mid-March.  In addition, the U.S. Dollar weakened against most major currencies which led to a rally in emerging market debt, equities and FX.

 

19



 

Equities contributed positively through the quarter. Returns generated in North America and Asia ex Japan more than offset losses in Europe amid a fair amount of choppiness at the start of Q1. Equities were the main source of gains mid-quarter, with long positions across regions contributing, and positive performance at quarter-end came from long positions in Europe responsible for the majority of gains.

 

Performance for the quarter was mixed in FX.  Trading Advisors entered the quarter net long USD and exhibited losses as the  dollar sold off meaningfully against most other currencies. By mid-quarter Trading Advisors had reduced exposure and were modestly net long USD. Contributions came from long positions in CAD and AUD and shorts in Euro and GBP. Overall though, contributions were minor. FX was the biggest detractor at quarter-end with a net long USD position and shorts in CAD, GBP and EUR detracting from performance

 

In fixed income, losses were driven by a selloff in fixed income in Europe, a meaningful snap back in U.S. rates in the earlier part of the quarter and broad-based market choppiness. The sector was a smaller contributor mid-quarter as gains from long positions in Europe, were offset by losses in the back end of the U.S. However, the portfolio held a long bias to fixed income in the first half of March which then moved towards a short position in the latter half of the month before turning long again at the end of the month ultimately detracting from performance.

 

Commodities detracted throughout the quarter. Losses in energy, precious metals and grains more than offset gains in industrial metals at the start of the quarter, while long positions to sectors across the board detracted mid-quarter. Only positions in metals contributed positively. Short positions in energies saw the largest losses followed by long metals positions at quarter-end, despite short positions in softs contributing positively to performance.

 

In terms of positioning, the biggest area of risk is in FX with net long positions in ZAR, JPY and AUD and net short positions in EUR and GBP among the top risk-weighted positions in the portfolio. Equities is the second largest area of risk where Trading Advisors are net long in North America and Europe.  The portfolio is close to flat in both interest rates and commodities where the net long exposure in commodities at the beginning of March has gradually tapered off at quarter-end.

 

April 1, 2017 to June 30, 2017

 

The following table is an allocation by sector as a percentage of net unrealized profit and loss on open positions for the Fund as a whole taking into account the positions at the Affiliated Master Fund level and the allocation to each Master Fund as of June 30, 2017:

 

20



 

June 30 2017

 

Commodity Industry
Sector

 

Net Unrealized
Profit (Loss)
on Open Positions

 

Percent of
Net Unrealized
Profit (Loss)
on Open Positions

 

Agricultural Commodities

 

$

(211,360

)

5.67

%

Energy

 

(521,898

)

14.00

%

Interest Rates

 

(1,523,360

)

40.87

%

Metals

 

105,921

 

(2.84

)%

Stock Indices

 

(1,445,907

)

38.79

%

Currencies - Future

 

(44,022

)

1.18

%

Currencies - Forward

 

(86,763

)

2.33

%

 

 

 

 

 

 

 

Total

 

$

(3,727,389

)

100

%

 

The Fund experienced a net trading loss for the second quarter ended June 30, 2017 of $4,758,288.

 

References herein to the Fund’s trading and portfolio refer to such trading and portfolios through the Master Funds generally.

 

Fixed Income and Commodities were common contributors to the Fund’s negative performance throughout the quarter.

 

Europe dominated the headlines at the start of the quarter.  The Euro rebounded and European equity and debt markets rallied on the performance of Emanuel Macron, in the first round of the French elections, and the Sterling recovered after the call for the snap election by UK’s Prime Minister, Theresa May.  However, attention shifted mid-quarter and proved to be a noteworthy month for western bond markets through quarter-end as markets remained focused on clues from central banks.  Hawkish rhetoric from global central banks only compounded a volatile end to June driving bond yields higher while headline equity indices fell.

 

Equities performed positively at the start of the quarter, with contributions driven largely by long European and US positions, while the UK was a detractor. Mid-quarter, it was long exposure to US, UK and Hong Kong equities that drove the gains in the sector. Despite mixed performance in Equities at quarter-end, the asset class ended down overall.

 

Fixed Income was negative in April, generating losses at the same time as equities rallied, but performed positively in May. Long Canadian, UK and European bonds were among the biggest contributors to the strategy. However, long positions were among the greatest detractors in June, with exposure in Europe, UK, Canada and Australia responsible for the bulk of losses in the asset class.

 

FX began the quarter as the worst performer remained a detractor through quarter-end. Net long USD position hurt the portfolio in May as the US dollar weakened against both developed and emerging market currencies.  By quarter end, the portfolio began building a net short USD position.

 

Commodities were once again a detractor from the portfolio in April.  Energies were responsible for the bulk of the losses in May as managers continued to be whipsawed by the choppy price moves in the sector, making commodities the worst performer that month. Most of the gains made in commodities during June were reversed in the last week. Energies were able to hold on to some of their gains, however, and managed to post positive returns.

 

21



 

In terms of risk, there has been an increase in portfolio risk to the upper range of what we have been noting this year.  Risk in the portfolio is highest in FX, with long EURUSD, short CADUSD, short JPYUSD and long GBPUSD among the top positions in terms of risk allocation.  Equities are the second biggest portion of risk, although long exposure has come down during the month in North America and Europe.  Commodity risk is overall net short with movements within the asset class in terms of positioning — short positions in Energies and Agricultural grains are being reduced while short positions in Precious Metals are being added to. Fixed Income risk is the smallest portion of portfolio risk with net receiver positions slowly being pared back.

 

July 1, 2017 to September 30, 2017

 

The following table is an allocation by sector as a percentage of net unrealized profit and loss on open positions for the Fund as a whole taking into account the positions at the Affiliated Master Fund level and the allocation to each Master Fund as of September 30, 2017:

 

September 30, 2017

 

Commodity Industry
Sector

 

Net Unrealized
Profit (Loss)
on Open Positions

 

Percent of
Net Unrealized
Profit (Loss)
on Open Positions

 

Agricultural Commodities

 

$

54,562

 

(20.27

)%

Energy

 

133,295

 

(49.52

)%

Interest Rates

 

(791,819

)

294.19

%

Metals

 

(382,795

)

142.22

%

Stock Indices

 

1,454,944

 

(540.56

)%

Currencies - Future

 

(161,862

)

60.14

%

Currencies - Forward

 

(575,480

)

213.80

%

 

 

 

 

 

 

Total

 

$

(269,155

)

100

%

 

The Fund experienced a net trading profit for the third quarter ended September 30, 2017 of $1,625,790.

 

Strong corporate earnings and a further weakening of the embattled Trump administration set the tone for the start of the quarter leading to positive returns for both equities and treasuries.  However, mid-quarter was dominated by geopolitical tensions dampening investors’ sentiment despite positive economic data. By quarter end, markets appeared to take central bank tightening rhetoric and action more seriously in as Developed Market government bond yields rose sharply and the U.S. Dollar ended its multi-month downtrend. What’s more, the impact of hurricanes Harvey and Irma were felt on U.S. economic data releases, most notably in a sudden rise in initial jobless claims.

 

Equities were the common contributor to the Fund’s positive performance throughout the quarter, while contributions from Fixed Income and Commodities were mixed.

 

At the start of the quarter, the portfolio benefited from positive performance in Equities driven primarily by a robust earnings season in the US.  Long North American exposure was the biggest contributor to the asset class.  However, gains in US and Asia ex-Japan equities were slightly offset by losses in European and Japanese equities come August. At quarter-end, Equities positive performance was homogeneous across managers.

 

22



 

Fixed Income was a detractor at the start of the quarter, with net long positions across regions generating losses.  However, the sector was the biggest contributor mid-quarter, with managers firmly long bonds across regions and amid a double digit rally in most bond markets. At quarter-end, Fixed Income was the largest detractor with managers now long bonds across regions lead by Gilts, Japan, US Treasuries and Bunds,.

 

FX was a positive contributor in July with a notable increase in the portfolio’s net short USD position during the month, and remained positive, although with less meaningful contributions in terms of portfolio PnL in August. By quarter-end, however, FX detracted from performance driven by long positions in CAD and Sterling.

 

Commodities were the most meaningful detractor to performance at the beginning of the quarter primarily from losses among Agriculturals, Metals and Energies positions. However, at mid-quarter, commodities were a noteworthy contributor. Industrial metals amid a large rally in copper, nickel and aluminum in particular aided performance which then suffered some reversion at quarter-end.  Commodities were the most meaningful detractor in September.

 

The level of portfolio risk has remained flat over the quarter and Equity remains the largest risk factor within the portfolio. At quarter end, FX and Commodity risk increased marginally while interest rate risk declined and is now the smallest contributor of risk.

 

January 1, 2016 to September 30, 2016

 

January 1, 2016 to March 31, 2016

 

The following table is an allocation by sector as a percentage of net unrealized profit and loss on open positions for the Fund as a whole taking into account the positions at the Affiliated Master Fund level and the allocation to each Affiliated Master Fund as of March 31, 2016:

 

March 31, 2016

 

Commodity Industry
Sector

 

Net Unrealized
Profit (Loss)
on Open Positions

 

Percent of
Net Unrealized
Profit (Loss)
on Open Positions

 

Agricultural Commodities

 

$

163,906

 

12.53

%

Currencies - Futures

 

(168,363

)

(12.87

)%

Currencies - Forwards

 

(90,761

)

(6.94

)%

Energy

 

31,676

 

2.42

%

Interest Rates

 

1,030,491

 

78.80

%

Metals

 

(56,054

)

(4.29

)%

Stock Indices

 

396,993

 

30.35

%

 

 

 

 

 

 

 

Total

 

$

1,307,888

 

100

%

 

The Fund experienced a net trading profit for the first quarter ended March 31, 2016 of $6,107,121.

 

Returns were varied over the quarter with positive returns in January and February, while March gave back some earlier gains.

 

23



 

References herein to the Fund’s trading and portfolio refer to such trading and portfolios through the Master Funds generally.

 

The start of the quarter was characterized by an overall risk-off sentiment as the Chinese equity market experienced extreme volatility with heavy sell-offs that hit the circuit breakers twice in a week, coupled with the continued decline in the energy market.  Consequently, this led to raised uncertainty about policy actions from the central banks that remained throughout the quarter.  Mid-quarter, the outlook for 2016 became even more complicated as markets also dealt with the marginal effect of negative rate policy in the Eurozone and Japan. However, Yellen’s speech at the end of March maintained the dovish tone held throughout the quarter, leading the market to revise down the probability of a June rate hike. The portfolio however maintained a positive net-of-fees result year-to-date, despite the backdrop of uncertainty from central bank action.

 

The main contributor to performance at the start of the quarter was the fixed income sector, receiving positions across the developed market rates benefited from the January rally, especially during the final week of the month. Fixed income remained the main contributor to performance through February. However, this sector performed negatively towards the end of the quarter.  The majority of the losses came from long positions in developed market bonds such as UK Gilts despite being offset by long positions in Italian and French government bonds.

 

The commodities sector performed positively in January.  The short position in crude benefited early in the month as the price of oil slid below the $30/bbl mark. However, towards the middle of the quarter, while precious metals detracted from performance, gains were led by shorts in energy and agriculturals making the commodities sector the second best performing asset class in February.  Commodities was the worst performer in March despite most programs scaling back their shorts in the energy sector towards the end of the quarter.

 

The equities sector was the only sector that detracted at the start of the quarter as a result of the market sell-off, and remained down until the end of the quarter. Longs in the U.S. and Japanese major equity indices all suffered from the price drop during the first two weeks of January, and long positions in S&P500 and DAX detracted in February.  In March, the Fund saw positive performance with gains led by longs in the U.S. equity market including S&P500, Nasdaq and Dow Jones.

 

Foreign currencies future and forwards contributed positively at the start of the quarter, but turned negative by the end. Short positions in GBP, CAD and ZAR against USD contributed to performance in the beginning of January.  However, a long JPY against USD position was maintained into February and through March as at the end of the quarter the euro and pound strengthened against the U.S. dollar, further detracting from performance.

 

In terms of positioning at quarter end, the portfolio continued to hold its long delta exposure although there were some notable reductions within the fixed income sector. The portfolio trimmed some of the longs in precious metals in the last week of the quarter and adjusted its overall delta exposure in commodities to almost flat. Regarding equities, the portfolio entered March flat, but swiftly built up a long exposure most significantly in the U.S. as the equities market rallied. Finally, the portfolio notably reversed its net long dollar exposure to net short during the second half of March in the FX sector.

 

24



 

April 1, 2016 to June 30, 2016

 

The following table is an allocation by sector as a percentage of net unrealized profit and loss on open positions for the Fund as a whole taking into account the positions at the underlying Master Fund level and the allocation to each underlying Master Fund as of June 30, 2016:

 

June 30, 2016

 

Commodity Industry
Sector

 

Net Unrealized
Profit (Loss)
on Open Positions

 

Percent of
Net Unrealized
Profit (Loss)
on Open Positions

 

Agricultural Commodities

 

$

638,852

 

8.02

%

Energy

 

(216,631

)

-2.72

%

Interest Rates

 

4,601,288

 

57.78

%

Metals

 

657,175

 

8.25

%

Stock Indices

 

521,248

 

6.54

%

Currencies - Future

 

817,289

 

10.26

%

Currencies - Forward

 

944,926

 

11.86

%

 

 

 

 

 

 

 

Total

 

$

7,964,147

 

100

%

 

The Fund experienced a net trading profit for the second quarter ended September 30, 2016 of $664,987.

 

Returns were negative at the start and through mid-quarter, but rebounded at quarter end to post positive returns.

 

References herein to the Fund’s trading and portfolio refer to such trading and portfolios through the Master Funds generally.

 

The quarter started with economic and financial market conditions being generally firmer, characterized by a further rebound in global stock markets and the commodities sector. The Federal Open Market Committee (FOMC) acknowledged these improving trends, and expectations of a near term Federal Reserve (Fed) rate hike were substantially upgraded in May following the release of the April FOMC minutes.  Come June, however, attention shifted.  A disappointing non-farm payroll report which led to a decline in the US dollar and a rally in bonds across regions was overshadowed later in the month by the referendum on Britain voting to leave the EU.

 

The fixed income sector detracted substantially in April due to the broad sell-off towards month end, but performed well in May given most programs’ long positioning in bonds.  Long bond positions across the US and Europe led the gains in June. The fixed income sector was the best performing asset class throughout the quarter end and contributed most notably post Brexit in the final week of June.

 

The FX sector contributed positively to performance at the start of the quarter, but was the main detractor in May with a meaningful net short position in the dollar.  Overall, USD net exposure in FX was aggressively reversed to long mid-quarter.  In June, the FX sector was the second best performer, benefiting from the currency moves post Brexit.

 

25



 

Commodities detracted from performance with energy, grains, softs and industrial metals performing negatively, although precious metals and livestock mitigated the losses at the start of the quarter. Mid-quarter, positive performance in longs in agricultural markets could not offset the losses from long positions in precious and industrial metals which suffered heavily.  However, this sector contributed positively at the end of the quarter. Precious metals and agriculturals were the top performers while the energy sector detracted.

 

Equities were mixed over the quarter.  The net long equity exposure performed positively through most of April, but could not hold on to the gains as equities market sold off in major developed markets at the end of the month. Despite positive performance in May, the equity sector detracted in June.  This was mainly due to losses related to the post Brexit referendum selloff as the portfolio held a bullish bias to this asset class.

 

In terms of positioning, the portfolio continues to hold a net long bias in fixed income and has increased risk towards quarter end. The increase is mainly driven by topping up long positions in the US bond market. Regarding the FX sector, the portfolio started June net long in USD, but reversed to flat by month end. This was primarily driven by a combination of increasing longs in JPY and reducing shorts in GBP and EUR against USD. In commodities, the portfolio maintained a net long exposure overall and increased its long bias to precious metals and agriculturals. Although the portfolio remained net long equities through June, net exposure has come down due to significant reduction in long US equity futures positions, along with a reversal in positioning in European equities from long to short.

 

July 1, 2016 to September 30, 2016

 

The following table is an allocation by sector as a percentage of net unrealized profit and loss on open positions for the Fund as a whole taking into account the positions at the underlying Master Fund level and the allocation to each underlying Master Fund as of September 30, 2016:

 

September 30, 2016

 

Commodity Industry
Sector

 

Net Unrealized
Profit (Loss)
on Open Positions

 

Percent of
Net Unrealized
Profit (Loss)
on Open Positions

 

Agricultural Commodities

 

$

660,824

 

34.17

%

Energy

 

(265,864

)

-13.75

%

Interest Rates

 

503,170

 

26.02

%

Metals

 

(11,217

)

-0.58

%

Stock Indices

 

727,898

 

37.64

%

Currencies - Future

 

251,710

 

13.01

%

Currencies - Forward

 

67,526

 

3.49

%

 

 

 

 

 

 

 

Total

 

$

1,934,049

 

100

%

 

The Fund experienced a net trading loss for the third quarter ended September 30, 2016 of $4,168,157.

 

26



 

Returns were positive in July, but detracted from end of July through to quarter end.

 

References herein to the Fund’s trading and portfolio refer to such trading and portfolios through the Master Funds generally.

 

The start of the quarter was volatile for currencies, fixed income and commodities.  USD was up with a strong July payrolls report and higher retail sales mid-month, but reversed at the end of July, as the Federal Open Market Committee expressed that “near term risks to the economic outlook have diminished” and the Bank of Japan held rates and marginally increased their ETF purchase program. UK rates continued their post-Brexit march lower, and global bond curves flattened. Mid-quarter was relatively directionless for markets overall as the positive impact of additional QE measures was offset by increased inflation fears. The cumulative impact on markets, in terms of news flow, was relatively muted at quarter end, with central bank activity, fundamental data out of the US, an informal OPEC meeting, the US elections and concerns about the solvency of Deutsche Bank being relevant market drivers at one point or another.

 

The equity sector was the best performing asset class throughout July and exposure was increased. As a result, managers were net long broadly heading into mid-quarter, and gains were partially offset by poor performance in certain regions like Japan. At quarter end, managers accumulated losses against markets which exhibited a fair amount of choppiness.

 

In fixed income, the sector contributed at the start of the quarter, particularly as rates rallied through the final week of July.  Mid-quarter experienced losses that continued through quarter end.

 

Performance in July was mixed and slightly negative overall in the FX sector at the start of the quarter, although FX remained the highest risk allocation in the portfolio. As the US dollar rallied broadly against managers bearish positions, FX ended in negative territory mid-quarter. However, managers ended the month with gains despite carrying a net long US dollar bias against a broad move down in the greenback.

 

At the start of the quarter, the commodities sector was overall positive, with noteworthy positive contribution from energies and precious metals and losses from agriculturals. However, mid quarter the biggest drivers of negative performance were energies and precious metals. Energies also explain the bulk of losses in the commodity sector at quarter end.

 

In terms of positioning, managers continue to hold a net long bias to equites and fixed income. In FX, managers are roughly neutral to the US dollar overall. In commodities, the primary drivers of risk by subsector are precious metals. Net exposure in energy keeps on shifting back and forth on continued market choppiness and with programs having moved (again) from net short to flat by quarter end.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Introduction

 

The Affiliated Funds are speculative commodity pools. The market sensitive instruments held by the Affiliated Funds are acquired for speculative trading purposes and all or substantially all of the Affiliated Funds’ 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 Affiliated Funds’ main line of business.

 

27



 

Market movements result in frequent changes in the fair market value of the Affiliated Funds’ open positions and, consequently, in their earnings and cash flows. The Affiliated Funds’ 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 Affiliated Funds’ open positions and the liquidity of the markets in which they trade.

 

The Affiliated Funds, under the direction of their respective Trading Advisors rapidly acquire and liquidate both long and short positions in a wide range of different markets.  Consequently, it is not possible to predict how a possible future market scenario will affect performance and the Fund’s and the Affiliated Funds’ past performance is not necessarily indicative of future results.

 

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

 

Quantifying the Fund’s Trading Value at Risk

 

Quantitative Forward Looking Statements

 

The following quantitative disclosures regarding the Fund’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933 (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (“Securities 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 Fund’s risk exposure in the various market sectors traded by the Affiliated Funds is quantified below in terms of VaR. Due to the Affiliated Funds’ fair value accounting, any loss in the fair value of the Affiliated Funds’ open positions is directly reflected in the Affiliated Funds’ earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).

 

VaR was calculated for each Affiliated Fund by first calculating VaR with respect to each Master Fund and adjusting based on the Affiliated Fund’s pro-rata ownership of the Master Fund.  VaR of the Master Funds is based on a one day 99% Monte Carlo model VaR utilizing 1,000 simulations.  The sector breakdown of VaR for each Master Fund is based on an incremental VaR calculated for each position that is aggregated across each of the sectors presented below.

 

There are various ways of calculating VaR, and each methodology will not yield the same result.  Differences between VaR methodologies could be material as the underlying assumptions will vary.

 

28



 

The Affiliated Funds’ Trading Value at Risk in Different Market Sectors

 

The following information with respect to VaR is set forth in respect of the Affiliated Funds separately, rather than for the Fund.

 

The following tables indicate the average, highest, and lowest trading VaR associated with the Affiliated Funds’ open positions by market category for the nine month periods ended September 30, 2017 and September 30, 2016. (For initial Affiliated Fund investments made during the period, VaR is calculated starting from the commencement of the holding.)

 

Blakeney (1)

 

 

 

September 30, 2017

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

13,484

 

0.12

%

$

36,343

 

$

750

 

Energy

 

5,749

 

0.05

%

25,657

 

90

 

Interest Rates

 

25,646

 

0.23

%

66,604

 

5,974

 

Metals

 

12,022

 

0.11

%

39,142

 

1,503

 

Stock Indices

 

122,900

 

1.10

%

206,630

 

83,600

 

Currencies

 

54,807

 

0.49

%

118,516

 

13,318

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

234,609

 

2.10

%

$

492,893

 

$

105,234

 

 


(1)   Average capitalization of Blakeney is $11,173,232.

 

Campbell (2)

 

 

 

September 30, 2017

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

30,299

 

0.35

%

$

114,380

 

$

672

 

Energy

 

20,716

 

0.24

%

79,672

 

5,255

 

Interest Rates

 

33,883

 

0.39

%

98,397

 

160

 

Metals

 

25,567

 

0.29

%

75,736

 

5,127

 

Stock Indices

 

122,752

 

1.41

%

243,353

 

26,196

 

Currencies

 

60,022

 

0.69

%

115,623

 

5,520

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

293,240

 

3.37

%

$

727,161

 

$

42,930

 

 


(2)   Average capitalization of Campbell is $8,695,825.

 

Century CAT (3)

 

 

 

September 30, 2017

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

2,167

 

0.02

%

$

7,700

 

$

123

 

Energy

 

9,632

 

0.08

%

49,503

 

333

 

Interest Rates

 

44,162

 

0.38

%

91,353

 

12,275

 

Metals

 

5,729

 

0.05

%

19,145

 

233

 

Stock Indices

 

139,523

 

1.19

%

245,707

 

67,297

 

Currencies

 

106,640

 

0.91

%

175,364

 

48,238

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

307,854

 

2.62

%

$

588,773

 

$

128,499

 

 


(3)   Average capitalization of Century CAT is $11,747,965.

 

29



 

CCP Core Macro (4)

 

 

 

September 30, 2017 *

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

7,278

 

0.06

%

$

17,577

 

$

333

 

Energy

 

6,826

 

0.06

%

24,111

 

542

 

Interest Rates

 

62,693

 

0.56

%

171,166

 

12,625

 

Metals

 

21,787

 

0.19

%

40,992

 

5,725

 

Stock Indices

 

147,916

 

1.32

%

241,109

 

82,797

 

Currencies

 

17,419

 

0.16

%

40,964

 

2,428

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

263,919

 

2.35

%

$

535,919

 

$

104,450

 

 


(4)   Average capitalization of CCP Core Macro is $11,211,392.

* CCP Core Macro redeemed July 14, 2017.

 

Quantica MF (5)

 

 

 

September 30, 2017

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

6,564

 

0.07

%

$

23,461

 

$

252

 

Energy

 

8,408

 

0.09

%

26,422

 

1,093

 

Interest Rates

 

32,618

 

0.34

%

87,023

 

5,261

 

Metals

 

12,729

 

0.13

%

49,683

 

289

 

Stock Indices

 

189,583

 

1.98

%

242,685

 

89,065

 

Currencies

 

40,025

 

0.42

%

92,093

 

240

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

289,926

 

3.03

%

$

521,368

 

$

96,201

 

 


(5)   Average capitalization of Quantica MF is $9,564,026.

 

Silver (6)

 

 

 

September 30, 2017

 

 

 

Average
Value at Risk

 

% of Average
Capitalization

 

Highest Value
at Risk

 

Lowest Value
at Risk

 

Agricultural Commodities

 

$

17,903

 

0.21

%

$

74,673

 

$

3,497

 

Energy

 

26,579

 

0.32

%

98,934

 

303

 

Interest Rates

 

37,265

 

0.44

%

133,683

 

5,995

 

Metals

 

23,790

 

0.28

%

69,392

 

155

 

Stock Indices

 

149,959

 

1.78

%

216,021

 

70,051

 

Currencies

 

70,553

 

0.84

%

127,579

 

24,098

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

326,050

 

3.87

%

$

720,283

 

$

104,100

 

 


(6)   Average capitalization of Silver is $8,426,100.

 

Blakeney (1)

 

 

 

September 30, 2016

 

 

 

Average
Value at Risk

 

% of Average
Capitalization

 

Highest Value
at Risk

 

Lowest Value
at Risk

 

Agricultural Commodities

 

$

13,682

 

0.07

%

$

22,374

 

$

18

 

Energy

 

57,852

 

0.30

%

174,690

 

15,045

 

Interest Rates

 

267,940

 

1.38

%

528,998

 

143,201

 

Metals

 

41,504

 

0.21

%

87,266

 

13,585

 

Stock Indices

 

64,677

 

0.33

%

166,220

 

2,307

 

Currencies

 

122,203

 

0.63

%

322,947

 

55,215

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

567,858

 

2.92

%

$

1,302,495

 

$

229,371

 

 


(1)   Average capitalization of Blakeney is $19,347,237.

 

30



 

Campbell (2)

 

 

 

September 30, 2016

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

54,967

 

0.29

%

$

115,750

 

$

32,018

 

Energy

 

65,026

 

0.34

%

188,541

 

2,733

 

Interest Rates

 

205,420

 

1.07

%

347,156

 

73,183

 

Metals

 

40,250

 

0.21

%

94,474

 

1,835

 

Stock Indices

 

139,973

 

0.73

%

274,580

 

36,105

 

Currencies

 

90,973

 

0.47

%

263,978

 

18,349

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

596,609

 

3.11

%

$

1,284,479

 

$

164,223

 

 


(2)   Average capitalization of Campbell is $19,259,560.

 

Carlisle (3)

 

 

 

September 30 , 2016 *

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

18,096

 

0.22

%

$

31,053

 

$

7,164

 

Energy

 

63,630

 

0.77

%

125,640

 

3,230

 

Interest Rates

 

151,620

 

1.83

%

208,645

 

46,770

 

Metals

 

10,213

 

0.12

%

16,960

 

5,644

 

Stock Indices

 

23,933

 

0.29

%

38,709

 

6,331

 

Currencies

 

30,214

 

0.36

%

45,151

 

6,609

 

Other

 

18,984

 

0.23

%

28,014

 

7,676

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

316,690

 

3.82

%

$

494,172

 

$

83,424

 

 


(3)   Average capitalization of Carlisle is $8,306,779.

* Carlisle redeemed April 2016.

 

Century CAT (4)

 

 

 

September 30, 2016 *

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

6,737

 

0.04

%

$

9,692

 

$

737

 

Energy

 

22,528

 

0.14

%

87,315

 

1,864

 

Interest Rates

 

201,487

 

1.21

%

330,627

 

114,137

 

Metals

 

7,020

 

0.04

%

10,232

 

1,478

 

Stock Indices

 

59,480

 

0.36

%

129,586

 

4,124

 

Currencies

 

123,908

 

0.74

%

239,550

 

14,295

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

421,161

 

2.53

%

$

807,002

 

$

136,634

 

 


(4)   Average capitalization of Century CAT is $16,671,070.

* Century CAT commenced March 2016.

 

CCPCore Macro (5)

 

 

 

September 30, 2016

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

13,658

 

0.12

%

$

50,815

 

$

176

 

Energy

 

52,761

 

0.47

%

131,014

 

1,352

 

Interest Rates

 

170,896

 

1.51

%

337,476

 

58,968

 

Metals

 

10,122

 

0.09

%

21,136

 

112

 

Stock Indices

 

51,738

 

0.46

%

117,811

 

508

 

Currencies

 

44,168

 

0.39

%

132,030

 

4,027

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

343,343

 

3.04

%

$

790,282

 

$

65,143

 

 


(5)   Average capitalization of CCP Core Macro is $11,322,688

 

31



 

Quantica MF (6)

 

 

 

September 30, 2016

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

20,973

 

0.17

%

$

37,803

 

$

7,614

 

Energy

 

49,608

 

0.40

%

305,453

 

546

 

Interest Rates

 

225,001

 

1.83

%

529,812

 

66,618

 

Metals

 

59,083

 

0.48

%

105,016

 

32,662

 

Stock Indices

 

48,548

 

0.40

%

121,227

 

1,658

 

Currencies

 

27,697

 

0.23

%

107,484

 

4,963

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

430,909

 

3.51

%

$

1,206,795

 

$

114,061

 

 


(6)   Average capitalization of Quantica MF is $12,282,950.

 

Silver (7)

 

 

 

September 30, 2016

 

 

 

Average

 

% of Average

 

Highest Value

 

Lowest Value

 

 

 

Value at Risk

 

Capitalization

 

at Risk

 

at Risk

 

Agricultural Commodities

 

$

23,279

 

0.19

%

$

43,009

 

$

4,959

 

Energy

 

74,795

 

0.61

%

280,212

 

13,808

 

Interest Rates

 

164,098

 

1.33

%

489,756

 

4,719

 

Metals

 

57,812

 

0.47

%

110,685

 

16,980

 

Stock Indices

 

105,780

 

0.86

%

237,984

 

7,696

 

Currencies

 

107,676

 

0.88

%

187,779

 

31,931

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

533,440

 

4.34

%

$

1,349,425

 

$

80,093

 

 


(7)   Average capitalization of Silver is $12,302,444.

 

Material Limitations on Value at Risk as an Assessment of Market Risk

 

The face value of the market sector instruments held by the Fund and the Affiliated Funds are typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Fund and the Affiliated Funds.  The magnitude of the Fund’s and the Affiliated Funds’ open positions creates a “risk of ruin” not typically found in most other investment vehicles.  Because of the size of their positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Fund and the Affiliated Funds to incur severe losses over a short period of time.  The foregoing VaR table — as well as the past performance of the Fund and the Affiliated Funds — gives no indication of this “risk of ruin.”

 

Non-Trading Risk

 

The Affiliated Funds have non-trading market risk on foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are generally immaterial.

 

These Affiliated Funds also have non-trading market risk on their assets which are held in cash at the clearing broker. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding the Fund’s market risk exposures through the Affiliated Funds after the change in structure — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Fund manages its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Fund’s primary market risk exposures as well as the strategies used and

 

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to be used by FRM and the Trading Advisors of the Affiliated Funds for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the risk controls for the Fund and for the trading conducted through Affiliated Funds to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund’s risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of the value of their investment in the Fund.

 

Qualitative Disclosures Regarding Means of Managing Risk Exposure

 

Each Affiliated Fund (inclusive of its related Master Fund) and its Trading Advisor are monitored by FRM’s investment team.  This coverage is intended to ensure that each Affiliated Fund and its Trading Advisor are monitored by individuals who have an in-depth understanding of the Affiliated Fund and its Trading Advisor, as well as knowledge of the market environment affecting that particular strategy.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

FRM’s President and Principal Financial Officer, on behalf of the Fund, have evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act) with respect to the Fund as of the end of the quarter which ended September 30, 2017, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective.

 

Changes in Internal Control over Financial Reporting

 

No change in internal control over financial reporting (in connection with Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act) occurred during the quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

Item 1.           Legal Proceedings

 

None.

 

Item 1A.        Risk Factors

 

There are no material changes from risk factors as previously disclosed in the Fund’s report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 30, 2017.

 

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

 

(b)   Not applicable.

(c)   Not applicable

(d)   Not applicable.

 

Item 3.           Defaults Upon Senior Securities

 

None.

 

Item 4.           Mine Safety Disclosures

 

Not applicable.

 

Item 5.           Other Information

 

None.

 

Item 6.           Exhibits

 

31.01 and

31.02                  Rule 13a-14(a)/15d-14(a) Certifications

 

Exhibit 31.01

and 31.02:        Are filed herewith.

 

32.01 and

32.02                  Section 1350 Certifications

 

Exhibit 32.01

and 32.02          Are filed herewith.

 

Exhibit 101       Are filed herewith.

 

The following materials from the Fund’s quarterly Report on Form 10-Q for the three and nine month period ended September 30, 2017 formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Financial Condition (ii) Statements of Operations (iii) Statements of Changes in Members’ Capital (iv) Financial Data Highlights and (v) Notes to Financial Statements, tagged as blocks of text.

 

34



 

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.

 

 

 

MAN FRM MANAGED FUTURES STRATEGIES LLC

 

 

 

 

 

 

By:

FRM INVESTMENT

 

 

MANAGEMENT (USA) LLC

 

 

(Manager)

 

 

 

 

 

Date: November 9, 2017

By:

/s/ Michelle McCloskey

 

 

Michelle McCloskey

 

 

President

 

 

(Principal Executive Officer)

 

 

 

 

 

Date: November 9, 2017

By:

/s/ Linzie Steinbach

 

 

Linzie Steinbach

 

 

Principal Financial Officer

 

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