UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

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

 

For the Quarterly Period Ended: March 31, 2020

 

Or

 

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

 

Commission File Number: 000-54028

 

MILLBURN MULTI-MARKETS FUND L.P.

(Exact name of registrant as specified in its charter)

 

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

 

c/o MILLBURN RIDGEFIELD CORPORATION

55 West 46^th Street, 31^st Floor

New York, NY 10036

(Address of principal executive offices) (Zip Code)

 

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

 

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

 

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

 

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

Yes ☒     No ☐

 

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

Yes ☒     No ☐

 

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

 

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

 

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

Yes ☐     No ☐

 

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

Yes ☐     No ☒

 

 

PART I. FINANANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Millburn Multi-Markets Fund L.P.

Financial statements

For the three months ended March 31, 2020 and 2019 (unaudited)     

 

Statements of Financial Condition (a)		2
Statements of Operations (b)		3
Statements of Changes in Partners’ Capital (b)		4
Statements of Financial Highlights (b)		5
Notes to Financial Statements		7

 

(a) At March 31, 2020 (unaudited) and December 31, 2019

 

(b) For the three months ended March 31, 2020 and 2019 (unaudited)

 

 

Millburn Multi-Markets Fund L.P.

Statements of Financial Condition

 

		March 31, 2020 (unaudited)				December 31, 2019
ASSETS
Investment in Millburn Multi-Markets
Trading L.P. (the “Master Fund”)		$	161,206,850			$	191,189,357
Due from the Master Fund			503,669				736,814
Cash and cash equivalents			6,003,956				2,864,000
Total assets		$	167,714,475			$	194,790,171
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Capital contributions received in advance		$	1,500,000			$	2,864,000
Capital withdrawal payable to Limited Partners			503,669				736,814
Due to the Master Fund			4,503,956				-
Total liabilities			6,507,625				3,600,814
PARTNERS’ CAPITAL:
General Partner			2,517,590				3,122,595
Limited partners:
Series A (132,193.6465 and 132,149.4067 units outstanding)			133,329,455				166,972,241
Series B (7,006.8146 and 7,006.4813 units outstanding)			8,298,190				10,343,480
Series C (3,314.8321 and 3,207.8856 units outstanding)			4,005,422				4,831,807
Series D (11,382.5859 and 4,132.1394 units outstanding)			13,056,193				5,919,234
Total limited partners			158,689,260				188,066,762
Total partners’ capital			161,206,850				191,189,357
TOTAL		$	167,714,475			$	194,790,171
NET ASSET VALUE PER UNIT OUTSTANDING:
Series A		$	1,008.59			$	1,263.51
Series B		$	1,184.30			$	1,476.27
Series C		$	1,208.33			$	1,506.23
Series D		$	1,147.03			$	1,432.49

 

See notes to financial statements (Unaudited)

 

  

Millburn Multi-Markets Fund L.P.

Statements of Operations (UNAUDITED)

 

		For the three months ended
		March 31, 2020				March 31, 2019
INVESTMENT INCOME:
Interest income (allocated from the Master Fund)		$	745,458			$	918,633
EXPENSES:
Management fees			881,272				798,354
Brokerage commissions (allocated from the Master Fund)			239,309				176,250
Selling commissions and platform fees			777,504				731,049
Administrative and operating expenses			148,671				147,232
Custody fees and other expenses (allocated from the Master Fund)			7,360				7,138
Total expenses			2,054,116				1,860,023
NET INVESTMENT LOSS			(1,308,658	)			(941,390	)
REALIZED AND UNREALIZED GAINS (LOSSES)
ALLOCATED FROM THE MASTER FUND
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			(45,545,809	)			8,979,045
Foreign exchange transactions			(212,434	)			(49,941	)
Net change in unrealized:
Futures and forward currency contracts			6,370,887				(4,241,887	)
Foreign exchange translation			(192,068	)			(43,991	)
Net gains (losses) from U.S. Treasury notes:
Realized			144,597				(926	)
Net change in unrealized			619,570				125,538
Net realized and unrealized gains (losses) allocated from the Master Fund			(38,815,257	)			4,767,838
NET INCOME (LOSS)			(40,123,915	)			3,826,448
LESS PROFIT SHARE ALLOCATION			-				751,170
FROM THE MASTER FUND
NET INCOME (LOSS) AFTER PROFIT SHARE		$	(40,123,915	)		$	3,075,278
NET INCOME (LOSS) PER UNIT OUTSTANDING:
Series A		$	(254.92	)		$	21.96
Series B		$	(291.97	)		$	30.73
Series C		$	(297.90	)		$	31.36
Series D		$	(285.46	)		$	27.08

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Fund L.P.

Statements of Changes in Partners’ Capital (UNAUDITED)

For the three months ended March 31, 2020 and 2019

 

		General				Limited Partners
		Partner				Series A								Series B								Series C								Series D								Total
		Amount				Amount				Units				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS’ CAPITAL — January 1, 2020		$	3,122,595			$	166,972,241				132,149.4067			$	10,343,480				7,006.4813			$	4,831,807				3,207.8856			$	5,919,234				4,132.1394			$	191,189,357
Capital contributions			-				2,241,400				1,775.4044				50,000				36.3723				150,000				106.9465				9,769,000				7,250.4465				12,210,400
Capital withdrawals			-				(2,019,450	)			(1,731.1646	)			(49,542	)			(36.0390	)			-				-				-				-				(2,068,992	)
Net (loss) before profit share			(605,005	)			(33,864,736	)			-				(2,045,748	)			-				(976,385	)			-				(2,632,041	)			-				(40,123,915	)
Profit share			-				-				-				-				-				-				-				-				-				-
PARTNERS’ CAPITAL — March 31, 2020		$	2,517,590			$	133,329,455				132,193.6465			$	8,298,190				7,006.8146			$	4,005,422				3,314.8321			$	13,056,193				11,382.5859			$	161,206,850
Net Asset Value per Unit at March 31, 2020										$	1,008.59							$	1,184.30							$	1,208.33							$	1,147.03

 

		General				Limited Partners
		Partner				Series A								Series B								Series C								Series D								Total
		Amount				Amount				Units				Amount				Units				Amount				Units				Amount				Units				Amount
PARTNERS’ CAPITAL — January 1, 2019		$	2,788,913			$	144,621,713				121,399.2481			$	9,305,965				6,794.4628			$	2,008,278				1,437.1195			$	794,737				593.8529			$	159,519,606
Capital contributions			-				2,460,000				2,067.5090				305,000				226.0810				165,000				118.4490				1,411,500				1,060.9890				4,341,500
Capital withdrawals			-				(2,201,119	)			(1,857.6873	)			-				-				(162,222	)			(114.9243	)			-				-				(2,363,341	)
Net income (loss) before profit share			92,919				3,332,147				-				275,417				-				59,455				-				66,510				-				3,826,448
Profit share							(670,734	)							(55,002	)							(12,132	)							(13,302	)							(751,170	)
PARTNERS’ CAPITAL — March 31, 2019		$	2,881,832			$	147,542,007				121,609.0698			$	9,831,380				7,020.5438			$	2,058,379				1,440.6442			$	2,259,445				1,654.8419			$	164,573,043
Net Asset Value per Unit at March 31, 2019										$	1,213.25							$	1,400.37							$	1,428.79							$	1,365.35

 

See notes to financial statements (Unaudited) 

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended March 31, 2020

 

The following information presents per unit operating performance data for each series for the three months ended March 31, 2020.

  

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C				Series D
NET ASSET VALUE PER UNIT — Beginning of period		$	1,263.51			$	1,476.27			$	1,506.23			$	1,432.49
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(9.22	)			(4.10	)			(4.18	)			(6.21	)
Total trading and investing losses (1)			(245.70	)			(287.87	)			(293.72	)			(279.25	)
Net loss before profit share allocation from Master Fund			(254.92	)			(291.97	)			(297.90	)			(285.46	)
Less: profit share allocation from Master Fund (1) (6)			0.00				0.00				0.00				0.00
Net loss from operations after profit share allocation from Master Fund			(254.92	)			(291.97	)			(297.90	)			(285.46	)
NET ASSET VALUE PER UNIT — End of period		$	1,008.59			$	1,184.30			$	1,208.33			$	1,147.03
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			(20.18	)%			(19.78	)%			(19.78	)%			(19.93	)%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			0.00				0.00				0.00				0.00
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			(20.18	)%			(19.78	)%			(19.78	)%			(19.93	)%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.88	%			2.89	%			2.89	%			3.63	%
Profit share allocation from Master Fund (2) (6)			0.00				0.00				0.00				0.00
Total expenses			4.88	%			2.89	%			2.89	%			3.63	%
Net investment loss (3) (4) (5)			(3.21	)%			(1.22	)%			(1.22	)%			(1.99	)%

 

(1)

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

(2)

Not Annualized.

(3)

Annualized.

(4)

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

(5)

Excludes profit share allocation from the Master Fund.

(6)

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

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Fund L.P.

Statement of Financial Highlights (UNAUDITED)

For the three months ended March 31, 2019

 

The following information presents per unit operating performance data for each series for the three months ended March 31, 2019.

  

Per Unit Performance
(For a Unit Outstanding Throughout the Period)		Series A				Series B				Series C				Series D
NET ASSET VALUE PER UNIT — Beginning of period		$	1,191.29			$	1,369.64			$	1,397.43			$	1,338.27
INCOME (LOSS) ALLOCATED FROM MASTER FUND:
Net investment loss (1)			(7.59	)			(1.90	)			(1.93	)			(4.32	)
Total trading and investing gains (1)			35.03				40.55				41.64				41.77
Net income before profit share allocation from Master Fund			27.44				38.65				39.71				37.45
Less: profit share allocation from Master Fund (1) (6)			5.48				7.92				8.35				10.37
Net income from operations after profit share allocation from Master Fund			21.96				30.73				31.36				27.08
NET ASSET VALUE PER UNIT — End of period		$	1,213.25			$	1,400.37			$	1,428.79			$	1,365.35
TOTAL RETURN BEFORE PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			2.30	%			2.82	%			2.84	%			2.79	%
LESS: PROFIT SHARE ALLOCATION FROM MASTER FUND (2) (6)			0.46				0.58				0.60				0.77
TOTAL RETURN AFTER PROFIT SHARE ALLOCATION FROM MASTER FUND (2)			1.84	%			2.24	%			2.24	%			2.02	%
RATIOS TO AVERAGE NET ASSET VALUE:
Expenses (3) (4) (5)			4.83	%			2.82	%			2.82	%			3.57	%
Profit share allocation from Master Fund (2) (6)			0.46				0.58				0.60				0.77
Total expenses			5.29	%			3.40	%			3.42	%			4.34	%
Net investment loss (3) (4) (5)			(2.55	)%			(0.55	)%			(0.55	)%			(1.29	)%

 

(1)

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

(2)

Not Annualized.

(3)

Annualized.

(4)

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

(5)

Excludes profit share allocation from the Master Fund.

(6)

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

  

See notes to financial statements (Unaudited)

 

 

NOTES TO FINANCIAL STATEMENTS

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The Partnership invests substantially all of its assets in Millburn Multi-Markets Trading L.P. (the “Master Fund”). The Partnership’s ownership percentage of the Master Fund at March 31, 2020 and December 31, 2019 was 24.51% and 30.30%, respectively, of total partners’ capital of the Master Fund. See the attached financial statements of the Master Fund.

 

3. RELATED PARTY TRANSACTIONS

 

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

 

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

 

4. FINANCIAL HIGHLIGHTS

 

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

 

		Three months ended March 31,
		2020				2019
Series A			133,232.657				122,451.423
Series B			7,006.601				6,942.677
Series C			3,244.280				1,453.078
Series D			7,109.045				1,282.519

 

5. SUBSEQUENT EVENTS

 

During the period from April 1, 2020 to May 14, 2020, contributions of $1,600,000 were made to the Partnership. The General Partner has performed its evaluation of subsequent events through May 14, 2020, the date the Form 10-Q was filed. Based on such evaluation, no further events were discovered that required disclosure or adjustment to the financial statements.

 

 

Millburn Multi-Markets Trading L.P.

Financial statements

For the three months ended March 31, 2020 and 2019 (unaudited)

 

Statements of Financial Condition (a)		9
Condensed Schedules of Investments (a)		10
Statements of Operations (b)		14
Statements of Changes in Partners’ Capital (b)		15
Statements of Financial Highlights (b)		16
Notes to Financial Statements		18

 

(a) At March 31, 2020 (unaudited) and December 31, 2019

 

(b) For the three months ended March 31, 2020 and 2019 (unaudited)

  

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Condition

 

		March 31, 2020 (unaudited)				December 31, 2019
ASSETS
EQUITY IN TRADING ACCOUNTS:
Investments in U.S. Treasury notes — at fair value (amortized cost $55,698,235 and $99,692,940)		$	56,099,798			$	99,835,520
Net unrealized appreciation on open futures and forward currency contracts			26,231,612				5,430,488
Due from brokers, net			29,116,133				20,430,870
Cash denominated in foreign currencies (cost $24,842,782 and $31,152,549)			24,418,925				31,566,671
Total equity in trading accounts			135,866,468				157,263,549
INVESTMENTS IN U.S. TREASURY NOTES — at fair value (amortized cost $500,084,382 and $440,349,793)			502,809,141				440,688,034
CASH AND CASH EQUIVALENTS			48,716,090				53,997,893
ACCRUED INTEREST RECEIVABLE			2,618,220				2,333,434
DUE FROM MILLBURN MULTI-MARKETS LTD.			1,001,436				100
DUE FROM MILLBURN MULTI-MARKETS FUND L.P.			4,503,956				-
TOTAL		$	695,515,311			$	654,283,010
LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Net unrealized depreciation on open futures and forward currency contracts		$	1,632,944			$	5,818,429
Cash overdrafts denominated in foreign currencies (cost $3,009,222 and $0)			2,936,930				-
Subscriptions received in advance			2,800,000				1,565,000
Capital withdrawal payable to Limited Partners			22,486,790				736,814
Capital withdrawal payable to General Partner			-				9,224,590
Management fee payable			759,968				798,199
Selling commissions payable			233,135				283,920
Accrued expenses			576,024				254,637
Due to brokers, net			6,347,829				4,479,776
Commissions and other trading fees on open futures contracts			44,266				119,320
Total liabilities			37,817,886				23,280,685
PARTNERS’ CAPITAL			657,697,425				631,002,325
TOTAL		$	695,515,311			$	654,283,010

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments (UNAUDITED)

March 31, 2020

 

		Net Unrealized
		Appreciation
		(Depreciation)				Net
		as a % of Partners’				Unrealized Appreciation
FUTURES AND FORWARD CURRENCY CONTRACTS		Capital				(Depreciation)
FUTURES CONTRACTS
Long futures contracts:
Grains			0.07	%		$	437,963
Interest rates:
2 Year U.S. Treasury Note (1,390 contracts, settlement date  June 2020)			0.07				439,054
5 Year U.S. Treasury Note (952 contracts, settlement date June 2020)			0.06				406,976
Other interest rates			0.45				2,940,770
Total interest rates			0.58				3,786,800
Livestock			0.00				23,380
Metals			(1.35	)			(8,816,783	)
Softs			(0.00	)			(4,219	)
Stock indices			0.25				1,613,203
Total long futures contracts			(0.45	)			(2,959,656	)
Short futures contracts:
Energies			0.82				5,404,745
Grains			(0.01	)			(77,445	)
Metals			1.68				11,037,148
Softs			0.07				449,712
Stock indices			0.04				273,716
Total short futures contracts			2.60				17,087,876
TOTAL INVESTMENTS IN FUTURES CONTRACTS — Net			2.15				14,128,220
FORWARD CURRENCY CONTRACTS
Total long forward currency contracts			(2.74	)			(18,016,314	)
Total short forward currency contracts			4.33				28,486,762
TOTAL INVESTMENTS IN FORWARD CURRENCY CONTRACTS — Net			1.59				10,470,448
TOTAL			3.74	%		$	24,598,668

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments (UNAUDITED)

March 31, 2020

 

U.S. TREASURY NOTES

 

Face Amount				Description		Fair Value as a % of Partners’ Capital				Fair Value
$	177,440,000			U.S. Treasury notes, 1.500%, 05/15/2020			27.03	%		$	177,779,631
	188,640,000			U.S. Treasury notes, 1.500%, 08/15/2020			28.84				189,656,888
	189,540,000			U.S. Treasury notes, 1.750%, 11/15/2020			29.11				191,472,420
				Total investments in U.S. Treasury notes (amortized cost $555,782,617)			84.98	%		$	558,908,939

 

See notes to financial statements (Unaudited)

(Concluded)

  

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2019

 

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

 

(Continued)

 

 

Millburn Multi-Markets Trading L.P.

Condensed Schedule of Investments

December 31, 2019

  

U.S. TREASURY NOTES

 

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

 

See notes to financial statements (Unaudited)

(Concluded)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Operations (UNAUDITED)

  

		For the three months ended
		March 31				March 31
		2020				2019
INVESTMENT INCOME — Interest income		$	3,067,116			$	2,757,758
EXPENSES:
Brokerage fees			981,763				525,022
Management fees			2,509,260				1,809,709
Selling commissions and platform fees			781,193				733,771
Administrative and operating expenses			321,384				273,464
Custody fees and other expenses			31,902				21,069
Total expenses			4,625,502				3,363,035
NET INVESTMENT LOSS			(1,558,386	)			(605,277	)
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gains (losses) on closed positions:
Futures and forward currency contracts			(191,462,689	)			26,990,818
Foreign exchange transactions			(891,983	)			(151,645	)
Net change in unrealized:
Futures and forward currency contracts			24,986,609				(12,561,508	)
Foreign exchange translation			(765,687	)			(133,288	)
Net gains (losses) from U.S. Treasury notes
Realized			609,616				(2,728	)
Net change in unrealized			2,645,501				375,903
Total net realized and unrealized gains (losses)			(164,878,633	)			14,517,552
NET INCOME (LOSS)			(166,437,019	)			13,912,275
LESS PROFIT SHARE TO GENERAL PARTNER			-				2,325,569
NET INCOME (LOSS) AFTER PROFIT SHARE TO GENERAL PARTNER		$	(166,437,019	)		$	11,586,706

 

See notes to financial statements (Unaudited)

  

 

Millburn Multi-Markets Trading L.P.

Statements of Changes in Partners’ Capital (UNAUDITED)

  

For the three months ended March 31, 2020

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS’ CAPITAL - January 1, 2020		$	629,952,934			$	-			$	1,049,391			$	631,002,325
Contributions			221,314,400				-				-				221,314,400
Withdrawals			(28,182,281	)			-				-				(28,182,281	)
Net loss before profit share			(166,234,154	)			-				(202,865	)			(166,437,019	)
General Partner’s allocation - profit share			-				-				-				-
PARTNERS’ CAPITAL- March 31, 2020		$	656,850,899			$	-			$	846,526			$	657,697,425

 

For the three months ended March 31, 2019

		Limited Partners				New Profit Memo Account				General Partner				Total
PARTNERS’ CAPITAL - January 1, 2019		$	473,885,200			$	-			$	939,174			$	474,824,374
Contributions			75,725,082				-				-				75,725,082
Withdrawals			(62,075,549	)			-				-				(62,075,549	)
Net income before profit share			13,880,401				-				31,874				13,912,275
General Partner’s allocation - profit share			(2,325,569	)			-				-				(2,325,569	)
PARTNERS’ CAPITAL- March 31, 2019		$	499,089,565			$	-			$	971,048			$	500,060,613

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Highlights (UNAUDITED)

 

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

 

		For the three months ended
		March 31,				March 31,
		2020				2019
Total return before General Partner profit share allocation (3)			(19.73	)%			2.87	%
Less: General Partner profit share allocation (3)			-				0.57
Total return after General Partner profit share allocation (3)			(19.73	)%			2.30	%
Ratios to average net asset value:
Expenses (1) (4)			2.68	%			2.56	%
General Partner profit share allocation (3)			-				0.57
Total expenses (1)			2.68	%			3.13	%
Net investment loss (1) (2) (4)			(1.00	)%			(0.28	)%

 

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

 

(1)

Includes the Master Fund’s proportionate share of expenses allocated from the Master Fund’s operations for the three months ended March 31, 2020 and 2019.

(2)

Excludes General Partner profit share allocation and includes interest income.

(3)

Not Annualized.

(4)

Annualized.

 

See notes to financial statements (Unaudited)

 

 

Millburn Multi-Markets Trading L.P.

Statements of Financial Highlights (UNAUDITED)

 

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

 

		For the three months ended
		March 31,				March 31,
		2020				2019
Total return before General Partner profit share allocation (3)			(19.71	)%			2.82	%
Less: General Partner profit share allocation (3)			-				0.48
Total return after General Partner profit share allocation (3)			(19.71	)%			2.34	%
Ratios to average net asset value:
Expenses (1) (4)			2.56	%			2.80	%
General Partner profit share allocation (3)			-				0.48
Total expenses (1)			2.56	%			3.28	%
Net investment loss (1) (2) (4)			(0.84	)%			(0.52	)%

 

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

 

(1)

Includes the Master Fund's proportionate share of expenses allocated from the Master Fund's operations for the three months ended March 31, 2020 and 2019.

(2)

Excludes General Partner profit share allocation and includes interest income.

(3)

Not Annualized.

(4)

Annualized.

 

See notes to financial statements (Unaudited)

 

  

NOTES TO FINANCIAL STATEMENTS

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

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

 

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

 

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

 

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

 

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

 

The Partnership is for U.S. GAAP purposes an investment company in accordance with FASB Codification 946 Financial Services – Investment Companies.

 

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

 

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

 

		March 31,				December 31,
		2020				2019
Partnership			24.51	%			30.30	%
Cayman Feeder			68.92	%			60.29	%
Total			93.43	%			90.59	%

 

The capital withdrawals payable at March 31, 2020 and December 31, 2019 were $22,486,790 and $9,961,404, respectively, as detailed below.

 

		March 31,				December 31,
		2020				2019
Direct investors (1)		$	10,329,337			$	9,224,590
Partnership			503,669				736,814
Cayman Feeder			11,653,784				-
Total		$	22,486,790			$	9,961,404

 

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

 

 

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

 

3. FAIR VALUE

 

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

 

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

 

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

indirectly; and

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Financial assets and liabilities at fair value as of March 31, 2020

 

		Level 1				Level 2				Total
U.S. Treasury notes (1)		$	558,908,939			$	-			$	558,908,939
Short-Term Money Market Fund*			48,466,090				-				48,466,090
Exchange-traded futures contracts
Energies			5,404,745				-				5,404,745
Grains			360,518				-				360,518
Interest rates			3,786,800				-				3,786,800
Livestock			23,380				-				23,380
Metals			2,220,365				-				2,220,365
Softs			445,493				-				445,493
Stock indices			1,886,919				-				1,886,919
Total exchange-traded futures contracts			14,128,220				-				14,128,220
Over-the-counter forward currency contracts			-				10,470,448				10,470,448
Total futures and forward currency contracts (2)			14,128,220				10,470,448				24,598,668
Total financial assets and liabilities at fair value		$	621,503,249			$	10,470,448			$	631,973,697
Per line item in Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral										$	56,099,798
Investments in U.S. Treasury notes held in custody											502,809,141
Total investments in U.S. Treasury notes										$	558,908,939
(2)
Net unrealized appreciation on open futures and forward currency contracts										$	26,231,612
Net unrealized depreciation on open futures and forward currency contracts											(1,632,944	)
Total net unrealized appreciation on open futures and forward currency contracts										$	24,598,668

 

*

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

 

 

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

 

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

 

*

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

 

4. DERIVATIVE INSTRUMENTS

 

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

 

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

 

The Master Fund engages in the speculative trading of futures and forward contracts on interest rates, grains, softs, currencies, metals, energies, livestock and stock indices. The following were the primary trading risk exposures of the Master Fund at March 31, 2020 by market sector:

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

Since the derivatives held or sold by the Master Fund are for speculative trading purposes, the derivative instruments are not designated as hedging instruments under the provisions of the Derivatives and Hedging guidance. Accordingly, all realized gains and losses, as well as any change in net unrealized gains or losses on open positions from the preceding period, are recognized as part of the Master Fund’s trading gains and losses in the Statements of Operations.

 

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

 

Fair value of futures and forward currency contracts at March 31, 2020  

 

																		Net
																		Unrealized
																		Gain (Loss)
		Fair Value - Long Positions								Fair Value - Short Positions								on Open
Sector		Gains				Losses				Gains				Losses				Positions
Futures contracts:
Energies		$	-			$	-			$	5,763,403			$	(358,658	)		$	5,404,745
Grains			514,163				(76,200	)			3,757				(81,202	)			360,518
Interest rates			5,418,581				(1,631,781	)			-				-				3,786,800
Livestock			29,400				(6,020	)			-				-				23,380
Metals			841,418				(9,658,201	)			11,697,095				(659,947	)			2,220,365
Softs			27,994				(32,213	)			470,677				(20,965	)			445,493
Stock indices			1,769,154				(155,951	)			674,876				(401,160	)			1,886,919
Total futures contracts			8,600,710				(11,560,366	)			18,609,808				(1,521,932	)			14,128,220
Forward currency contracts			12,239,364				(30,255,678	)			41,514,551				(13,027,789	)			10,470,448
Total futures and forward currency contracts		$	20,840,074			$	(41,816,044	)		$	60,124,359			$	(14,549,721	)		$	24,598,668

 

 

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

 

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

 

The effect of trading futures and forward currency contracts is represented on the Master Fund’s Statements of Operations for the three months ended March 31, 2020 and 2019 as “Net realized gains (losses) on closed positions: Futures and forward currency contracts” and “Net change in unrealized: Futures and forward currency contracts.” These trading gains and losses are detailed below.

 

Trading gains (losses) of futures and forward currency contracts for the three months ended March 31, 2020 and 2019

 

		Three months				Three months
		ended:				ended:
		March 31,				March 31,
Sector		2020				2019
Futures contracts:
Energies		$	49,101,218			$	(10,506,327	)
Grains			(1,129,745	)			1,502,777
Interest rates			(11,638,533	)			23,630,534
Livestock			845,070				(930	)
Metals			(7,132,220	)			(1,122,722	)
Softs			2,602,868				186,065
Stock indices			(204,346,133	)			5,790,280
Total futures contracts			(171,697,475	)			19,479,677
Forward currency contracts			5,221,395				(5,050,367	)
Total futures and forward currency contracts		$	(166,476,080	)		$	14,429,310

 

 

For the three months ended March 31, 2020 and 2019, the monthly average number of futures contracts bought and sold and the monthly average notional value of forward currency contracts traded are detailed below:

 

		2020				2019
Average bought			127,925				60,582
Average sold			119,470				61,880
Average notional		$	8,430,000,000			$	7,200,000,000

 

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

 

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

 

Offsetting of derivative assets and liabilities at March 31, 2020

 

						Gross amounts				Net amounts of
						offset in the				assets presented in
		Gross amounts of				Statement of				the Statement of
Assets		recognized assets				Financial Condition				Financial Condition
Futures contracts
Counterparty C		$	5,463,171			$	(1,405,912	)		$	4,057,259
Counterparty I			18,007,128				(11,553,158	)			6,453,970
Counterparty J			3,740,219				(123,228	)			3,616,991
Total futures contracts			27,210,518				(13,082,298	)			14,128,220
Forward currency contracts
Counterparty G			31,754,738				(19,651,346	)			12,103,392
Total assets		$	58,965,256			$	(32,733,644	)		$	26,231,612

 

						Gross amounts				Net amounts of
						offset in the				liabilities presented in
		Gross amounts of				Statement of				the Statement of
Liabilities		recognized liabilities				Financial Condition				Financial Condition
Forward currency contracts
Counterparty K		$	23,632,121			$	(21,999,177	)		$	1,632,944
Total liabilities		$	23,632,121			$	(21,999,177	)		$	1,632,944

 

 

 

		Net amounts of
		Assets				Amounts Not Offset in the
		presented in the				Statement of Financial Condition
		Statement of Financial				Financial				Collateral
Counterparty		Condition				Instruments				Received(1)(2)				Net Amount(3)
Counterparty C		$	4,057,259			$	-			$	(4,057,259	)		$	-
Counterparty I			6,453,970				-				(6,453,970	)			-
Counterparty J			3,616,991				-				(3,616,991	)			-
Counterparty G			12,103,392				-				-				12,103,392
Total		$	26,231,612			$	-			$	(14,128,220	)		$	12,103,392

 

		Net amounts of
		Liabilities				Amounts Not Offset in the
		presented in the				Statement of Financial Condition
		Statement of Financial				Financial				Collateral
Counterparty		Condition				Instruments				Pledged(1)(2)				Net Amount(4)
Counterparty K		$	1,632,944			$	-			$	1,632,944			$	-
Total		$	1,632,944			$	-			$	1,632,944			$	-

 

(1)

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

(2)

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

(3)

Net amount represents the amount that is subject to loss in the event of a counterparty failure as of March 31, 2020.

(4)

Net amount represents the amounts owed by the Master Fund to each counterparty as of March 31, 2020.

 

Offsetting of derivative assets and liabilities at December 31, 2019

 

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

 

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

 

 

 

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

 

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

 

(1)

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

(2)

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

(3)

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

(4)

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

 

CONCENTRATION OF CREDIT RISK

 

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

 

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

 

The Master Fund’s forward currency trading activities are cleared by DB, and BA. The Master Fund’s concentration of credit risk associated with DB, or BA nonperformance includes unrealized gains inherent in such contracts, which are recognized in the Statements of Financial Condition plus the value of margin or collateral held by DB, and BA. The amount of such credit risk was $77,657,781 and $55,480,494 at March 31, 2020 and December 31, 2019, respectively.

 

5. PROFIT SHARE

 

The following table indicates the total profit share earned and accrued during the three months ended March 31, 2020 and 2019. Profit share earned (from Limited Partners’ redemptions) is credited to the New Profit Memo account as defined in the Master Fund’s Agreement of Limited Partnership.

  

		Three months ended:				Three months ended:
		March 31, 2020				March 31, 2019
Profit share earned		$	-			$	-
Profit share accrued			-				2,325,569
Total profit share		$	-			$	2,325,569

 

 

6. FINANCIAL HIGHLIGHTS

 

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

 

7. SUBSEQUENT EVENTS

 

In early 2020, an outbreak of a novel strain of coronavirus (SARS-CoV-2) causing the disease COVID-19 emerged globally. As a result, there have been mandates from federal, state and local authorities resulting in an overall decline in economic activity. The ultimate impact of COVID-19 on the financial performance of the Partnership is not reasonably estimable at this time.

 

During the period from April 1, 2020 to May 14, 2020, contributions of $25,230,000 were made to the Master Fund. The General Partner has performed its evaluation of subsequent events through May 14, 2020 the date the Form 10-Q was filed. Based on such evaluation, no further events were discovered that required disclosure or adjustment to the financial statements.

 

 

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

 

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

 

OPERATIONAL OVERVIEW

 

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

 

LIQUIDITY AND CAPITAL RESOURCES

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

The Master Fund’s assets are generally held as cash or cash equivalents, including U.S. government securities or securities issued by federal agencies, other Commodity Futures Trading Commission-authorized investments or bank held or certain other money market instruments (e.g., bankers acceptances and Eurodollar or other time deposits), which are used to margin the Master Fund’s futures, forward, and spot currency positions and withdrawn, as necessary, to pay redemptions and expenses. Other than potential market-imposed limitations on liquidity, due to limited open interest in certain futures markets or to daily price fluctuation limits, for example, to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Master Fund’s futures, forward and spot trading, the Master Fund’s assets are highly liquid and are expected to remain so. During its operations for the three months ended March 31, 2020, the Partnership, through its investment in the Master Fund, experienced no meaningful periods of illiquidity in any of the numerous markets traded by the General Partner.

 

CRITICAL ACCOUNTING ESTIMATES

 

The Master Fund records its transactions in futures, forward and spot contracts, including related income and expenses, on a trade date basis. Open futures contracts traded on an exchange are valued at fair value, which is based on the closing settlement price on the exchange where the futures contract is traded by the Master Fund on the day with respect to which net assets are being determined. Open spot currency contracts are valued based on the current Spot Price. Open forward currency contracts are recorded at fair value, based on pricing models that consider the Spot Price and Forward Point. Spot Prices and Forward Points for open forward currency contracts are generally based on the median of the average midpoint of bid/ask quotations at the last minute ending at 3:00 P.M. New York time provided by widely used quotation service providers on the day with respect to which net assets are being determined. Forward Points from the quotation service providers are generally in periods of one month, two months, three months, six months, nine months and twelve months forward while the contractual forward delivery dates for the forward currency contracts traded by the Partnership may be in between these periods. The General Partner’s policy to determine fair value for forward currency contracts involves first calculating the number of Months to Maturity, then identifying the Forward Month Contracts. Linear interpolation is then performed between the dates of these two Forward Month Contracts to calculate the interpolated Forward Point. The General Partner will also compare the calculated price to the forward currency prices provided by dealers to determine whether the calculated price is fair and reasonable.

 

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

 

 

RESULTS OF OPERATIONS

 

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

  

 

Period ended March 31, 2020

 

 

		Total
		Partners’
		Capital of the
Month Ended:		Partnership
March 31, 2020		$	161,206,850
December 31, 2019			191,189,357

 

		Three Months
Change in Partners’ Capital		$	(29,982,507	)
Percent Change			(15.68	)%

 

THREE MONTHS ENDED MARCH 31, 2020

 

The decrease in the Partnership’s net assets of $29,982,507 was attributable to net loss after profit share through its investment in the Master Fund of $40,123,915 and withdrawals of $2,068,992 which were partially offset by contributions of $12,210,400. 

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2020 increased $82,918 relative to the corresponding period in 2019. The increase was due to an increase in the average net asset value of the Master Fund during the three months ended March 31, 2020, relative to the corresponding period in 2019.

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2020 increased $63,059 relative to the corresponding period in 2019. The increase was due predominantly to an increase in the average net asset value of the Partnership during the three months ended March 31, 2020, relative to the corresponding period in 2019.

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the three months ended March 31, 2020 increased $46,455 relative to the corresponding period in 2019. The increase was due to an increase in the average net asset value of commission paying investors of the Master Fund during the three months ended March 31, 2020, relative to the corresponding period in 2019.

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2020 increased $1,439 relative to the corresponding period in 2019. The increase was due to an increase in the average net asset value of the Master Fund during the three months ended March 31, 2020, relative to the corresponding period in 2019.

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2020 decreased $173,175 relative to the corresponding period in 2019. This decrease was due predominantly to a decrease in short-term U.S. Treasury yields and partially offset by an increase in average net asset value of the Partnership during the three months ended March 31, 2020 relative to the corresponding period in 2019.

 

For the three months ended March 31, 2020, the Partnership, through its investment in the Master Fund, experienced net realized and unrealized losses of $38,815,257 from trading operations (including foreign exchange transactions and translations). Management fees of $881,272, brokerage commissions of $239,309, selling commissions and platform fees of $777,504, administrative and operating expenses of $148,671, custody fees and other expenses of $7,360. Interest income of $745,458 partially offset the Master Fund expenses allocated to the Partnership resulting in net loss after profit share of $40,123,915.

 

 

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

 

		% Gain
Sector		(Loss)
Currencies			0.63	%
Energies			6.25	%
Grains			(0.22	)%
Interest rates			(1.51	)%
Livestock			0.06	%
Metals			(1.01	)%
Softs			0.32	%
Stock indices			(24.26	)%
Trading loss*			(19.74	)%

 

*

Percentage of the Partnership Capital

 

MANAGEMENT DISCUSSION – 2020

 

Three months ended March 31, 2020

 

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

 

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

 

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

 

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

 

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

 

 

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

 

Trading of soft and agricultural commodity futures was fractionally profitable.

 

 

Period ended March 31, 2019 

 

 

		Total
		Partners’
		Capital of the
Month Ended:		Partnership
March 31, 2019		$	164,573,043
December 31, 2018			159,519,606

 

		Three Months
Change in Partners’ Capital		$	5,053,437
Percent Change			3.17	%

 

THREE MONTHS ENDED MARCH 31, 2019

 

The increase in the Partnership’s net assets of $5,053,437 was attributable to net income after profit share through its investment in the Master Fund of $3,075,278 and contributions of $4,341,500 which were partially offset by withdrawals of $2,363,341. 

 

Management fees, through the Partnership’s investment in the Master Fund, are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Management fees, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2019 decreased $46,818 relative to the corresponding period in 2018. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended March 31, 2019, relative to the corresponding period in 2018.

 

The Partnership, through its investment in the Master Fund, bears all trade-related commission and clearing charges due to third-party brokers. Brokerage commissions, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2019 increased $32,390 relative to the corresponding period in 2018. The increase was due to an increase in trading activity during the three months ended March 31, 2019, relative to the corresponding period in 2018.

 

Selling commissions and platform fees are calculated on the net asset value on the last day of each month and are affected by trading performance, contributions and withdrawals. Selling commissions and platform fees for the three months ended March 31, 2019 decreased $34,862 relative to the corresponding period in 2018. The decrease was due to a decrease in the average net asset value of commission paying investors of the Partnership during the three months ended March 31, 2019, relative to the corresponding period in 2018.

 

The Partnership, through its investment in the Master Fund, pays administrative expenses for legal, audit and accounting services. Administrative expenses, net of amounts borne by the General Partner, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2019 decreased $7,933 relative to the corresponding period in 2018. The decrease was due to a decrease in the average net asset value of the Partnership during the three months ended March 31, 2019, relative to the corresponding period in 2018. 

 

Interest income, through the Partnership’s investment in the Master Fund, is derived from cash and U.S. Treasury instruments held at the Master Fund’s brokers and custodian. Interest income, through the Partnership’s investment in the Master Fund, for the three months ended March 31, 2019 increased $377,415 relative to the corresponding period in 2018. This increase was due predominantly to an increase in short-term U.S. Treasury yields during the three months ended March 31, 2019 relative to the corresponding period in 2018.

 

 

For the three months ended March 31, 2019, the Partnership, through its investment in the Master Fund, experienced net realized and unrealized gains of $4,767,838 from trading operations (including foreign exchange transactions and translations). Management fees of $798,354, brokerage commissions of $176,250, selling commissions and platform fees of $731,049, administrative and operating expenses of $147,232, custody fees and other expenses of $7,138, and profit share of $751,170 were paid or accrued. Interest income of $918,633 partially offset the Master Fund expenses allocated to the Partnership resulting in net income after profit share of $3,075,278.

 

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

 

		% Gain
Sector		(Loss)
Currencies			(1.08	)%
Energies			(2.21	)%
Grains			0.31	%
Interest rates			4.95	%
Livestock			(0.02	)%
Metals			(0.26	)%
Softs			0.02	%
Stock indices			1.17	%
Trading gain*			2.88	%

 

* Percentage of the Partnership Capital

 

MANAGEMENT DISCUSSION – 2019

 

Three months ended March 31, 2019 

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

OFF-BALANCE SHEET ARRANGEMENTS

 

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

 

CONTRACTUAL OBLIGATIONS

 

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

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required.

 

ITEM 4. CONTROLS AND PROCEDURES

 

The General Partner, with the participation of the principal executive officers and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the period covered by this quarterly report, and, based on its evaluation, has concluded that these disclosure controls and procedures are effective. There were no changes in the General Partner’s internal controls over financial reporting during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the General Partner’s internal controls over financial reporting with respect to the Partnership.

 

 

PART II. OTHER INFORMATION

 

ITEM 1. Legal Proceedings 

 

None.

 

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

 

(a) Pursuant to the Partnership’s Third Amended and Restated Limited Partnership Agreement (the “Partnership Agreement”), the Partnership may sell Units at the beginning of each calendar month. Refer to Form 8-K filed on March 4, 2020 for the limited partnership interests sold on January 1, 2020, February 1, 2020, and March 1, 2020.

 

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

 

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

 

The following table summarizes the redemptions by Series A and Series B limited partners during the three months ended March 31, 2020. There were no Series C or Series D redemptions.

 

		Series A								Series B
Date of		Units				NAV				Units				NAV
Withdrawal		Redeemed				per Unit				Redeemed				per Unit
January 31, 2020			(798.6320	)		$	1,261.95				-			$	1,476.75
February 29, 2020			(433.1540	)			1,172.67				(36.0390	)			1,374.68
March 31, 2020			(499.3786	)			1,008.59				-				1,184.30
Total			(1,731.1646	)							(36.0390	)

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not Applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable. 

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

The following exhibits are included herewith:

 

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

 

 

SIGNATURES

 

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

 

By:

Millburn Ridgefield Corporation, General Partner

 

Date: May 14, 2020
	/s/ Michael W. Carter
	Michael W. Carter
	Vice-President
	(Principal Accounting Officer)

 

 

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