Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________

 

FORM 10-Q

_______________________________

 

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

 

For the quarterly period ended September 30, 2020

 

OR

 

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

 

For the transition period from ________ to ___________

 

Commission File Number:  000-53815

_______________________________

 

ALTEGRIS QIM FUTURES FUND, L.P.

(Exact name of registrant as specified in its charter)

_______________________________

 

DELAWARE		27-0473854
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

c/o ALTEGRIS ADVISORS, L.L.C.

1200 Prospect Street, Suite 400

La Jolla, California 92037

(Address of principal executive offices) (zip code)

 

(858) 459-7040

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

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

 

Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests

 

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 ý No o

 

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 ý No o

 

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 o		Accelerated filer o
Non-accelerated filer o		Smaller reporting company ý
		Emerging Growth Company o

 

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

 

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

 

 

 

 

TABLE OF CONTENTS
		Page
PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Statements of Financial Condition	1
	Condensed Schedules of Investments	2 - 4
	Statements of Income (Loss)	5
	Statements of Changes in Partners’ Capital (Net Asset Value)	6
	Notes to Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II – OTHER INFORMATION		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosure	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
Signatures		31
Rule 13a–14(a)/15d–14(a) Certifications
Section 1350 Certifications

 

 

 

 

PART I – FINANCIAL INFORMATION

 

ALTEGRIS QIM FUTURES FUND, L.P.

STATEMENTS OF FINANCIAL CONDITION

SEPTEMBER 30, 2020 (Unaudited) and DECEMBER 31, 2019 (Audited)

_______________

 

 

		2020				2019
ASSETS
Equity in commodity broker account:
Cash deposit with broker		$	533,849			$	846,509
Segregated cash			266,179				1,247,462
Segregated foreign currency (cost - $12,115 and $0)			12,110				–
Net unrealized gain on open futures contracts			13,865				145,732
Total assets in commodity broker account			826,003				2,239,703
Cash			7,022,525				411,223
Investment securities at fair value (cost - $0 and $9,044,907)			–				9,045,081
Interest receivable			–				145
Total assets		$	7,848,528			$	11,696,152
LIABILITIES
Equity in commodity broker account:
Segregated Foreign currency due to broker (proceeds-$0 and $31,771)		$	–			$	31,582
Total liabilities in commodity broker account			–				31,582
Redemptions payable			595,550				588,811
Service fees payable			7,092				12,705
Management fee payable			7,852				11,427
Incentive fees payable			–				7,827
Brokerage commissions payable			7,533				6,494
Administrative fee payable			2,029				2,968
Other liabilities			105,019				135,810
Total liabilities			725,075				797,624
PARTNERS' CAPITAL (NET ASSET VALUE)
General Partner			691				785
Limited Partners			7,122,762				10,897,743
Total partners' capital (Net Asset Value)			7,123,453				10,898,528
Total liabilities and partners' capital		$	7,848,528			$	11,696,152

 

See accompanying notes.

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS

SEPTEMBER 30, 2020 (Unaudited)

_______________

 

 

		Range of Expiration Dates		Number of Contracts				Fair Value				% of Partners' Capital
Long Futures Contracts:
Currencies		Dec-20			21			$	(4,662	)			(0.06)%
Energy		Oct-20			2				(550	)			(0.01)%
Interest Rates		Dec-20			16				(1,301	)			(0.02)%
Metals		Dec-20			2				3,360				0.05%
Stock Indices		Oct 20 - Dec 20			20				19,489				0.27%
Treasury Rates		Dec-20			8				(1,163	)			(0.02)%
Total Long Futures Contracts					69				15,173				0.21%
Short Futures Contracts:
Currencies		Dec-20			9				(287	)			0.00%
Metals		Dec-20			1				(654	)			(0.01)%
Stock Indices		Oct-20			19				(367	)			(0.01)%
Total Short Futures Contracts					29				(1,308	)			(0.02)%
Total Futures Contracts								$	13,865				0.19%

 

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (continued)

DECEMBER 31, 2019 (Audited)

_______________

 

 

INVESTMENT SECURITIES
Face Value				Maturity Date		Description		Fair Value				% of Partners' Capital
Fixed Income Investments
U.S. Government Agency Bonds and Notes
$	3,586,000			1/2/2020		Federal Farm Credit Bank Disc Note, 1.15%*		$	3,585,886				32.90%
	2,500,000			1/3/2020		Federal Home Loan Bank Disc Note, 1.57%*			2,499,895				22.94%
	1,000,000			1/23/2020		Federal Home Loan Bank Disc Note, 1.58%*			999,119				9.17%
	Total U.S. Government Agency Bonds and Notes (cost - $7,084,708)								7,084,900				65.01%
Certificate of Deposit
	181,000			1/15/2020		The Chiba Bank Ltd., 1.80%			180,998				1.66%
	Total Certificate of Deposit (cost - $181,000)								180,998				1.66%
Corporate Notes
	278,000			1/2/2020		Cedar Springs Capital Company LLC, 1.59%*			277,988				2.55%
	355,000			1/14/2020		Chevron Corporation, 1.63%*			354,787				3.26%
	271,000			1/13/2020		Exxon Mobil Corp Disc Note, 1.67%*			270,846				2.48%
	271,000			1/13/2020		MetLife Short Term Funding LLC, 1.81%*			270,829				2.49%
	250,000			1/2/2020		The Home Depot, Inc., 1.46%*			249,990				2.29%
	355,000			1/15/2020		Thunder Bay Funding, LLC, 1.88%*			354,743				3.25%
	Total Corporate Notes (cost - $1,779,199)								1,779,183				16.32%
	Total Investment Securities (cost - $9,044,907)							$	9,045,081				82.99%

 

* The rate reported is the effective yield at time of purchase.

 

See accompanying notes.

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

CONDENSED SCHEDULES OF INVESTMENTS (continued)

DECEMBER 31, 2019 (Audited)

_______________

 

 

		Range of Expiration Dates		Number of Contracts				Fair Value				% of Partners' Capital
Long Futures Contracts:
Currencies		Mar-20			2				6				0.01%
Energy		Jan-20			10				2,988				0.03%
Interest Rates		Mar-20			72				(83,118	)			(0.77)%
Metals		Feb 20 - Mar 20			62				162,087				1.49%
Stock Indices		Jan 20 - Mar 20			164				74,461				0.68%
Treasury Rates		Mar-20			75				(36,048	)			(0.33)%
Total Long Futures Contracts					385				120,376				1.11%
Short Futures Contracts:
Currencies		Mar-20			22				(6,051	)			(0.06)%
Energy		Jan-20			1				318				0.01%
Stock Indices		Jan 20 - Mar 20			53				31,089				0.29%
Total Short Futures Contracts					76				25,356				0.24%
Total Futures Contracts								$	145,732				1.35%

 

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

STATEMENTS OF INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (Unaudited)

_______________

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
TRADING GAINS (LOSSES)
Gain (loss) on trading of derivatives contracts
Net realized		$	(217,354	)		$	(52,569	)		$	(583,500	)		$	(1,772,118	)
Net change in unrealized			31,792				(150,911	)			(131,867	)			181,740
Brokerage commissions			(30,729	)			(53,488	)			(108,526	)			(181,777	)
Net loss from trading derivatives contracts			(216,291	)			(256,968	)			(823,893	)			(1,772,155	)
Gain (loss) on trading of securities
Net realized			–				29				–				29
Net change in unrealized			–				145				(174	)			366
Net gain (loss) from trading securities			–				174				(174	)			395
Gain (loss) on trading of foreign currency
Net realized			37,684				(3,181	)			23,338				1,058
Net change in unrealized			(38,256	)			(8	)			(194	)			(1,781	)
Net gain (loss) from trading foreign currency			(572	)			(3,189	)			23,144				(723	)
Total trading losses			(216,863	)			(259,983	)			(800,923	)			(1,772,483	)
NET INVESTMENT LOSS
Income
Interest income			–				74,324				38,814				255,432
			–				74,324				38,814				255,432
Expenses
Service fees			21,119				44,564				81,728				156,855
Management fee			25,269				43,882				89,343				149,014
Professional fees			31,862				38,002				94,740				137,909
Administrative fee			6,537				11,311				23,153				38,363
Out of pocket fees			–				4,400				–				17,600
Interest expense			895				2,325				3,819				5,006
Incentive fees			–				–				–				4,793
Other expenses			10,346				21,550				26,473				25,065
Total expenses			96,028				166,034				319,256				534,605
Net investment loss			(96,028	)			(91,710	)			(280,442	)			(279,173	)
NET LOSS		$	(312,891	)		$	(351,693	)		$	(1,081,365	)		$	(2,051,656	)

 

See accompanying notes.

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (Unaudited)

_______________

 

 

						Limited Partners
															Institutional				General
			Total				Class A				Class B				Interests				Partner
Balances at December 31, 2018		$	20,350,023			$	13,755,422			$	5,765,565			$	828,205			$	831
Capital additions			500,000				–				500,000				–				–
Capital withdrawals			(6,792,974	)			(4,845,417	)			(1,476,747	)			(470,810	)			–
From operations:
Net investment loss			(279,173	)			(237,262	)			(41,073	)			(821	)			(17	)
Net realized loss from investments (net of brokerage commissions)			(1,952,808	)			(1,291,474	)			(576,153	)			(85,091	)			(90	)
Net change in unrealized gain from investments			180,325				109,931				64,262				6,122				10
Net loss			(2,051,656	)			(1,418,805	)			(552,964	)			(79,790	)			(97	)
Balances at September 30, 2019		$	12,005,393			$	7,491,200			$	4,235,854			$	277,605			$	734
Balances at December 31, 2019		$	10,898,528			$	6,494,634			$	4,104,248			$	298,861			$	785
Capital withdrawals			(2,693,710	)			(2,037,782	)			(655,928	)			–				–
From operations:
Net investment loss			(280,442	)			(200,019	)			(76,014	)			(4,383	)			(26	)
Net realized loss from investments (net of brokerage commissions)			(668,688	)			(410,036	)			(236,025	)			(22,568	)			(59	)
Net change in unrealized loss from investments			(132,235	)			(74,217	)			(54,749	)			(3,260	)			(9	)
Net loss			(1,081,365	)			(684,272	)			(366,788	)			(30,211	)			(94	)
Balances at September 30, 2020		$	7,123,453			$	3,772,580			$	3,081,532			$	268,650			$	691

 

See accompanying notes.

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS

_______________

 

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

A.

General Description of the Partnership

 

Altegris QIM Futures Fund, L.P. (the “Partnership”) was organized as a Delaware limited partnership in June 2009. The Partnership's general partner is Altegris Advisors, L.L.C. (the “General Partner”). The General Partner has overall responsibility for the management, operation and administration of the Partnership, including the selection of its commodity trading adviser. The Partnership’s trading activities are conducted pursuant to an advisory contract with Quantitative Investment Management LLC (the “Advisor”). The Partnership speculatively trades commodity futures contracts, and may trade options on futures contracts, forward currency contracts and other commodity interests. The objective of the Partnership’s business is appreciation of its assets. It is subject to the regulations of the Commodity Futures Trading Commission (the “CFTC”), an agency of the United States (“U.S.”) government that regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of commodity exchanges and futures commission merchants (brokers) through which the Partnership trades.

 

The General Partner is registered with the U.S. Securities and Exchange Commission under the U.S. Investment Advisers Act of 1940, as amended, as an investment adviser and is registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator, and is a member of the National Futures Association, an industry self-regulatory organization.

 

B.

Method of Reporting

 

The Partnership’s financial statements are presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Therefore, the Partnership follows the accounting and reporting guidelines for investment companies. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported fair value of assets and liabilities, disclosures of contingent assets and liabilities as of September 30, 2020 and December 31, 2019, and reported amounts of income and expenses for the three and nine months ended September 30, 2020 and 2019, respectively. Management believes that the estimates utilized in preparing the Partnership’s financial statements are reasonable; however, actual results could differ from these estimates and it is reasonably possible that the differences could be material.

 

The financial information included herein is unaudited; however, such financial information reflects all adjustments which are, in the opinion of management, necessary for the fair presentation of the financial statements for the interim period.

 

C.

Fair Value

 

In accordance with the authoritative guidance under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date.

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

C.

Fair Value (continued)

 

In determining fair value, the Partnership uses various valuation approaches. The authoritative guidance under U.S. GAAP establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Partnership.

 

Unobservable inputs reflect the Partnership’s assumption about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:

 

Level 1 – Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Partnership has the ability to access at the measurement date;

 

Level 2 – Quoted prices which are not active, or inputs that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and

 

Level 3 – Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

The availability of valuation techniques and observable inputs can vary among assets and liabilities and is affected by a wide variety of factors, including the type of asset or liability, whether the asset or liability is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the asset or liability existed. Accordingly, the degree of judgment exercised by the Partnership in determining fair value is greatest for assets and liabilities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined by the lowest level input that is significant to the fair value measurement.

 

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure.

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

C.

Fair Value (continued)

 

Therefore, even when market assumptions are not readily available, the Partnership’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Partnership uses prices and inputs that are current as of the measurement date, including prices and inputs during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many assets and liabilities. This condition could cause an asset or liability to be reclassified to a lower level within the fair value hierarchy. The Partnership values futures contracts at the closing price of the contract’s primary exchange. The Partnership includes futures contracts in Level 1 of the fair value hierarchy, as they are exchange traded derivatives.

 

The fair value of U.S. government agency bonds and notes is generally based on quoted prices in active markets. When quoted prices are not available, fair value is determined based on a valuation model that uses inputs that include interest-rate yield curves, cross-currency-basis index spreads, and country credit spreads similar to the bond in terms of issue, maturity and seniority. U.S. government agency bonds and notes are generally categorized in Level I or Level 2 of the fair value hierarchy. As of September 30, 2020 and December 31, 2019, none of the Partnership’s holdings in U.S. government agency bonds and notes were fair valued using valuation models.

 

The fair value of corporate notes is determined using recently executed transactions, market price quotations (where observable), notes spreads or credit default swap spreads. The spread data used are for the same maturity as that of the notes. If the spread data does not reference the issuer, data that references a comparable issuer is used. When observable price quotations are not available, fair value is determined based on cash flow models with yield curves, bond, or single-name credit default swap spreads and recovery rates based on collateral values as key inputs. These valuation methods represent both a market and income approach to fair value measurement. Corporate notes are categorized in Level 2 of the fair value hierarchy; however, in instances where significant inputs are unobservable, they are categorized in Level 3 of the hierarchy. As of September 30, 2020 and December 31, 2019, none of the Partnership’s holdings in corporate notes were fair valued using valuation models.

 

The fair value of certificates of deposit is determined based on a constant maturity curve for comparable instruments denominated in USD. This valuation method represents both a market and income approach to fair value measurement. Certificates of deposit are categorized in Level 2 of the fair value hierarchy.

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

C.

Fair Value (continued)

 

There were no changes in the Partnership’s valuation methodology during period ended September 30, 2020 and the year ended December 31, 2019.

 

The following table presents information about the Partnership’s assets and liabilities measured at fair value as of September 30, 2020 and December 31, 2019:

 

														Balance as of
September 30, 2020		Level 1				Level 2				Level 3				September 30, 2020
Assets
Futures contracts (1)		$	28,453			$	–			$	–			$	28,453
Liabilities
Futures contracts (1)		$	(14,588	)		$	–			$	–			$	(14,588	)

 

														Balance as of
December 31, 2019		Level 1				Level 2				Level 3				December 31, 2019
Assets
Futures contracts (1)		$	282,964			$	–			$	–			$	282,964
U.S. Government agency bonds and notes			–				7,084,900				–				7,084,900
Certificates of deposit			–				180,998				–				180,998
Corporate notes			–				1,779,183				–				1,779,183
Total Assets		$	282,964			$	9,045,081			$	–			$	9,328,045
Liabilities
Futures contracts (1)		$	(137,232	)		$	–			$	–			$	(137,232	)

 

(1) See Note 7. “Financial Derivative Instruments” for the fair value in each type of contracts within this category.

 

For the period ended September 30, 2020 and the year ended December 31, 2019, there were no Level 3 securities.

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

D.    Investment Transactions and Investment Income

 

Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from security transactions are determined using the specific identification cost method. Change in net unrealized gain or loss from the preceding period is reported in the Statements of Income (Loss). Brokerage commissions on securities and other trading fees are reflected as an adjustment to cost or proceeds at the time of the transaction. Interest income is recorded on an accrual basis.

 

Gains or losses on futures contracts are realized when contracts are closed. Net unrealized gains or losses on open contracts (the difference between contract trade price and quoted market price) are reflected in the Statements of Financial Condition. Any change in net unrealized gain or loss from the preceding period is reported in the Statements of Income (Loss). Brokerage commissions on futures contracts include other trading fees and are recognized as trading gains and losses.

 

Net realized gains and losses from foreign currency related transactions represent gains and losses from sales of foreign currencies, currency gains and losses realized between trade and settlement dates on securities transactions, and the difference between the amounts of interest and foreign withholding taxes recorded on the Partnership’s books and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized gain (loss) on other assets and other liabilities denominated in foreign currency arise from changes in the value of assets, other than investments in securities, and liabilities at quarter end, resulting from changes in the exchange rates.

 

J.P. Morgan Chase Bank, N.A. (the “Custodian”) is the Partnership’s custodian. SG Americas Securities, LLC (the “Clearing Broker”) is the Partnership’s commodity broker. A portion of the Partnership’s assets are held as initial margin or option premiums (in cash or Treasury securities) in the Partnership’s brokerage accounts at the Clearing Broker. The Clearing Broker may convert the Partnership’s cash in U.S. dollar to foreign currency to facilitate the Partnership’s commodity trading activities. At times, the Partnership may carry foreign cash on loan with the Clearing Broker. Any net foreign currency on loan will be recognized in Foreign Currency Due from Broker/Due to Broker on the Statements of Financial Condition. The Partnership’s Clearing Broker holds margin balances in a single currency, in which all margin requirements can be satisfied in U.S. dollars. Foreign currency balances can also be used to satisfy margin requirements. As of September 30, 2020 and December 31, 2019, the Partnership’s Segregated cash balance on the Statements of Financial Condition of $266,179 and $1,247,462, respectively, represents the collateral pledged by the Partnership to satisfy the Clearing Broker’s margin requirements in US Dollars. As of September 30, 2020 and December 31, 2019, the Partnership’s Segregated foreign currency due from/to broker balance on the Statements of Financial Condition of $12,110 and $(31,582), respectively, represents the collateral owed by the Partnership to satisfy the Clearing Broker’s margin requirements in foreign currency. The Partnership’s assets not deposited at the Clearing Broker are deposited with either the Custodian or held in bank cash accounts at Northern Trust Company (and used to pay Partnership operating expenses). For the Partnership’s cash deposited at the Custodian, the Partnership receives cash management services from J.P. Morgan Investment Management Inc. (“JPMIM”).

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

E.

Futures Contracts

 

The Partnership engages in futures contracts as part of its investment strategy. Upon entering into a futures contract, the Partnership is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the “initial margin.” Subsequent payments (“variation margin”) are made or received by the Partnership each day, depending on the daily fluctuations in the value of the contract, and are included in unrealized gain (loss) on futures contracts. Due from/Due to broker amounts on the Statements of Financial Condition represent receivables / payables related to the Partnership’s required cash margin. The Partnership recognizes a realized gain or loss when the contract is closed.

 

There are several risks in connection with the use of futures contracts as an investment option. The change in value of futures contracts primarily corresponds with the value of their underlying instruments. In addition, there is the risk that the Partnership may not be able to enter into a closing transaction because of an illiquid secondary market. Open positions in futures contracts at September 30, 2020 and December 31, 2019 are reflected within the Condensed Schedules of Investments.

 

F.

Foreign Currency Transactions

 

The Partnership’s functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the Statements of Financial Condition.  Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in the Statements of Income (Loss).

 

G.

Cash

 

The Partnership maintains a custody account with JPMorgan Chase Bank, N.A. and Northern Trust Company. At times, the Partnership’s cash balance could exceed the insured amount under the Federal Deposit Insurance Corporation (“FDIC”). The Partnership has not experienced any losses in such accounts and believes it is not subject to any significant counterparty risk related to its cash account.

 

Both Segregated cash and Segregated foreign currency are held as margin collateral deposits for futures transactions.

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

H.

Income Taxes

 

The Partnership is treated as a partnership for U.S. federal income tax purposes. As such, the partners are individually liable for their own distributable share of taxable income or loss. No provision has been made in the accompanying financial statements for U.S., federal, state, or local income taxes.

 

The Partnership is required to determine whether its tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. De-recognition of a tax benefit previously recognized results in the Partnership recording a tax liability that reduces ending partners’ capital. Based on its analysis, the Partnership has determined that it has not incurred any liability for unrecognized tax benefits as of September 30, 2020 and December 31, 2019. However, the Partnership’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. The Partnership is subject to income tax examinations by major taxing authorities for all tax years since 2016.

 

The Partnership recognizes interest and penalties related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties have been recognized for the three and nine months ended September 30, 2020 and 2019.

 

NOTE 2 - PARTNERS’ CAPITAL

 

A. Capital Accounts and Allocation of Income and Loss

 

The Partnership accounts for subscriptions and redemptions on a per partner capital account basis.

 

The Partnership consists of the General Partner’s Interest, Class A Interests, Class B Interests and Institutional Interests (collectively referred to as “Interests”). Income or loss (prior to management fees, administrative fees, service fees and incentive fees) is allocated pro rata among the Limited Partners (each, a “Limited Partner” and collectively the “Limited Partners”) based on their respective capital accounts as of the end of each month in which the items accrue, pursuant to the terms of the Partnership’s Agreement of Limited Partnership (the “Agreement”), as may be amended and restated from time to time. Class A Interests, Class B Interests and Institutional Interests are then charged with their applicable management fee, administrative fee, service fee and incentive fee in accordance with the Agreement.

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 2 - PARTNERS’ CAPITAL (CONTINUED)

 

B. Subscriptions, Distributions and Redemptions

 

No Limited Partner of the Partnership shall be liable for any debts or liabilities of the Partnership or any losses thereof in excess of such Limited Partner's capital contributions, except as may be required by law.

 

Investments in the Partnership are made by subscription agreement, subject to acceptance by the General Partner.

 

The Partnership is not required to make distributions, but may do so at the sole discretion of the General Partner. A Limited Partner may request and receive redemption of capital, subject to restrictions set forth in the Agreement. The General Partner may request and receive redemption of capital, subject to the same terms as any Limited Partner. The partners may withdraw their interests on a monthly basis upon at least 15 days’ prior written notice, subject to the discretion of the General Partner. No distributions were made for the nine months ended September 30, 2020 and 2019.

 

NOTE 3 - RELATED PARTY TRANSACTIONS

 

A. General Partner Management Fee

 

The General Partner receives a monthly management fee from the Partnership equal to 0.104% (1.25% annually) for Class A and Class B, and 0.0625% (0.75% annually) for Institutional Interests of the Partnership's net asset value apportioned to each Partner’s capital account at the beginning of the month, before deduction of any accrued incentive fees related to the current quarter (the “management fee net asset value”). The General Partner may declare any Limited Partner a “Special Limited Partner” and the management fees or incentive fees charged to any such partner may be different than those charged to other Limited Partners. For the three and nine months ended September 30, 2020 and 2019, there were no Special Limited Partners.

 

Total management fees earned by the General Partner for the three and nine months ended September 30, 2020 and 2019 are shown on the Statements of Income (Loss) as Management Fee.

 

B. Administrative Fee

 

The General Partner receives a monthly administrative fee from the Partnership equal to 0.0275% (0.33% annually) of the Partnership's management fee net asset value attributable to Class A and Class B Interests. For the three and nine months ended September 30, 2020, administrative fees for Class A Interests were $3,892 and $14,128, respectively, and administrative fees for Class B Interests were $2,645 and $9,025, respectively. For the three and nine months ended September 30, 2019, administrative fees for Class A Interests were $7,632 and $26,558, respectively, and administrative fees for Class B Interests were $3,679 and $11,805, respectively.

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)

 

C. Altegris Investments, L.L.C. and Altegris Clearing Solutions, L.L.C.

 

Altegris Investments, L.L.C. (“Altegris Investments”), an affiliate of the General Partner, is registered as a broker-dealer with the SEC and a Delaware limited liability company. Altegris Clearing Solutions, L.L.C. (Altegris Clearing Solutions), an affiliate of the General Partner and an introducing broker registered with the CFTC, is the Partnership’s introducing broker.

 

Altegris Investments has entered into a selling agreement with the Partnership whereby it receives 2% per annum as continuing compensation for Class A Interests sold by Altegris Investments that are outstanding at month end. The Partnership’s introducing broker receives a portion of the commodity brokerage commissions paid by the Partnership to the Clearing Broker and interest income retained by the Clearing Broker. Additionally, the Partnership pays to its clearing brokers and its introducing broker, at a minimum, brokerage charges at a flat rate of 0.125% (1.5% annually) of the Partnership’s management fee net asset value. Brokerage charges may exceed the flat rate described above, depending on commission and trading volume levels, which may vary.

 

At September 30, 2020 and December 31, 2019, respectively, the Partnership had charges for brokerage-related services payable to Altegris Clearing Solutions of $6,945 and $3,727, respectively, and service fees payable to Altegris Investments of $1,581 and $2,532, respectively. The following tables show the fees paid to Altegris Investments and Altegris Clearing Solutions for the three and nine months ended September 30, 2020 and 2019, respectively:

 

		Three months ended				Nine months ended				Three months ended				Nine months ended
		September 30, 2020				September 30, 2020				September 30, 2019				September 30, 2019
Altegris Clearing Solutions - Brokerage Commission fees		$	25,301			$	65,818			$	23,896			$	110,949
Altegris Investments- Service fees			4,871				18,296				8,227				26,246
Total		$	30,172			$	84,114			$	32,123			$	137,195

 

The amounts above are included in Brokerage Commissions and Service Fees on the Statements of Income (Loss), respectively. The amounts shown on the Statements of Income (Loss) include fees paid to non-related parties.

 

NOTE 4 - ADVISORY CONTRACT

 

The Partnership pays the Advisor a quarterly incentive fee of 30% of the trading profits. However, the quarterly incentive fee is payable only on cumulative profits achieved from commodity trading (as defined in the Agreement), calculated separately for each partner’s interest. The incentive fee is accrued on a monthly basis and paid quarterly. Incentive fees are reflected in the Statements of Income (Loss).

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 5 - SERVICE FEES

 

As compensation for the continuing services of the selling agents to the Class A Limited Partners, Class A Interests pay the selling agents an ongoing monthly payment of 0.166% (2% annually) of the net asset value of interests sold by the agents that are outstanding at month-end. As compensation for the continuing services of the selling agents to the Limited Partners holding Institutional Interests, the selling agents may elect the Institutional Interests to pay the selling agents an ongoing monthly payment of 0.0417% (0.50% annually) of the net asset value of Institutional Interests sold by the agents that are outstanding at month-end. For the three and nine months ended September 30, 2020, service fees for Class A Interests were $21,119 and $81,728, respectively. For the three and nine months ended September 30, 2019, service fees for Class A Interests were $44,564 and $156,855, respectively. There were no service fees for Institutional Interests for the three and nine months ended September 30, 2020 and 2019.

 

NOTE 6 - BROKERAGE COMMISSIONS AND CHARGES

 

The Partnership is subject to monthly brokerage charges equal to the greater of: (A) actual commissions and expenses paid to the Clearing Broker by the Partnership; or (B) an amount equal to 0.125% of the management fee net asset value of all Limited Partners’ month-end capital account balances (1.50% annually) (the “Minimum Amount”).

 

If actual commissions and expenses paid to the Clearing Broker in a month (in (A) above) are less than the Minimum Amount, the Partnership will pay to the Introducing Broker the difference as payment for brokerage-related services, including, but not limited to, monitoring trade, execution, clearing, custodial and distribution services provided to the Partnership. If actual commissions and expenses paid to the Clearing Broker in a month (in (A) above) are greater than the Minimum Amount, the Partnership pays only the amounts described in (A) above. The Partnership’s payments of brokerage commissions to the Clearing Broker for clearing trades on its behalf, and payments to the Introducing Broker for brokerage-related services, if any, are reflected in the Statements of Income (Loss) as Brokerage Commissions.

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS

 

The Partnership engages in the speculative trading of futures contracts for the purpose of achieving capital appreciation. None of the Partnership’s derivative instruments are designated as hedging instruments, as defined in the Derivatives and Hedging Topic of the Accounting Standards Codification (“ASC”), nor are they used for other risk management purposes. The Advisor and General Partner actively assess, manage and monitor risk exposure on derivatives on a contract basis, a sector basis (e.g., interest rate derivatives, agricultural derivatives, etc.), and on an overall basis in accordance with established risk parameters. Due to the speculative nature of the Partnership’s derivative trading activity, the Partnership is subject to the risk of substantial losses from derivatives trading.

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

The following presents the fair value of derivative contracts as of September 30, 2020 and December 31, 2019. The fair value of derivative contracts is presented as an asset if in a gain position and a liability if in a loss position. Fair value is presented on a gross basis in the table below even though the derivative contracts qualify for net presentation in the Statements of Financial Condition.

 

		September 30, 2020
			Assets				Liability
Type of			Derivatives				Derivatives				Net
Derivatives Contracts			Fair Value				Fair Value				Fair Value
Futures Contracts
Currencies		$	2,926			$	(7,875	)		$	(4,949	)
Energy			–				(550	)			(550	)
Interest rates			1,327				(2,628	)			(1,301	)
Metals			3,360				(654	)			2,706
Stock Indices			20,840				(1,718	)			19,122
Treasury Rates			–				(1,163	)			(1,163	)
Total Futures Contracts		$	28,453			$	(14,588	)		$	13,865

 

			December 31, 2019
			Assets				Liability
Type of			Derivatives				Derivatives				Net
Derivatives Contracts			Fair Value				Fair Value				Fair Value
Futures Contracts
Currencies		$	5,072			$	(11,117	)		$	(6,045	)
Energy			4,138				(832	)			3,306
Interest rates			2,209				(85,327	)			(83,118	)
Metals			162,087				–				162,087
Stock Indices			109,458				(3,908	)			105,550
Treasury Rates			–				(36,048	)			(36,048	)
Total Futures Contracts		$	282,964			$	(137,232	)		$	145,732

 

The following presents the trading results of the Partnership’s derivative trading and information related to the volume of the Partnership’s derivative activity for the three and nine months ended September 30, 2020 and 2019.

 

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

The below captions of “Realized” and “Change in Unrealized” correspond to the captions in the Statements of Income (Loss) for gain (loss) on trading derivatives contracts.

 

Three Months Ended September 30, 2020
Type of							Change in
Derivatives Contracts			Realized				Unrealized
Futures Contracts
Currencies		$	(15,639	)		$	(2,474	)
Energy			(17,613	)			(1,944	)
Interest rates			(47,225	)			9,134
Metals			(40,261	)			27,175
Stock Indices			(92,715	)			4,928
Treasury Rates			(3,901	)			(5,027	)
Total Futures Contracts		$	(217,354	)		$	31,792

 

For the three months ended September 30, 2020, the average notional value of the futures contracts was $6,392,697. The average notional value of futures contracts are representative of the Partnership’s volume of derivative activity for futures contracts during the period under review.

 

Nine Months Ended September 30, 2020
Type of							Change in
Derivatives Contracts			Realized				Unrealized
Futures Contracts
Currencies		$	28,525			$	1,096
Energy			107,995				(3,856	)
Interest rates			48,508				81,817
Metals			262,920				(159,381	)
Stock Indices			(898,641	)			(86,428	)
Treasury Rates			(132,807	)			34,885
Total Futures Contracts		$	(583,500	)		$	(131,867	)

 

For the nine months ended September 30, 2020, the average notional value of the futures contracts was $20,820,698. The average notional value of futures contracts are representative of the Partnership’s volume of derivative activity for futures contracts during the period under review.

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)

 

Three Months Ended September 30, 2019
Type of							Change in
Derivatives Contracts			Realized				Unrealized
Futures Contracts
Currencies		$	106,751			$	14,487
Energy			38,361				22,565
Interest rates			(398,124	)			(6,153	)
Metals			(245,120	)			(137,051	)
Stock Indices			452,845				(73,570	)
Treasury Rates			(7,282	)			28,811
Total Futures Contracts		$	(52,569	)		$	(150,911	)

 

For the three months ended September 30, 2019, the average notional value of the futures contracts was $44,772,139. The average notional value of futures contracts are representative of the Partnership’s volume of derivative activity for futures contracts during the period under review.

 

Nine Months Ended September 30, 2019
Type of							Change in
Derivatives Contracts			Realized				Unrealized
Futures Contracts
Currencies		$	(78,732	)		$	15,332
Energy			10,447				79,283
Interest rates			(200,584	)			(43,222	)
Metals			108,736				69,625
Stock Indices			(1,798,537	)			47,927
Treasury Rates			186,552				12,795
Total Futures Contracts		$	(1,772,118	)		$	181,740

 

For the nine months ended September 30, 2019, the average notional value of the futures contracts was $32,636,406. The average notional value of futures contracts are representative of the Partnership’s volume of derivative activity for futures contracts during the period under review.

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

 

NOTE 8 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND UNCERTAINTIES

 

The Partnership participates in the speculative trading of commodity futures contracts, substantially all of which are subject to margin requirements. The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges and interbank market makers. Further, the Clearing Broker has the right to require margin in excess of the minimum exchange requirement. Risk arises from changes in the value of these contracts (market risk) and the potential inability of brokers or interbank market makers to perform under the terms of their contracts (credit risk).

 

All of the contracts currently traded by the Partnership are exchange traded. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions because, in over-the-counter transactions, the Partnership must rely solely on the credit of its respective individual counterparties. However, in the future, if the Partnership were to enter into non-exchange traded contracts, it would be subject to the credit risk associated with counterparty non-performance. The credit risk from counterparty non-performance associated with such instruments is the net unrealized gain, if any.

 

The Partnership also has credit risk because the sole counterparty to all domestic futures contracts is the exchange clearing corporation. In addition, the Partnership bears the risk of financial failure by the Clearing Broker. The Partnership's policy is to continuously monitor its exposure to market and counterparty risk through the use of a variety of financial position and credit exposure reporting and control procedures. In addition, the Partnership has a policy of reviewing the credit standing of each clearing broker or counterparty with which it conducts business.

 

The Partnership has a substantial portion of its assets on deposit with the Custodian in U.S. government agency bonds and notes, corporate notes and certificates of deposit. Risks arise from investments in bonds and notes due to possible illiquidity and the potential for default by the issuer or counterparty. Such instruments are also sensitive to changes in interest rates and economic conditions.

 

NOTE 9 - INDEMNIFICATIONS

 

In the normal course of business, the Partnership enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. The Partnership expects the risk of any future obligation under these indemnifications to be remote.

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 10 - FINANCIAL HIGHLIGHTS

 

The following information presents the financial highlights of the Partnership for the three and nine months ended September 30, 2020 and 2019. This information has been derived from information presented in the financial statements.

 

		Three Months ended September 30, 2020
										Institutional
		Class A				Class B				Interest
Total return for Limited Partners (3)
Total return prior to incentive fees			(3.75)%				(3.30)%				(3.12)%
Incentive fees			0.00%				(0.00)%				0.00%
Total return after incentive fees			(3.75)%				(3.30)%				(3.12)%
Ratio to average net asset value
Expenses prior to incentive fees (2)			5.60%				3.70%				2.87%
Incentive fees (3)			0.00%				0.00%				0.00%
Total expenses			5.60%				3.70%				2.87%
Net investment loss (1) (2)			(5.60)%				(3.70)%				(2.87)%

 

			Nine Months ended September 30, 2020
											Institutional
			Class A				Class B				Interest
Total return for Limited Partners (3)
Total return prior to incentive fees			(11.95)%				(10.69)%				(10.10)%
Incentive fees			0.00%				0.00%				0.00%
Total return after incentive fees			(11.95)%				(10.69)%				(10.10)%
Ratio to average net asset value
Expenses prior to incentive fees (2)			5.32%				3.34%				2.50%
Incentive fees (3)			0.00%				0.00%				0.00%
Total expenses			5.32%				3.34%				2.50%
Net investment loss (1) (2)			(4.79)%				(2.82)%				(2.02)%

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 10 - FINANCIAL HIGHLIGHTS (CONTINUED)

 

		Three Months ended September 30, 2019
										Institutional
		Class A				Class B				Interest
Total return for Limited Partners (3)
Total return prior to incentive fees			(2.77)%				(2.30)%				(2.09)%
Incentive fees			0.00%				0.00%				0.00%
Total return after incentive fees			(2.77)%				(2.30)%				(2.09)%
Ratio to average net asset value
Expenses prior to incentive fees (2)			5.39%				3.47%				2.64%
Incentive fees (3)			0.00%				0.00%				0.00%
Total expenses			5.39%				3.47%				2.64%
Net investment loss (1) (2)			(3.29)%				(1.37)%				(0.53)%

 

			Nine Months ended September 30, 2019
											Institutional
			Class A				Class B				Interest
Total return for Limited Partners (3)
Total return prior to incentive fees			(11.70)%				(10.38)%				(9.81)%
Incentive fees			0.00%				(0.09)%				0.00%
Total return after incentive fees			(11.70)%				(10.47)%				(9.81)%
Ratio to average net asset value
Expenses prior to incentive fees (2)			4.98%				3.22%				2.25%
Incentive fees (3)			0.00%				0.10%				0.00%
Total expenses			4.98%				3.32%				2.25%
Net investment loss (1) (2)			(2.90)%				(1.14)%				(0.16)%

 

Total return and the ratios to average net asset value are calculated for each class of Limited Partners’ capital taken as a whole. An individual Limited Partner’s total return and ratios may vary from the above returns and ratios due to the timing of their contributions and withdrawals and differing fee structures.

 

Total return is calculated on a monthly compounded basis.

 

(1)

Excluded incentive fee

(2)

Annualized.

(3)

Not annualized.

 

 

 

 

 

 

ALTEGRIS QIM FUTURES FUND, L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

_______________

 

NOTE 11 - SUBSEQUENT EVENTS

 

Management of the Partnership evaluated subsequent events through the date these financial statements were issued, and concluded that no events subsequent to September 30, 2020 have occurred that would require recognition or disclosure, except as noted below.

 

From October 1, 2020 through November 11, 2020, the Partnership had redemptions of $163,603.

 

On September 9, 2020, Artivest Holdings, Inc. (“Artivest”), the current parent company of the General Partner publicly announced the entry into a definitive agreement with Altegris Holdings, LLC (“Holdings”) to sell all of the outstanding ownership interests of the General Partner to Holdings (the “Acquisition”). Holdings is a newly-formed holding company that will, as of the closing of the Acquisition, be owned by Continuum Capital Managers, LLC (“Continuum”) and AV5 Acquisition, LLC (“AV5”).  AV5 is a newly-formed holding company that is solely owned by Matthew C. Osborne.  Subsequent to the quarter ending September 30, 2020, Holdings will acquire the General Partner and all related assets from Artivest, including its commodity pool business. The close of this transaction is contemplated to be completed at or about December 31, 2020, or as soon thereafter as possible, at which time the General Partner will become a wholly-owned subsidiary of Holdings, its new parent company and which will be controlled by  Mr. Osborne (through his ownership of AV5) and Continuum.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION (continued)

 

 

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 conjunction with, the following analysis.

 

Liquidity

 

The Partnership’s assets are generally held as cash or cash equivalents, which are used to margin the Partnership’s futures positions and are sold to pay redemptions and expenses as needed. Other than any potential market-imposed limitations on liquidity, the Partnership’s assets are highly liquid and are expected to remain so. Market-imposed limitations, when they occur, can be due to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Partnership’s futures trading. A portion of the Partnership’s assets not used for margin and held with the Custodian are invested in liquid, high quality securities. Through September 30, 2020, the Partnership experienced no meaningful periods of illiquidity in any of the markets traded by the Advisor on behalf of the Partnership.

 

Capital Resources

 

The Partnership raises additional capital only through the sale of Interests and capital is increased through trading profits (if any) and interest income. The Partnership does not engage in borrowing.

 

The amount of capital raised for the Partnership should not have a significant impact on its operations, as the Partnership has no significant capital expenditure or working capital requirements other than for capital to pay trading losses, brokerage commissions and expenses. Within broad ranges of capitalization, the Partnership’s trading positions should increase or decrease in approximate proportion to the size of the Partnership.

 

The Partnership participates in the speculative trading of commodity futures contracts and may trade options on futures contracts and forward contracts, substantially all of which are subject to margin requirements. The minimum amount of margin required for each contract is set from time to time in response to various market factors by the respective exchanges. Further, the Partnership’s futures commission merchants and brokers may require margin in excess of minimum exchange requirements.

 

All of the futures contracts currently traded by the Advisor on behalf of the Partnership are exchange-traded. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions because, in over-the-counter transactions, the Partnership must rely solely on the credit of its trading counterparties, whereas exchange-traded contracts are generally, but not universally, backed by the collective credit of the members of the exchange. In the future, the Partnership anticipates that it will enter into non-exchange-traded foreign currency contracts and be subject to the credit risk associated with counterparty non-performance.

 

The Partnership bears the risk of financial failure by the Clearing Broker and/or other clearing brokers or counterparties with which the Partnership trades.

 

Results of Operations

 

The Partnership’s success depends primarily upon the Advisor’s ability to recognize and capitalize on market trends in the sectors of the global commodity futures markets in which it trades. The Partnership seeks to produce long-term capital appreciation through growth, and not current income. The past performance of the Partnership is not necessarily indicative of future results.

 

Due to the nature of the Partnership’s trading, the results of operations for the interim period presented should not be considered indicative of the results that may be expected for the entire year.

 

 

 

 

Performance Summary

 

Three Months Ended September 30, 2020

 

During the third quarter of 2020, the Partnership incurred net realized and unrealized losses of $216,863 from its trading activities, net of brokerage commissions of $30,729. The Partnership accrued total expenses of $96,028, including $25,269 in management fees paid to the General Partner, $0 in incentive fees, and $52,981 in service and professional fees. The Partnership earned $0 in interest income during the third quarter of 2020. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the third quarter of 2020 is set forth below.

 

Third Quarter 2020. The Partnership’s trading advisor, QIM believes that numerous small inefficiencies exist in financial markets that can be exploited through the prudent use of robust analysis and predictive technologies. The trading program currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation. Third quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was negative in July of 2020. Each sector contributed to overall losses. Leading the negative returns was stock index trading which was the largest underperforming sector. Metals positions were the next largest detractor from performance, followed by currencies. Interest rates were also negative to a lesser extent, and energies were closest to flat but still added to aggregate losses. The Partnership was negative in August of 2020. Stock index trading was the most underperforming sector, followed by interest rates. Energies detracted slightly from performance and metals were near flat. Currencies were slightly positive and the only sector with gains. The Partnership was positive in September of 2020. The largest profits were driven by stock index positions, which outperformed the other sectors. Currencies did not have a meaningful impact while gains from metals trading contributed to overall positive performance. Offsetting some of these gains were negative results from interest rates and energies.

 

Three Months Ended September 30, 2019

 

During the third quarter of 2019, the Partnership incurred net realized and unrealized losses of $259,983 from its trading activities, net of brokerage commissions of $53,488. The Partnership accrued total expenses of $166,034, including $43,882 in management fees paid to the General Partner, $0 in incentive fees, and $82,566 in service and professional fees. The Partnership earned $74,324 in interest income during the third quarter of 2019. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the third quarter of 2019 is set forth below.

 

Third Quarter 2019: The Partnership’s trading advisor, QIM believes that numerous small inefficiencies exist in financial markets that can be exploited through the prudent use of robust analysis and predictive technologies. The trading program currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation. Third quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was positive in July of 2019. All sectors posted gains and profits were driven by stock index trading, which outperformed the other sectors. Interest rates were the next most profitable sector, followed closely by currencies. Trading in metals and energies also contributed to overall positive performance. The Partnership was negative in August of 2019. Trading in interest rates detracted the most from performance. Results from positions in metals were the next underperforming sector and currency trading also added slightly to losses. Gains in stock indices offset some losses, and energies were also slightly positive but did not provide a meaningful impact to performance. The Partnership was negative in September of 2019. Stock indices were the most underperforming sector. Trading in metals and interest rates also resulted in losses. Energies were close to flat, which did not provide a significant effect on aggregate returns. Trading in currencies also resulted in near flat performance and did not have a significant effect on overall returns.

 

 

 

 

Nine Months Ended September 30, 2020

 

During the nine months ended September 30, 2020, the Partnership incurred net realized and unrealized losses of $800,923 from its trading activities, net of brokerage commissions of $108,526. The Partnership accrued total expenses of $319,256, including $89,343 in management fees paid to the General Partner, $0 in incentive fees, and $176,468 in service and professional fees. The Partnership earned $38,814 in interest income during the nine months ended September 30, 2020. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the nine months ended September 30, 2020 is set forth below.

 

Third Quarter 2020. The Partnership’s trading advisor, QIM believes that numerous small inefficiencies exist in financial markets that can be exploited through the prudent use of robust analysis and predictive technologies. The trading program currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation. Third quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was negative in July of 2020. Each sector contributed to overall losses. Leading the negative returns was stock index trading which was the largest underperforming sector. Metals positions were the next largest detractor from performance, followed by currencies. Interest rates were also negative to a lesser extent, and energies were closest to flat but still added to aggregate losses. The Partnership was negative in August of 2020. Stock index trading was the most underperforming sector, followed by interest rates. Energies detracted slightly from performance and metals were near flat. Currencies were slightly positive and the only sector with gains. The Partnership was positive in September of 2020. The largest profits were driven by stock index positions, which outperformed the other sectors. Currencies did not have a meaningful impact while gains from metals trading contributed to overall positive performance. Offsetting some of these gains were negative results from interest rates and energies.

 

Second Quarter 2020. The Partnership’s trading advisor, QIM believes that numerous small inefficiencies exist in financial markets that can be exploited through the prudent use of robust analysis and predictive technologies. The trading program currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation. Second quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was negative in April of 2020. Stock index trading was the most underperforming sector, followed by energies. Positions from both interest rates and metals were also negative, adding to losses. Currencies were slightly positive and the only sector with gains. The Partnership was positive in May of 2020. The largest profits were driven by interest rate trading, which outperformed the other sectors. Gains from energies trading contributed to overall performance. Offsetting some of these gains were negative results from metals which were the most underperforming sector, followed by currencies. The Partnership was negative in June of 2020. Each sector contributed to overall losses. Leading the negative returns was stock index trading which was the largest underperforming sector. Currency positions were the next largest detractor from performance, followed by metals. Interest rates and energies were also negative to a lesser extent, adding to aggregate losses.

 

First Quarter 2020. The Partnership’s trading advisor, QIM believes that numerous small inefficiencies exist in financial markets that can be exploited through the prudent use of robust analysis and predictive technologies. The trading program currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation. First quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was positive in January of 2020. The Partnership enjoyed positive contribution from all sectors. Leading the performance, the largest profits were driven by interest rate trading, which outperformed the other sectors. Gains from stock index trading and metals were the next most significant contributors to returns. Positions in currencies and energies were also positive to a lesser extent. The Partnership was negative in February of 2020. Interest rate trading was the largest underperforming sector. Stock index positions also detracted from returns, adding to overall losses. Energies were the most positive performing sector, offsetting some of the losses. Currencies and metals were slightly positive, but not enough to impact aggregate results. The Partnership was negative in March of 2020. Losses were driven by stock index trading which was the most underperforming sector. Interest rates were the next most underperforming sector, followed by currencies. Energies were slightly negative and results from positions in metals were near flat.

 

 

 

 

Nine Months Ended September 30, 2019

 

During the nine months ended September 30, 2019, the Partnership incurred net realized and unrealized losses of $1,772,483 from its trading activities, net of brokerage commissions of $181,777. The Partnership accrued total expenses of $534,605, including $149,014 in management fees paid to the General Partner, $4,793 in incentive fees, and $294,764 in service and professional fees. The Partnership earned $255,432 in interest income during the nine months ended September 30, 2019. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for the nine months ended September 30, 2019 is set forth below.

 

Third Quarter 2019. The Partnership’s trading advisor, QIM believes that numerous small inefficiencies exist in financial markets that can be exploited through the prudent use of robust analysis and predictive technologies. The trading program currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation. Third quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was positive in July of 2019. All sectors posted gains and profits were driven by stock index trading, which outperformed the other sectors. Interest rates were the next most profitable sector, followed closely by currencies. Trading in metals and energies also contributed to overall positive performance. The Partnership was negative in August of 2019. Trading in interest rates detracted the most from performance. Results from positions in metals were the next underperforming sector and currency trading also added slightly to losses. Gains in stock indices offset some losses, and energies were also slightly positive but did not provide a meaningful impact to performance. The Partnership was negative in September of 2019. Stock indices were the most underperforming sector. Trading in metals and interest rates also resulted in losses. Energies were close to flat, which did not provide a significant effect on aggregate returns. Trading in currencies also resulted in near flat performance and did not have a significant effect on overall returns.

 

Second Quarter 2019. The Partnership’s trading advisor, QIM believes that numerous small inefficiencies exist in financial markets that can be exploited through the prudent use of robust analysis and predictive technologies. The trading program currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation. Second quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was negative in April of 2019. Losses were driven primarily by stock index trading, which was significantly the most underperforming sector. Metals were also slightly negative which further detracted from returns. Energy trading contributed to losses, while interest rates were close to flat. Currencies were slightly positive, although gains were not enough to offset overall declines. The Partnership was negative in May of 2019. Trading in stock indices detracted the most from performance. Interest rate trading also added to losses. Metals, currencies, and energies produced slightly positive results, but did not provide a meaningful impact to performance. The Partnership was positive in June of 2019. Positions in stock indices were responsible for the majority of profits. Trading in metals also resulted in meaningful gains. Energies were close to flat, which did not provide a significant effect on aggregate returns. Exposure to currencies and interest rates underperformed, detracting from performance.

 

First Quarter 2019. The Partnership’s trading advisor, QIM believes that numerous small inefficiencies exist in financial markets that can be exploited through the prudent use of robust analysis and predictive technologies. The trading program currently employs several thousand quantitative trading models that utilize pattern recognition to predict short-term price movements in global futures markets. All models are tested across large data sets that expose them to a wide range of market, economic, and political environments, as well as a wide range of time frames and interactions. Only those models that prove to be the most robust, statistically significant, and conceptually diverse are used in actual trading. The resultant system of models offers what QIM believes to be reliable signals that guide market timing and trade allocation. First quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was negative in January of 2019. Losses were driven primarily by stock index trading, which was significantly the most underperforming sector. Currencies were also slightly negative which further detracted from returns. Metals were the best performing sector, although gains were not enough to offset overall declines. Energies were also positive, however not significant enough to deter losses while interest rates were flat. The Partnership was negative in February of 2019. Trading in stock indices detracted the most from performance. Metals, currencies, and energies were also underperformers adding to losses. Interest rate trading produced slightly positive results but did not provide a meaningful impact to performance. The Partnership was negative in March of 2019. Positions in stock indices were responsible for the majority of losses. Profits from interest rate trading worked towards minimizing the impact of declines and metals were also slightly positive. Exposure to currencies and energies resulted in moderate declines which contributed to aggregate negative performance.

 

 

 

 

Off-Balance Sheet Arrangements

 

The Partnership does not engage in off-balance sheet arrangements with other entities.

 

Item 3: Quantitative and Qualitative Disclosures About Market Risk.

 

Not required.

 

Item 4: Controls and Procedures.

 

The General Partner, with the participation of the General Partner’s principal executive officer 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 their evaluation, has concluded that these disclosure controls and procedures are effective. There were no significant changes in the General Partner’s internal controls over financial reporting with respect to the Partnership or in other factors applicable to the Partnership that could significantly affect these controls subsequent to the date of the evaluation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1: Legal Proceedings.

 

None.

 

Item 1A: Risk Factors.

 

None.

 

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

 

(a) None.

 

(b) Not applicable.

 

(c) Limited Partners may redeem some or all of their Interest in the Partnership as of the end of any calendar month upon fifteen (15) days’ prior written notice to the General Partner. The Partnership may declare additional redemption dates upon notice to the Limited Partners. The redemption by a Limited Partner has no impact on the value of the capital accounts of the remaining Limited Partners. The following table summarizes the redemptions by Limited Partners during the third calendar quarter of 2020:

 

Month			Amount Redeemed
July 31, 2020			$	492,328
August 31, 2020			$	312,399
September 30, 2020			$	595,550

 

Item 3: Defaults Upon Senior Securities.

 

(a) None.

 

(b) None.

 

Item 4: Mine Safety Disclosure.

 

Not applicable.

 

Item 5: Other Information.

 

(a) None.

 

(b) Not applicable.

 

 

 

 

Item 6: Exhibits.

 

The following exhibits are incorporated herein by reference from the exhibits of the same numbers and descriptions filed with the registrant’s Registration Statement on Form 10 (File No. 000-53815) filed on November 2, 2009.

 

Exhibit Number	Description of Document
3.1	Certificate of Formation of APM – QIM Futures Fund, L.P.
10.1	Agreement with Quantitative Investment Management LLC
10.2	Selling Agency Agreement between APM – QIM Futures Fund, L.P. and Altegris Investments Inc.

 

The following exhibit is incorporated herein by reference from the exhibit of the same number and description filed with the registrant’s Current Report on Form 8-K (File No. 000-53815) filed on August 5, 2010.

 

Exhibit Number	Description of Document
3.01	Amendment to the Certificate of Formation of APM – QIM Futures Fund, L.P., changing the registrant’s name to Altegris QIM Futures Fund, L.P.

 

The following exhibit is incorporated herein by reference from the exhibit of the same number and description filed with the registrant’s Annual Report on Form 10-K (File No. 000-53815) filed on March 31, 2015.

 

Exhibit Number	Description of Document
4.1	Second Amended and Restated Agreement of Limited Partnership of Altegris QIM Futures Fund, L.P.

 

The following exhibits are included herewith.

 

Exhibit Number	Description of Document
31.1	Rule 13a-14(a)/15d-14(a) Certification
31.2	Rule 13a-14(a)/15d-14(a) Certification
32.1	Section 1350 Certification
32.2	Section 1350 Certification

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURES

 

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: November 16, 2020

 

ALTEGRIS QIM FUTURES FUND, L.P.

 

By:	ALTEGRIS ADVISORS, L.L.C.,
		its general partner

 

 

 

/s/ Martin Beaulieu

Martin Beaulieu, Principal Executive Officer and Principal Financial Officer