Attached files
| file | filename |
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| EX-32.02 - CERTIFICATION - Altegris QIM Futures Fund, L.P. | qim_ex3202.htm |
| EX-32.01 - CERTIFICATION - Altegris QIM Futures Fund, L.P. | qim_ex3201.htm |
| EX-31.02 - CERTIFICATION - Altegris QIM Futures Fund, L.P. | qim_ex3102.htm |
| EX-31.01 - CERTIFICATION - Altegris QIM Futures Fund, L.P. | qim_ex3101.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2020
or
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 000-53815
ALTEGRIS QIM FUTURES FUND, L.P.
(Exact name of registrant as specified in its charter)
|
DELAWARE (State or other jurisdiction of incorporation or organization) |
27-0473854 (I.R.S. Employer Identification No.) |
c/o ALTEGRIS ADVISORS, L.L.C.
1200 Prospect Street, Suite 400
La Jolla, CA 92037
(Address of principal executive offices) (zip code)
(858) 459-7040
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically 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 x No o
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 x |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
Not Applicable.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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(a) General Development of Business
Altegris QIM Futures Fund, L.P. (the “Partnership”) was organized as a Delaware limited partnership in June 2009 and commenced operations following an initial closing on October 1, 2009. The Partnership is a commodity pool engaged in speculative trading across a broad range of futures contracts and currencies. The Partnership may in the future trade options on futures contracts and forward contracts (together with futures contracts and currencies, “Commodity Interests”).
On December 31, 2014, pursuant to that certain General Partner Admission Agreement dated as of December 30, 2014 among Altegris Advisors, L.L.C. (“Advisors” or the “General Partner”), Altegris Portfolio Management, Inc. (“APM”) and the Partnership, Advisors, a Delaware limited liability company and an affiliate of APM, was admitted as a general partner of the Partnership effective immediately prior to the Transaction (defined below). Pursuant to an internal reorganization of APM, then a general partner of Partnership, and certain affiliated entities, APM merged with and into Advisors on December 31, 2014 (the “Transaction”). By operation of law and pursuant to Paragraph 17 of Partnership’s First Amended and Restated Agreement of Limited Partnership, effective as of July 26, 2010, Advisors then assumed the general partner interest of Partnership previously held by APM.
The General Partner has sole responsibility for management and administration of all aspects of the Partnership’s business. Investors purchasing limited partnership interests (the “Interests”) in the Partnership (“Limited Partners” and together with the General Partner, “Partners”) have no rights to participate in the management of the Partnership.
The General Partner is registered with the Commodity Futures Trading Commission (“CFTC”) as a Commodity Pool Operator (“CPO”) and is a member of National Futures Association (“NFA”). Quantitative Investment Management LLC, a Virginia limited liability company formed in May 2003, acts as the Partnership’s trading advisor (“QIM” or the “Advisor”). QIM became registered as a Commodity Trading Advisor (“CTA”) in 2004 and a CPO in 2005 and is a member of NFA.
Altegris Investments, L.L.C. (“Altegris”), an affiliate of the General Partner, serves as a selling agent of the Interests and acted as the Partnership’s introducing broker until January 1, 2011, when Altegris Futures L.L.C. (“Altegris Futures”) replaced Altegris as the Partnership’s introducing broker. On December 31, 2014, Altegris Futures merged with and into its affiliate, Altegris Clearing Solutions, L.L.C. Altegris Clearing Solutions, L.L.C. is registered with the CFTC as an Introducing Broker (“Clearing Solutions” or the “Introducing Broker”).
The Partnership’s term will end upon the first to occur of the following: receipt by the General Partner of an election to dissolve the Partnership at a specified time by Limited Partners owning more than 50% of the Interests then outstanding, notice of which is sent by registered mail to the General Partner not less than ninety (90) days prior to the effective date of such dissolution; withdrawal, admitted or court decreed insolvency or dissolution of the General Partner unless at such time there is at least one remaining General Partner in the Partnership; or any event that makes it unlawful for the existence of the Partnership to be continued or requiring termination of the Partnership.
The Partnership is not required to be, and is not, registered under the Investment Company Act of 1940, as amended.
As of January 31, 2021, the aggregate net asset value of the Interests in the Partnership before redemptions was $6,049,042. The Partnership operates on a calendar fiscal year and has no subsidiaries.
The Partnership offers three “classes” of Interests: Class A, Class B and Institutional Interests (each, a “Class of Interest”). The Classes of Interests differ from each other only in the fees that they pay and the applicable investment minimums.
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(b) Financial Information About Segments
The Partnership’s business constitutes only one segment for financial reporting purposes — i.e., a speculative “commodity pool.” The Partnership does not engage in sales of goods or services. Financial information regarding the Partnership’s business is set forth in the Partnership’s financial statements, included herewith.
(c) Narrative Description of Business
The Partnership’s objective is to produce long-term capital appreciation through growth, and not current income.
Predictive Modeling. QIM believes that financial markets are not entirely efficient and that numerous small inefficiencies exist and can be exploited through the prudent use of robust analysis and predictive technologies.
QIM 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.
QIM’s trading strategies and models may be revised from time to time as a result of ongoing research and development seeking to devise new strategies and systems as well as to improve current methods. The strategies and systems used by QIM in the future may differ significantly from those currently in use due to changes resulting from this research, and Limited Partners will not be informed of these changes as they may occur.
Risk Management. QIM applies risk management procedures that take into account the price, size, volatility, liquidity, and inter-relationships of the contracts traded. The Partnership’s positions are generally balanced in a manner that allocates approximately equal amounts of measured risk to as many distinct markets as possible and during significant drawdowns in equity, QIM will reduce market exposure by scaling back the Partnership’s overall leverage.
Trading. QIM’s trading is generally approximately 95% systematic and 5% discretionary. All facets of the predictive models, risk management, and trade allocation are fully automated or proceduralized. In this sense, the trading is systematic. Discretion of QIM, however, plays a significant role in the pursuit of improvements to the Program.
QIM has different time horizons for the execution of certain trades. For example, QIM may have certain trades executed at the beginning of the trading day while giving the executing broker limited discretion with respect to other trades.
Markets Traded. QIM currently trades or monitors a broad range of tradable markets in currencies, stock indices, interest rates, energy, grains, softs and metals. QIM may add or delete markets from this universe of tradable markets in its discretion if QIM’s research demonstrates that such an addition or deletion would enhance the program’s performance. All markets are futures markets or interbank currency markets.
QIM seeks to profitably trade each of these markets while taking advantage of the diversification available from such a varied universe of futures contracts. QIM’s trading program often takes opposing long and short positions within the same or related classes of correlated futures, which, taken in conjunction with the effect of diversification across a broad range of contracts, generally results in reduced market exposure than trading a single market with similar leverage.
A portion of the equity in the Partnership’s account is held in United States (“U.S.”) Treasury securities at the Custodian (as defined below). QIM will generally maintain an average margin to equity level of between 0% and 20%. The actual percentage of assets committed to margin at any time may be higher or lower than the target level.
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It is expected that between 5% and 20% of the Partnership’s assets generally will be held as initial margin or option premiums (in cash or U.S. Treasury Department (“Treasury”) securities) in the Partnership’s brokerage accounts at its clearing broker, SG Americas Securities LLC (“SGAS”), a futures commission merchant (“FCM”), and available for trading by QIM in Commodity Interests on behalf of the Partnership. Interest on Partnership assets held at SGAS in cash or Treasury securities will be credited to the Partnership. Depending on market factors, the amount of margin or option premiums held at SGAS could change significantly, and all of the Partnership’s assets are available for use as margin. The Partnership may also retain other brokers and/or dealers from time to time to clear or execute a portion of Partnership trades made by QIM.
With respect to Partnership assets not held at SGAS as described above, such proceeds are deposited with JPMorgan Chase Bank, N.A. (the “Custodian”) and held in cash or U.S. Treasury securities, or held in other bank cash accounts (and used to pay Partnership operating expenses). The Partnership’s custody agreement allows the Custodian to use sub-advisers to attempt to increase yield enhancement, and if so utilized, the Custodian and/or sub-adviser(s) will receive fees for cash management services. The General Partner may direct that a portion of Partnership assets be deposited with other custodians and retain other sub-advisers for the purpose of attempting to increase yield enhancement via other cash management arrangements.
(d) Regulation
The CFTC has delegated to NFA responsibility for the registration of “commodity trading advisors,” “commodity pool operators,” “futures commission merchants,” “introducing brokers,” “swap dealers,” “major swap participants” and, in most cases, their respective associated persons, as well as “floor brokers” and “floor traders.” The Commodity Exchange Act requires commodity pool operators such as the General Partner, commodity trading advisors such as the Advisor and commodity brokers or FCMs such as SGAS and introducing brokers such as the Introducing Broker to be registered and to comply with various reporting and record keeping requirements. CFTC regulations also require FCMs and certain introducing brokers to maintain a minimum level of net capital. In addition, the CFTC and certain commodities exchanges have established limits referred to as “speculative position limits” on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges. Similar position limits may in the future be put in place with respect to swaps that are exchange-traded or are economically equivalent to exchange-traded swaps or futures contracts. All accounts owned or managed by the Advisor will be combined for position limit purposes. The Advisor could be required to liquidate positions held for the Partnership in order to comply with such limits. Any such liquidation could result in substantial costs to the Partnership. In addition, many futures exchanges impose limits beyond which the price of a futures contract may not trade during the course of a trading day, and there is a potential for a futures contract to hit its daily price limit for several days in a row, making it impossible for the Advisor to liquidate a position and thereby experiencing a dramatic loss. Certain deliverable currency forward contracts are subject to limited regulation in the United States, including reporting and recordkeeping requirements.
In addition to the registration requirements described above, the CFTC and certain commodity exchanges have established limits on the maximum net long or net short position which any person may hold or control in particular commodities. Most exchanges also limit the changes in futures contract prices that may occur during a single trading day. The CFTC may in the future also implement position limits for certain exempt commodity contracts, including metals and energy contracts, with respect to futures, options on futures, and economically equivalent swaps. If such position limits are adopted, they could materially affect the Partnership’s trading strategy.
Deliverable currency forward contracts are currently subject to only limited regulation in the United States. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was enacted in July 2010, and gave the CFTC jurisdiction over non-deliverable currency forward contracts. The Reform Act mandates that a substantial portion of over-the-counter derivatives must be executed in regulated markets and submitted for clearing to regulated clearinghouses, and the CFTC may impose such a requirement on non-deliverable currency forward contracts. The mandates imposed by the Reform Act may result in the Partnership bearing higher upfront and mark-to-market margin, less favorable trade pricing, and the possible imposition of new or increased fees with respect to any swaps entered into by the Partnership.
The Partnership has no employees.
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Financial Information About Geographic Areas
The Partnership has no operations in foreign countries although it trades on foreign exchanges and other non-U.S. markets. The Partnership does not engage in sales of goods or services.
Not required.
ITEM 1B: UNRESOLVED STAFF COMMENTS
Not applicable.
The Partnership does not own or use any physical properties in the conduct of its business. Employees of the General Partner and its affiliates perform all administrative services for the Partnership from offices located at 1200 Prospect Street, Suite 400, La Jolla, CA 92037.
The Partnership is not aware of any pending legal proceedings to which either the Partnership is a party or to which any of its assets are subject. The Partnership is not aware of any material legal proceedings involving the General Partner or its principals in an adverse position to the Partnership or in which the Partnership has adverse interests. The Partnership has no subsidiaries.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market information
There is no trading market for the Interests, and none is likely to develop. Interests may be redeemed or transferred subject to the conditions imposed by the Limited Partnership Agreement.
(b) Holders
As of January 31, 2021 the Partnership had 128 holders of Interests.
(c) Dividends
The General Partner has sole discretion in determining what distributions, if any, the Partnership will make to its investors. To date no distributions or dividends have been paid on the Interests, and the General Partner has no present intention to make any.
(d) Securities Authorized for Issuance under Equity Compensation Plans
None.
(e) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
The Partnership did not sell any unregistered securities within the past three years which have not previously been included in the Partnership’s Quarterly Reports on Form 10-Q.
(f) Issuer Purchases of Equity Securities
Pursuant to the Limited Partnership Agreement, Limited Partners may redeem their Interests in the Partnership as of the end of any calendar month upon fifteen (15) days’ written notice to the General Partner. The redemption of capital from capital accounts by Limited Partners has no impact on the value of the capital accounts of other Limited Partners.
The following table summarizes Limited Partner redemptions during the fourth calendar quarter of 2020:
| Month Ended | Amount Redeemed | |||
| October 31, 2020 | $ | 165,403 | ||
| November 30, 2020 | 495,023 | |||
| December 31, 2020 | 370,955 | |||
| Total | $ | 1,031,381 | ||
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ITEM 6: SELECTED FINANCIAL DATA
Not required.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to “Item 8. Financial Statements and Supplementary Data.” The information contained therein is essential to, and should be read in conjunction with, the following analysis.
(a) 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 December 31, 2020 the Partnership experienced no meaningful periods of illiquidity in any of the markets traded by the Advisor on behalf of the Partnership.
(b) 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 FCMs 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 SGAS and/or other clearing brokers or counterparties with which the Partnership trades.
(c) Results of Operations
The Partnership’s success depends primarily upon QIM’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.
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Performance Summary
2020
During 2020, the Partnership achieved net realized and unrealized losses of ($550,983) from all trading; losses of ($574,731) from trading of derivatives including brokerage commissions of $134,637. The Partnership accrued total expenses of $308,509, including $0 in incentive fees, $110,866, in management fees paid to the General Partner, and $132,876 in service and professional fees. The Partnership earned $38,814 in interest income during 2020. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for each quarter during 2020 is set forth below.
Fourth 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. Fourth quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was negative in October of 2020. Stock index trading and interest rates trading were the most underperforming sectors leading to overall loses. Performance was close to flat from positions in currencies and metals. Energies were slightly positive, although not enough to have a meaningful impact. The Partnership was positive in November of 2020. The largest profits were driven by stock index positions, which outperformed the other sectors. Energies also contributed slightly to overall gains. Losses from interest rates trading were the largest detractor from performance. Currencies and metals were also negative to a lesser extent. The Partnership was negative in December of 2020. Leading the negative returns was stock index trading which was the largest underperforming sector. Interest rates positions were the next largest detractor from performance. Currencies and energies were slightly positive offsetting some of the losses and metals were near flat.
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.
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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.
2019
During 2019, the Partnership achieved net realized and unrealized losses of ($886,930) from all trading; losses of ($886,938) from trading of derivatives including brokerage commissions of $224,487. The Partnership accrued total expenses of $690,898, including $12,621 in incentive fees, $184,249, in management fees paid to the General Partner, and $389,023 in service and professional fees. The Partnership earned $304,377 in interest income during 2019. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for each quarter during 2019 is set forth below.
Fourth 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. Fourth quarter performance of the Partnership as a result of QIM’s trading program is as follows: The Partnership was positive in October of 2019. Profits were driven by stock index trading, which outperformed the other sectors. Interest rates were also positive, contributing to overall gains. Currencies were the largest detractor from performance, followed by metals. Energies were slightly negative. The Partnership was positive in November of 2019. Gains were led by stock index trading, which significantly outperformed the other sectors. Results from positions in metals and currencies also added slightly to gains. Interest rate trading was the largest underperforming sector, and energies were also modestly negative. The Partnership was positive in December of 2019. Stock index trading was the most outperforming sector, driving profits. Trading in metals also resulted in profits that contributed to aggregate gains. Interest rates were the most underperforming sector, offsetting positive performance. Currency positions also resulted in negative performance to a lesser extent. Energies were close to flat, which did not provide a significant effect on overall returns.
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.
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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.
2018
During 2018, the Partnership achieved net realized and unrealized losses of ($2,689,554) from all trading; losses of ($2,680,554) from trading of derivatives including brokerage commissions of $400,551. The Partnership accrued total expenses of $1,084,226, including $1,500 in incentive fees, $324,644 in management fees paid to the General Partner, and $611,936 in service and professional fees. The Partnership earned $440,529 in interest income during 2018. An analysis of the profits and losses generated from the Partnership’s commodity futures trading activities for each quarter during 2018 is set forth below.
Fourth Quarter 2018. Fourth quarter performance of the Partnership is as follows: the Partnership was negative in October of 2018. Losses were driven primarily by stock indices, as they substantially underperformed all other sectors. Energies were also slightly negative, further detracting from performance. Interest Rates, currencies, and metals all had modest gains, however they were not enough to meaningfully offset the aggregate decline. The Partnership was slightly negative in November of 2018. Losses were again driven by equities, however metals and currency trading also detracted. Gains were led by interest rate trading, the best performing sector and followed by energies, which also posted profits. The Partnership was positive in December of 2018. Equities’ contributions outpaced the contributions of all other sectors and drove positive performance. Interest rates were the only other positive contributor. Currencies were the worst performing sector, followed closely by energies, although the two combined were not enough to meaningfully negate gains made in equities. The metals sector’s contributions finished very slightly negative.
| 9 |
Third Quarter 2018. 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 2018. Losses were driven primarily by stock indices, which substantially underperformed the other sectors. Interest rates and energies were also slightly negative which further detracted from performance. Currencies and metals both had modest gains, however they were not enough to meaningfully offset aggregate declines. The Partnership was positive in August of 2018. Gains were led by interest rate trading, which was the best performing sector. Energies were the next best performing sector, followed closely by metals which also posted profits. Currencies were slightly negative, along with stock indices which were a minimal drag to performance. The Partnership was slightly negative in September of 2018. Currencies outperformed all sectors, though not enough to offset losses. Trading in equity indices and positions in the interest rate sector detracted the most from profits. Energies and metals were close to flat, having little effect on overall performance.
Second Quarter 2018. 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 modestly positive in April of 2018. Gains were driven solely by interest rate trading, which was the only positive performing sector. These gains were substantial enough to outperform losses from all other sectors. Each additional sector detracted slightly from performance. Currencies were the worst performing sector, followed closely by equities, energies, and metals to a lesser degree. The Partnership enjoyed positive returns in May of 2018. Gains were driven primarily by interest rate trading, which was significantly the best performing sector once again. Stock index trading was the worst performing sector, detracting the most from aggregate returns. Currencies and energies posted profits that contributed positively to performance. Metals were slightly negative, but did not meaningfully drag overall performance. The Partnership was positive in June of 2018. Profits were led by equities and energies which were the best performing sectors. Interest rate trading resulted in the most significant losses, giving back some of the gains earned earlier in the quarter. Positions in currencies produced favorable returns but were somewhat offset by moderately negative performance from the metals sector.
First Quarter 2018. 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 2018. Losses were driven primarily by the stock index sector, which was the worst performing sector. Losses from stock indices were somewhat offset by results from the other sectors; however the offsetting performance was insufficient in creating cumulative positive returns. Currencies were the best performing sector, closely followed by metals. Interest rate trading contributed positively to performance ahead of energies which were also positive to a lesser degree. The Partnership suffered losses for the month of February 2018. Losses were driven primarily by the stock index sector, which was significantly the worst performing sector. Currencies were the next underperforming sector detracting from returns, followed by metals which were only slightly negative. Interest rate performance was mixed, and exposures to energy contracts produced insignificant gains that were close to flat. The Partnership enjoyed positive returns for the month of March 2018. Profits were driven primarily by the stock index sector, which was the best performing sector followed by energies. Gains from stock index and energy trading were partially offset by losses in the interest rate sector, which was the worst performing sector. Currencies were mixed, and positions in the metals sector contributed minimal gains.
(d) Off-Balance Sheet Arrangements
The Partnership does not engage in off-balance sheet arrangements with other entities.
| 10 |
(e) Contractual Obligations
Not required.
(f) Critical Accounting Estimates
The General Partner believes that the Partnership’s most critical accounting estimates relate to the valuation of the Partnership’s assets. Futures and options on futures contracts are valued using the primary exchange’s closing price. U.S. government agency securities are generally valued based on quoted prices in active markets. Corporate notes are generally valued at fair value. Security transactions are recorded on the trade date. Realized gains and losses from security transactions are determined using the specific identification cost method. 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 statement 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 income currently.
The Partnership’s financial statements are presented in accordance with U.S. generally accepted accounting principles (U.S. GAAP), which require the use of certain estimates made by the Partnership’s management. Actual results could differ from those estimates. 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.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements required by this item are included herewith following the Index to Financial Statements and are incorporated by reference into this Item 8.
Because the Partnership is a Smaller Reporting Company, as defined by Rule 229.10(f)(1), the supplementary financial information required by Item 302 of Regulation S-K is not required.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A: CONTROLS AND PROCEDURES
(a) 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 annual report, and, based on their evaluation, has concluded that these disclosure controls and procedures are effective.
(b) Management’s Annual Report on Internal Control over Financial Reporting
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Altegris Advisors, L.L.C., the general partner of the Partnership, is responsible for the management of the Partnership. Management of the General Partner (“Management”) is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Partnership’s internal control over financial reporting includes those policies and procedures that:
| · | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; |
| · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Partnership’s transactions are being made only in accordance with authorizations of Management; and |
| · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2020. In making this assessment, Management used the criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment and based on the criteria in the COSO framework, management has concluded that, as of December 31, 2020, the Partnership’s internal control over financial reporting was effective.
(c) Changes in Internal Control over Financial Reporting
There were no changes in the Partnership’s internal control over financial reporting during the quarter and year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
None.
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ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
(a) Identification of Directors and Executive Officers
(i) The Partnership has no officers, directors, or employees. The Partnership’s affairs are managed by the General Partner (although it has delegated trading and investment authority to the Advisor and administrative duties to Altegris). During the fiscal year ended December 31, 2020: (a) the General Partner was an indirect subsidiary of Artivest Holdings, Inc., a corporation that may be deemed to be controlled by (i) entities managed by Aquiline Capital Partners LLC and its affiliates (“Aquiline”), a private equity firm in New York, New York and (ii) Genstar Capital Management LLC and its affiliates (“Genstar”), a private equity firm in San Francisco, California, and (b) the General Partner’s managers and executive officers were Martin Beaulieu and Matthew C. Osborne.
Martin Beaulieu (born 1958) joined Altegris Advisors as its Executive Chairman in July 2016, responsible for firm strategy and the day-to-day management of the company. In March 2016, Mr. Beaulieu joined the Board of Directors of Altegris Advisors’ parent company. During the past five years, Mr. Beaulieu was a Managing Director, Co-Head of iShares U.S. ETFs, Head of iShares Wealth Management, and Head of the Leveraged Distribution Group, at BlackRock Investments (August 2012 through October 2015). Mr. Beaulieu served in several senior management roles for MFS Investment Management, a large mutual fund complex (September 1990 through July 2012). These roles included acting, at various times, as MFS’ Vice Chairman, its Head of Global Distribution, its President, and as a National Sales Manager. During his tenure at MFS, he also served as CEO of MFS/McLean Budden. He earned a BA degree from Santa Clara University in 1980.
Matthew C. Osborne (born 1964) was appointed Chief Investment Officer of the General Partner in January 2016. Mr. Osborne has served as a manager of the General Partner (or a director of the General Partner’s predecessor entity, APM) since July 2002. He has also served as a Vice President of APM (July 2002 to January 2011), an Executive Vice President of the General Partner (January 2011 to June 2015) and as Co-President of the General Partner (June 2015 to January 2016). Mr. Osborne has also been (1) an Executive Vice President, Chief Investment Officer and a director of Altegris (July 2002 to May 2010); (2) a manager (December 2008 to present), Executive Vice President (December 2008 to June 2015), Co-President (June 2015 to January 2016), and Chief Investment Officer of Clearing Solutions (January 2016 to present); (3) a manager (February 2010 to present), Executive Vice President (February 2010 to June 2015), Co-President (June 2015 to January 2016), and Chief Investment Officer (January 2016 to present) of Services; and (4) a manager and Executive Vice President of Altegris Holdings (October 2012 to present).
| None of the individuals listed above currently serves as a director of a public company. | ||
| (ii) | Identification of Certain Significant Employees | |
| None. | ||
| (iii) | Family Relationships | |
| None. | ||
| (iv) | Business Experience | |
| None. | ||
| (v) | Involvement in Certain Legal Proceedings | |
| None. | ||
| (vi) | Promoters and Control Persons | |
| Not Applicable. | ||
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(b) Section 16(a) Beneficial Ownership Reporting Compliance
Not Applicable
(c) Code of Ethics
The Partnership has no employees, officers or directors and is managed by the General Partner. The General Partner has adopted a Code of Ethics that applies to its principal executive officers and certain other persons associated with the General Partner. A copy of this Code of Ethics may be obtained at no charge by written request to Altegris Advisors, L.L.C., 1200 Prospect Street, Suite 400, La Jolla, CA 92037.
(d) Corporate Governance
Not applicable.
ITEM 11: EXECUTIVE COMPENSATION
The Partnership has no officers, directors, or employees. None of the principals, officers, or employees of the General Partner or Altegris receives compensation from the Partnership. All persons serving in the capacity of officers or executives of the General Partner, the general partner of the Partnership, are compensated by Altegris and/or an affiliate in respect of their respective positions with such entities. The General Partner receives a monthly management fee equal to 1/12 of 1.25% of the management fee net asset value of the month-end capital account balances attributable to Class A and Class B Interests and equal to 1/12 of 0.75% of the management fee net asset value of the month-end capital account balances attributable to Institutional Interests. The General Partner also receives a monthly administrative fee equal to 1/12 of 0.333% of the management fee net asset value of the month- end capital account balances attributable to Class A and Class B Interests.
Altegris receives continuing monthly compensation from the Partnership equal to 1/12 of 2% of the month- end net asset value of Class A Interests sold by Altegris.
Clearing Solutions, in its capacity as Introducing Broker to the Partnership, receives compensation for brokerage-related services. The Partnership will pay monthly brokerage charges equal to the greater of (A) actual commissions of $9.75 per round-turn (higher for certain exchanges or commodities) multiplied by number of round- turn trades, which amount includes other transaction costs; or (B) an amount equal to 0.125% of the management fee net asset value of all Interest holders’ month-end capital account balances (1.50% annually). If actual monthly commissions and transaction costs in (A) above are less than the amount in (B) above, the Partnership will pay the difference to the Introducing Broker as payment for brokerage-related services. In any month when the amount in (A) is greater than the amount in (B) above, the Partnership will pay only the amount described in (A) above.
The Partnership has no other compensation arrangements. There are no compensation plans or arrangements relating to a change in control of the Partnership.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
(a) Security ownership of certain beneficial owners
Not applicable.
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(b) Security Ownership of Management
The Partnership has no officers or directors. Under the terms of the Limited Partnership Agreement, the Partnership’s affairs are managed by the General Partner, which has delegated discretionary authority over the Partnership’s trading to QIM. As of January 31, 2021, the General Partner’s general partner interest in the Partnership was valued at $696, which constituted approximately 0% of the Partnership’s total assets. The General Partner and the principals of the General Partner may purchase Interests. As of January 31, 2021, the following managers and executive officers of the General Partner owned Interests in the Partnership: None. The direct and indirect holding of Interests of each manager and executive officer and the total aggregate ownership of Interests is 0% of the Partnership’s total assets.
(c) Changes in Control
None.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The Partnership does not engage in any transactions with the General Partner or its affiliates other than in respect of the services and payment of fees therefor described above in Item 1.
The Partnership paid to the General Partner monthly management fees totaling $110,866 for the year ended December 31, 2020. The Partnership paid to the General Partner administrative fees totaling $28,741 for the year ended December 31, 2020.
The Partnership paid to Altegris monthly continuing compensation of $18,300 for the year ended December 31, 2020. Clearing Solutions, in its capacity as the Introducing Broker for the Partnership, received from the Partnership’s clearing broker the following compensation: a portion of the brokerage commissions paid by the Partnership to SGAS, and of the interest income earned on Partnership’s assets held at SGAS, equal to $33,936 for the year ended December 31, 2020. In addition, Clearing Solutions, in its capacity as Introducing Broker, receives from the Partnership, monthly brokerage charges as described in Item 11. For the year ended December 31, 2020 the Partnership paid monthly brokerage charges of $78,931.
The Partnership has not and does not make any loans to the General Partner, its affiliates, their respective officers, directors or employees or the immediate family members of any of the foregoing, or to any entity, trust or other estate in which any of the foregoing has any interest, or to any other person.
None of the General Partner, its affiliates, their respective officers, directors and employees or the immediate family members of any of the foregoing, or any entity trust or other estate in which any of the foregoing has any interest has, to date, sold any asset, directly or indirectly, to the Partnership.
The Partnership has no directors, officers or employees and is managed by the General Partner. The General Partner is managed by certain of its principals, none of whom is independent of the General Partner.
| 15 |
ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth (a) the fees billed to the Partnership for professional audit services provided by Ernst & Young LLP, the Partnership’s independent registered public accountant, for the audit of the Partnership’s annual financial statements for the year ended December 31, 2019 and (b) the fees expected to be billed to the Partnership for professional audit services provided by Deloitte & Touche, LLP for the audit of the Partnership’s annual financial statements for the year ended December 31, 2020.
| FEE CATEGORY | 2020 | 2019 | ||||||
| Audit Fees | $ | 16,000 | $ | 16,000 | ||||
| Audit-Related Fees | $ | 40,000 | $ | 40,000 | ||||
| Tax Fees | $ | 8,000 | $ | 38,925 | ||||
| All Other Fees | $ | – | $ | – | ||||
| TOTAL FEES | $ | 64,000 | $ | 94,925 | ||||
Audit Fees and Audit-Related Fees consist of fees for (i) the audit of Altegris QIM Futures Fund, L.P.’s annual financial statements included in the annual report on Form 10-K, quarterly reviews of financial statements included in the reports on the Partnership’s Form 10-Q and (ii) services that are normally provided by the Independent Registered Public Accountants in connection with statutory and regulatory filings of registration statements. 2019 Audit Fees and Audit-Related Fees were paid to Ernst & Young LLP.
Tax Fees consist of non-audit fees paid to Fleming Fund Services for professional services rendered in connection with tax compliance and Partnership income tax return filings. Tax Fees for 2019 were paid to Ernst & Young LLP
The managers of the General Partner pre-approve the engagement of the Partnership’s auditor for all services to be provided by the auditor.
| 16 |
ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Financial Statements
The financial statements and balance sheets required by this Item are included herewith, beginning after the signature page hereof, and are incorporated into this Item 15.
Exhibits
The following documents (unless otherwise indicated) are filed herewith and made part of this registration statement.
| Exhibit Designation | Description | |
| * 3.1 | Certificate of Formation of APM – QIM Futures Fund L.P. | |
| ** 4.1 | Second Amended and Restated Agreement of Limited Partnership of Altegris 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. | |
| 31.01 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer | |
| 31.02 | Rule 13a-14(a)/15d-14(a) Certification of Financial Executive Officer | |
| 32.01 | Section 1350 Certification of Principal Executive Officer | |
| 32.02 | Section 1350 Certification of Principal Financial Officer | |
| ***101.INS | XBRL Instance Document | |
| ***101.SCH | XBRL Schema Document | |
| ***101.CAL | XBRL Calculation Linkbase Document | |
| ***101.DEF | XBRL Definition Linkbase Document | |
| ***101.LAB | XBRL Label Linkbase Document | |
| ***101.PRE | XBRL Presentation Linkbase Document |
* These exhibits are incorporated by reference to the exhibits of the same numbers and descriptions filed with the Partnership’s Registration Statement (File No. 000-53815) filed on November 2, 2009 on Form 10-12G under the Securities Exchange Act of 1934.
** This exhibit is incorporated by reference to 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.
| 17 |
Pursuant to the requirements of Section 13 or 15(d) 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.
| Dated: March 29, 2021 |
Altegris QIM FUTURES FUND, L.P.
By: ALTEGRIS ADVISORS, L.L.C. |
| By: /s/ Matthew C. Osborne | |
| Name: Matthew C. Osborne | |
| Title: Principal Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the General Partner of the Registrant and in the capacities and on the date indicated.
| Title with | ||||
| Signature | General Partner | Date | ||
| /s/ Matthew C. Osborne | ||||
| Matthew C. Osborne | Principal Executive, Financial & Accounting Officer | March 29, 2021 | ||
(Being the principal executive officer, the principal financial officer and principal accounting officer, and a majority of the managers of Altegris Advisors, L.L.C.)
| 18 |
ALTEGRIS QIM FUTURES FUND, L.P.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
____________
TABLE OF CONTENTS
_____________
| PAGES | ||
| Affirmation of the Commodity Pool Operator | F-1 | |
| Report of Independent Registered Public Accounting Firm | F-2 | |
| Financial Statements | ||
| Statements of Financial Condition | F-3 | |
| Condensed Schedules of Investments | F-4 - F-6 | |
| Statements of Income (Loss) | F-7 | |
| Statements of Changes in Partners’ Capital (Net Asset Value) | F-8 | |
| Notes to Financial Statements | F-9 - F-25 |
| 19 |
ALTEGRIS QIM Futures Fund, L.P.
AFFIRMATION OF THE COMMODITY POOL OPERATOR
_______________
To the Partners of
Altegris QIM Futures Fund, L.P.
To the best of the knowledge and belief of the undersigned, the information contained in this Annual Report for the years ended December 31, 2020, 2019 and 2018 is accurate and complete.
| By: /s/ Matthew C. Osborne | |
| Altegris Advisors, L.L.C. | |
| Commodity Pool Operator for | |
| Altegris QIM Futures Fund, L.P. | |
| By: Matthew C. Osborne, Chief Executive Officer |
| F-1 |
 |
Deloitte & Touche LLP 695 Town Center Drive Tel: 714 436 7100 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The General Partner and Limited Partners of Altegris QIM Futures Fund, L.P.
Opinion on the Financial Statements
We have audited the accompanying statement of financial condition, including the condensed schedule of investments, of Altegris QIM Futures Fund, L.P. (the “Fund”) as of December 31, 2020, and the related statements of income (loss), changes in partners’ capital (net asset value) for the year then ended, and the related notes. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, and the results of its operations, and changes in its partners’ capital (net asset value) for the year then ended in conformity with accounting principles generally accepted in the United States of America. The statements of financial condition, including the condensed schedule of investments for the year ended December 31, 2019, and the related statements of income (loss) and changes in partners’ capital (net asset value) for each of the two years in the period ended December 31, 2019 for the Fund, were audited by other auditors whose report, dated March 9, 2020, expressed an unqualified opinion on those statements.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
Costa Mesa, California
March 25, 2021
We have served as the Fund’s auditor since 2020.
| F-2 |
ALTEGRIS QIM FUTURES FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2020 and DECEMBER 31, 2019
_______________
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Equity in commodity broker account: | ||||||||
| Cash deposit with broker | $ | 666,755 | $ | 846,509 | ||||
| Segregated cash | 803,393 | 1,247,462 | ||||||
| Segregated foreign currency (cost - $28,278 and $0) | 28,210 | – | ||||||
| Net unrealized gain on open futures contracts | – | 145,732 | ||||||
| Total assets in commodity broker account | 1,498,358 | 2,239,703 | ||||||
| Cash | 5,289,062 | 411,223 | ||||||
| Investment securities at fair value (cost - $0 and $9,044,907) | – | 9,045,081 | ||||||
| Interest receivable | – | 145 | ||||||
| Total assets | $ | 6,787,420 | $ | 11,696,152 | ||||
| LIABILITIES | ||||||||
| Equity in commodity broker account: | ||||||||
| Segregated Foreign currency due to broker (proceeds - $0 and $31,771) | $ | – | $ | 31,582 | ||||
| Net unrealized loss on open futures contracts | 9,573 | – | ||||||
| Total liabilities in commodity broker account | 9,573 | 31,582 | ||||||
| Redemptions payable | 370,955 | 588,811 | ||||||
| Service fees payable | 4,960 | 12,705 | ||||||
| Management fee payable | 7,102 | 11,427 | ||||||
| Incentive fees payable | – | 7,827 | ||||||
| Brokerage commissions payable | 4,719 | 6,494 | ||||||
| Administrative fee payable | 1,870 | 2,968 | ||||||
| Other liabilities | 35,482 | 135,810 | ||||||
| Total liabilities | 434,661 | 797,624 | ||||||
| PARTNERS' CAPITAL (NET ASSET VALUE) | ||||||||
| General Partner | 714 | 785 | ||||||
| Limited Partners | 6,352,045 | 10,897,743 | ||||||
| Total partners' capital (Net Asset Value) | 6,352,759 | 10,898,528 | ||||||
| Total liabilities and partners' capital | $ | 6,787,420 | $ | 11,696,152 | ||||
See accompanying notes.
| F-3 |
ALTEGRIS QIM FUTURES FUND, L.P.
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2020
_______________
| Range of Expiration Dates | Number of Contracts | Fair Value | % of Partners' Capital | ||||||||||
| Long Futures Contracts: | |||||||||||||
| Currencies | Mar-21 | 17 | $ | 7,626 | 0.12% | ||||||||
| Energy | Jan-21 | 7 | 2,813 | 0.04% | |||||||||
| Interest Rates | Mar-21 | 11 | (609 | ) | (0.01)% | ||||||||
| Metals | Feb 21 - Mar 21 | 3 | 1,066 | 0.02% | |||||||||
| Stock Indices | Jan-21 | 46 | 40,594 | 0.64% | |||||||||
| Treasury Rates | Mar-21 | 28 | 5,182 | 0.08% | |||||||||
| Total Long Futures Contracts | 112 | 56,672 | 0.89% | ||||||||||
| Short Futures Contracts: | |||||||||||||
| Stock Indices | Jan 21 - Mar 21 | 71 | (66,245 | ) | (1.04)% | ||||||||
| Total Short Futures Contracts | 71 | (66,245 | ) | (1.04)% | |||||||||
| Total Futures Contracts | $ | (9,573 | ) | (0.15)% | |||||||||
See accompanying notes.
| F-4 |
ALTEGRIS QIM FUTURES FUND, L.P.
CONDENSED SCHEDULES OF INVESTMENTS (continued)
DECEMBER 31, 2019
_______________
| 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.
| F-5 |
ALTEGRIS QIM FUTURES FUND, L.P.
CONDENSED SCHEDULES OF INVESTMENTS (continued)
DECEMBER 31, 2019
_______________
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.
| F-6 |
ALTEGRIS QIM FUTURES FUND, L.P.
FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
_______________
| 2020 | 2019 | 2018 | ||||||||||
| TRADING GAINS (LOSSES) | ||||||||||||
| Gain (loss) on trading of derivatives contracts | ||||||||||||
| Net realized | $ | (284,789 | ) | $ | (905,931 | ) | $ | (1,765,994 | ) | |||
| Net change in unrealized | (155,305 | ) | 243,480 | (513,999 | ) | |||||||
| Brokerage commissions | (134,637 | ) | (224,487 | ) | (400,551 | ) | ||||||
| Net loss from trading derivatives contracts | (574,731 | ) | (886,938 | ) | (2,680,544 | ) | ||||||
| Gain (loss) on trading of securities | ||||||||||||
| Net realized | – | 29 | 85 | |||||||||
| Net change in unrealized | (174 | ) | 565 | (488 | ) | |||||||
| Net gain (loss) from trading securities | (174 | ) | 594 | (403 | ) | |||||||
| Gain (loss) on trading of foreign currency | ||||||||||||
| Net realized | 24,179 | 1,244 | (10,641 | ) | ||||||||
| Net change in unrealized | (257 | ) | (1,830 | ) | 2,034 | |||||||
| Net gain (loss) from trading foreign currency | 23,922 | (586 | ) | (8,607 | ) | |||||||
| Total trading losses | (550,983 | ) | (886,930 | ) | (2,689,554 | ) | ||||||
| NET INVESTMENT LOSS | ||||||||||||
| Income | ||||||||||||
| Interest income | 38,814 | 304,377 | 440,529 | |||||||||
| 38,814 | 304,377 | 440,529 | ||||||||||
| Expenses | ||||||||||||
| Professional fees | 35,937 | 196,763 | 261,495 | |||||||||
| Service fees | 96,939 | 192,260 | 350,441 | |||||||||
| Management fee | 110,866 | 184,249 | 324,644 | |||||||||
| Administrative fee | 28,741 | 47,524 | 82,083 | |||||||||
| Out of pocket fees | – | 17,600 | 19,952 | |||||||||
| Incentive fees | – | 12,621 | 1,500 | |||||||||
| Interest expense | 4,568 | 7,128 | 16,096 | |||||||||
| Other expenses | 31,458 | 32,753 | 28,015 | |||||||||
| Total expenses | 308,509 | 690,898 | 1,084,226 | |||||||||
| Net investment loss | (269,695 | ) | (386,521 | ) | (643,697 | ) | ||||||
| NET LOSS | $ | (820,678 | ) | $ | (1,273,451 | ) | $ | (3,333,251 | ) | |||
See accompanying notes.
| F-7 |
ALTEGRIS QIM FUTURES FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE)
FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018
_______________
| Limited Partners | ||||||||||||||||||||
| Institutional | General | |||||||||||||||||||
| Total | Class A | Class B | Interests | Partner | ||||||||||||||||
| Balances at December 31, 2017 | $ | 31,350,202 | $ | 21,086,218 | $ | 7,726,323 | $ | 2,536,719 | $ | 942 | ||||||||||
| Capital additions | 610,679 | 433,441 | 144,238 | 33,000 | – | |||||||||||||||
| Capital withdrawals | (8,277,607 | ) | (5,404,873 | ) | (1,340,006 | ) | (1,532,728 | ) | – | |||||||||||
| From operations: | ||||||||||||||||||||
| Net investment loss | (643,697 | ) | (559,105 | ) | (78,814 | ) | (5,751 | ) | (27 | ) | ||||||||||
| Net realized loss from investments (net of brokerage commissions) | (2,177,101 | ) | (1,454,920 | ) | (548,824 | ) | (173,291 | ) | (66 | ) | ||||||||||
| Net change in unrealized loss from investments | (512,453 | ) | (345,339 | ) | (137,352 | ) | (29,744 | ) | (18 | ) | ||||||||||
| Net loss for the year ended December 31, 2018 | (3,333,251 | ) | (2,359,364 | ) | (764,990 | ) | (208,786 | ) | (111 | ) | ||||||||||
| Balances at December 31, 2018 | $ | 20,350,023 | $ | 13,755,422 | $ | 5,765,565 | $ | 828,205 | $ | 831 | ||||||||||
| 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 | (8,678,044 | ) | (6,304,016 | ) | (1,903,218 | ) | (470,810 | ) | – | |||||||||||
| From operations: | ||||||||||||||||||||
| Net investment loss | (386,521 | ) | (311,471 | ) | (73,135 | ) | (1,890 | ) | (25 | ) | ||||||||||
| Net realized loss from investments (net of brokerage commissions) | (1,129,145 | ) | (788,244 | ) | (276,069 | ) | (64,796 | ) | (36 | ) | ||||||||||
| Net change in unrealized gain from investments | 242,215 | 142,943 | 91,105 | 8,152 | 15 | |||||||||||||||
| Net loss for the year ended December 31, 2019 | (1,273,451 | ) | (956,772 | ) | (258,099 | ) | (58,534 | ) | (46 | ) | ||||||||||
| Balances at December 31, 2019 | $ | 10,898,528 | $ | 6,494,634 | $ | 4,104,248 | $ | 298,861 | $ | 785 | ||||||||||
| Balances at December 31, 2019 | $ | 10,898,528 | $ | 6,494,634 | $ | 4,104,248 | $ | 298,861 | $ | 785 | ||||||||||
| Capital withdrawals | (3,725,091 | ) | (2,725,678 | ) | (746,022 | ) | (253,391 | ) | – | |||||||||||
| From operations: | ||||||||||||||||||||
| Net investment loss | (269,695 | ) | (201,457 | ) | (65,666 | ) | (2,544 | ) | (28 | ) | ||||||||||
| Net realized loss from investments (net of brokerage commissions) | (395,247 | ) | (268,740 | ) | (115,741 | ) | (10,735 | ) | (31 | ) | ||||||||||
| Net change in unrealized loss from investments | (155,736 | ) | (86,211 | ) | (67,125 | ) | (2,388 | ) | (12 | ) | ||||||||||
| Net loss for the year ended December 31, 2020 | (820,678 | ) | (556,408 | ) | (248,532 | ) | (15,667 | ) | (71 | ) | ||||||||||
| Balances at December 31, 2020 | $ | 6,352,759 | $ | 3,212,548 | $ | 3,109,694 | $ | 29,803 | $ | 714 | ||||||||||
See accompanying notes.
| F-8 |
ALTEGRIS QIM FUTURES FUND, L.P.
_______________
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 December 31, 2020 and 2019, and reported amounts of income and expenses for the years ended December 31, 2020, 2019 and 2018, 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.
| 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.
| F-9 |
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.
| F-10 |
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 1 or Level 2 of the fair value hierarchy. As of December 31, 2020 and 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 December 31, 2020 and 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.
| F-11 |
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 the years ended December 31, 2020 and 2019.
The following table presents information about the Partnership’s assets and liabilities measured at fair value as of December 31, 2020 and December 31, 2019:
| Balance as of | ||||||||||||||||
| December 31, 2020 | Level 1 | Level 2 | Level 3 | December 31, 2020 | ||||||||||||
| Assets | ||||||||||||||||
| Futures contracts (1) | $ | 77,126 | $ | – | $ | – | $ | 77,126 | ||||||||
| Liabilities | ||||||||||||||||
| Futures contracts (1) | $ | (86,699 | ) | $ | – | $ | – | $ | (86,699 | ) | ||||||
| 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 years ended December 31, 2020 and 2019, there were no Level 3 securities.
| F-12 |
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 December 31, 2020 and 2019, the Partnership’s Segregated cash balance on the Statements of Financial Condition of $803,393 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 December 31, 2020 and 2019, the Partnership’s Segregated foreign currency due from/to broker balance on the Statements of Financial Condition of $28,210 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”).
| F-13 |
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 December 31, 2020 and 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 year. 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 J.P. Morgan 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.
| F-14 |
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 for any of the Partnership's open tax years. 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’s tax returns remain open for examination by United States federal tax authorities for a period of three years and by state tax authorities for a period of four years from the date they are filed. Taxes associated with foreign tax jurisdictions remain subject to examination based on varying statutes of limitations, if any. The Partnership is additionally not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. As a result, no other income tax liability or expense has been recorded in the accompanying financial statements.
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.
| F-15 |
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 years ended December 31, 2020, 2019 and 2018.
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 years ended December 31, 2020, 2019 and 2018, there were no Special Limited Partners.
Total management fees earned by the General Partner for the years ended December 31, 2020, 2019 and 2018 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 years ended December 31, 2020, 2019 and 2018, administrative fees for Class A Interests were $17,141, $32,262 and $59,591, respectively, and administrative fees for Class B Interests were $11,600, $15,262 and $22,492, respectively.
| F-16 |
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 December 31, 2020 and 2019, respectively, the Partnership had charges for brokerage-related services payable to Altegris Clearing Solutions of $3,621 and $3,727, respectively, and service fees payable to Altegris Investments of $4 and $2,532, respectively. The following tables show the fees paid to Altegris Investments and Altegris Clearing Solutions for the years ended December 31, 2020, 2019 and 2018, respectively:
| December 31, 2020 | December 31, 2019 | December 31, 2018 | ||||||||||
| Altegris Clearing Solutions - Brokerage Commission fees | $ | 78,931 | $ | 128,820 | $ | 224,549 | ||||||
| Altegris Investments- Service fees | 18,300 | 34,050 | 50,980 | |||||||||
| Total | $ | 97,231 | $ | 162,870 | $ | 275,529 | ||||||
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).
| F-17 |
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 years ended December 31, 2020, 2019 and 2018, service fees for Class A Interests were $96,939, $192,260 and $350,441, respectively. There were no service fees for Institutional Interests for the years ended December 31, 2020, 2019 and 2018.
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.
| F-18 |
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 December 31, 2020 and 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.
| December 31, 2020 | ||||||||||||
| Assets | Liability | |||||||||||
| Type of | Derivatives | Derivatives | Net | |||||||||
| Derivatives Contracts | Fair Value | Fair Value | Fair Value | |||||||||
| Futures Contracts | ||||||||||||
| Currencies | $ | 7,626 | $ | – | $ | 7,626 | ||||||
| Energy | 2,813 | – | 2,813 | |||||||||
| Interest rates | 1,211 | (1,820 | ) | (609 | ) | |||||||
| Metals | 1,422 | (356 | ) | 1,066 | ||||||||
| Stock Indices | 58,872 | (84,523 | ) | (25,651 | ) | |||||||
| Treasury Rates | 5,182 | – | 5,182 | |||||||||
| Total Futures Contracts | $ | 77,126 | $ | (86,699 | ) | $ | (9,573 | ) | ||||
| December 31, 2019 | ||||||||||||
| Assets | Liability | |||||||||||
| Type of | Derivatives | Derivatives | Net | |||||||||
| Futures Contracts | Fair Value | Fair Value | Fair Value | |||||||||
| Futures Contracts | ||||||||||||
| Currencies | $ | 5,072 | $ | (11,117 | ) | $ | (6,045 | ) | ||||
| Energy | 4,138 | (832 | ) | 3,306 | ||||||||
| Interest fates | 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 | ) | |||||||
| $ | 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 years ended December 31, 2020, 2019 and 2018.
| F-19 |
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.
| Year Ended December 31, 2020 | ||||||||
| Type of | Change in | |||||||
| Derivatives Contracts | Realized | Unrealized | ||||||
| Futures Contracts | ||||||||
| Currencies | $ | 9,721 | $ | 13,671 | ||||
| Energy | 140,579 | (493 | ) | |||||
| Interest rates | (39,901 | ) | 82,509 | |||||
| Metals | 240,855 | (161,021 | ) | |||||
| Stock Indices | (430,851 | ) | (131,201 | ) | ||||
| Treasury Rates | (205,192 | ) | 41,230 | |||||
| Total Futures Contracts | $ | (284,789 | ) | $ | (155,305 | ) | ||
For the year ended December 31, 2020, the average notional value of the futures contracts was $19,495,386. The average notional value of futures contracts are representative of the Partnership’s volume of derivative activity for futures contracts during the year.
| Year Ended December 31, 2019 | ||||||||
| Type of | Change in | |||||||
| Derivatives Contracts | Realized | Unrealized | ||||||
| Futures Contracts | ||||||||
| Currencies | $ | (260,084 | ) | $ | (4,785 | ) | ||
| Energy | 824 | 63,544 | ||||||
| Interest rates | (514,420 | ) | (109,929 | ) | ||||
| Metals | 199,641 | 146,777 | ||||||
| Stock Indices | (708,022 | ) | 175,577 | |||||
| Treasury Rates | 376,130 | (27,704 | ) | |||||
| Total Futures Contracts | $ | (905,931 | ) | $ | 243,480 | |||
For the year ended December 31, 2019, the average notional value of the futures contracts was $36,724,306. The average notional value of futures contracts are representative of the Partnership’s volume of derivative activity for futures contracts during the year.
| F-20 |
ALTEGRIS QIM FUTURES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS (CONTINUED)
| Year Ended December 31, 2018 | ||||||||
| Type of | Change in | |||||||
| Derivatives Contracts | Realized | Unrealized | ||||||
| Futures Contracts | ||||||||
| Currencies | $ | 896,943 | $ | (84,491 | ) | |||
| Energy | 547,001 | (16,054 | ) | |||||
| Interest rates | 435,223 | 59,453 | ||||||
| Metals | 543,490 | (300,867 | ) | |||||
| Stock Indices | (4,027,222 | ) | (95,538 | ) | ||||
| Treasury Rates | (161,429 | ) | (76,502 | ) | ||||
| Total Futures Contracts | $ | (1,765,994 | ) | $ | (513,999 | ) | ||
For the year ended December 31, 2018, the average notional value of the futures contracts was $84,867,699. The average notional value of futures contracts are representative of the Partnership’s volume of derivative activity for futures contracts during the year.
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).
| F-21 |
ALTEGRIS QIM FUTURES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 8 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND UNCERTAINTIES (CONTINUED)
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.
Governments worldwide have enacted emergency measures to combat the spread of a novel strain of coronavirus (COVID-19). These measures, which include the implementation of travel bans, closing of non-essential businesses, self-imposed quarantine periods and social distancing, have caused significant volatility in global equity markets and material disruptions to businesses globally resulting in an economic slowdown. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.
The duration of the COVID-19 global pandemic is unknown at this time, but it is likely to have an ongoing effect on the financial markets where the Fund operates. It is possible that market volatility related to COVID-19 could be in excess of the sensitivities disclosed in the notes to the financial statements.
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.
| F-22 |
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 years ended December 31, 2020, 2019 and 2018. This information has been derived from information presented in the financial statements.
| Year ended December 31, 2020 | ||||||||||||
| Institutional | ||||||||||||
| Class A | Class B | Interest | ||||||||||
| Total return for Limited Partners | ||||||||||||
| Total return prior to incentive fees | (8.92%) | (7.24%) | (6.43%) | |||||||||
| Incentive fees | 0.00% | (0.00%) | 0.00% | |||||||||
| Total return after incentive fees | (8.92%) | (7.24%) | (6.43%) | |||||||||
| Ratio to average net asset value | ||||||||||||
| Expenses prior to incentive fees | 4.42% | 2.28% | 1.44% | |||||||||
| Incentive fees | 0.00% | 0.00% | 0.00% | |||||||||
| Total expenses | 4.42% | 2.28% | 1.44% | |||||||||
| Net investment loss (1) | (3.98%) | (1.88%) | (1.03%) | |||||||||
| Year ended December 31, 2019 | ||||||||||||
| Institutional | ||||||||||||
| Class A | Class B | Interest | ||||||||||
| Total return for Limited Partners | ||||||||||||
| Total return prior to incentive fees | (5.60%) | (3.72%) | (2.91%) | |||||||||
| Incentive fees | 0.00% | (0.26%) | 0.00% | |||||||||
| Total return after incentive fees | (5.60%) | (3.98%) | (2.91%) | |||||||||
| Ratio to average net asset value | ||||||||||||
| Expenses prior to incentive fees | 5.11% | 3.28% | 2.33% | |||||||||
| Incentive fees | 0.00% | 0.27% | 0.00% | |||||||||
| Total expenses | 5.11% | 3.55% | 2.33% | |||||||||
| Net investment loss (1) | (3.11%) | (1.29%) | (0.33%) | |||||||||
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 |
| F-23 |
ALTEGRIS QIM FUTURES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
_______________
NOTE 10 - FINANCIAL HIGHLIGHTS (CONTINUED)
| Year ended December 31, 2018 | ||||||||||||
| Institutional | ||||||||||||
| Class A | Class B | Interest | ||||||||||
| Total return for Limited Partners | ||||||||||||
| Total return prior to incentive fees | (11.80% | ) | (10.06% | ) | (9.31% | ) | ||||||
| Incentive fees | (0.01% | ) | (0.01% | ) | (0.01% | ) | ||||||
| Total return after incentive fees | (11.81% | ) | (10.07% | ) | (9.32% | ) | ||||||
| Ratio to average net asset value | ||||||||||||
| Expenses prior to incentive fees | 4.72% | 2.80% | 1.87% | |||||||||
| Incentive fees | 0.01% | 0.01% | 0.01% | |||||||||
| Total expenses | 4.73% | 2.81% | 1.88% | |||||||||
| Net investment loss (1) | (3.08% | ) | (1.15% | ) | (0.30% | ) | ||||||
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 |
| F-24 |
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 December 31, 2020 have occurred that would require recognition or disclosure, except as noted below.
From January 1, 2021 through February 28, 2021, the Partnership had no subscriptions and had redemptions of $241,873.
Effective February 12, 2021, the General Partner and affiliated Altegris companies became owned and controlled by Altegris Holdings, LLC (Altegris Holdings) and indirectly owned and controlled by Continuum Capital Managers LLC (Continuum) and by AV5 Acquisition, LLC (AV5). Continuum is owned by Douglas C. Grip and Steven E. Vanourny. AV5 is owned solely by Matthew Osborne, Altegris Advisors’ Chief Executive Officer and Chief Investment Officer.
Effective January 1, 2021 the Partnership will maintain new custody accounts with First Republic Bank, replacing Northern Trust Company.
| F-25 |