| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
June 30, 2024 (Unaudited) |
December 31, 2023 | |||||||
Assets: |
||||||||
Investment in the Funds (1) , at fair value |
$ | $ | ||||||
Redemptions receivable from the Funds |
||||||||
Equity in trading account: |
||||||||
Unrestricted cash |
||||||||
Restricted cash |
||||||||
Foreign cash (cost $ |
||||||||
Net unrealized appreciation on open futures contracts |
||||||||
Options purchased, at fair value (premiums paid $ |
||||||||
Total equity in trading account |
||||||||
Interest receivable |
||||||||
Total assets |
$ | $ | ||||||
Liabilities and Partners’ Capital: |
||||||||
Liabilities: |
||||||||
Net unrealized depreciation on open forward contracts |
$ | $ | ||||||
Accrued expenses: |
||||||||
Ongoing selling agent fees |
||||||||
Management fees |
||||||||
General Partner fees |
||||||||
Incentive fees |
||||||||
Professional fees |
||||||||
Redemptions payable to General Partner |
||||||||
Redemptions payable to Limited Partners |
||||||||
Total liabilities |
||||||||
Partners’ Capital: |
||||||||
General Partner, Class Z, |
||||||||
Limited Partners, Class A, |
||||||||
Limited Partners, Class Z, |
||||||||
Total partners’ capital (net asset value) |
||||||||
Total liabilities and partners’ capital |
$ | |
$ | |
||||
Net asset value per Redeemable Unit: |
||||||||
Class A |
$ | $ | ||||||
Class Z |
$ | $ | ||||||
(1) |
Defined in Note 1. |
Number of Contracts |
Fair Value |
% of Partners’ Capital |
||||||||||||||||||||
Futures Contracts Purchased |
||||||||||||||||||||||
Currencies |
$ | % | ||||||||||||||||||||
Energy |
||||||||||||||||||||||
Grains |
( |
) | ( |
) | ||||||||||||||||||
Indices |
||||||||||||||||||||||
Interest Rates U.S. |
||||||||||||||||||||||
Interest Rates Non-U.S. |
( |
) | ( |
) | ||||||||||||||||||
Livestock |
||||||||||||||||||||||
Metals |
( |
) | ( |
) | ||||||||||||||||||
Softs |
( |
) | ( |
) | ||||||||||||||||||
Total futures contracts purchased |
||||||||||||||||||||||
Futures Contracts Sold |
||||||||||||||||||||||
Currencies |
||||||||||||||||||||||
Energy |
( |
) | ( |
) | ||||||||||||||||||
Grains |
||||||||||||||||||||||
Indices |
( |
) | ( |
) | ||||||||||||||||||
Interest Rates U.S. |
( |
) | ( |
) | ||||||||||||||||||
Interest Rates Non-U.S. |
( |
) | ( |
) | ||||||||||||||||||
Livestock |
||||||||||||||||||||||
Metals |
( |
) | ( |
) | ||||||||||||||||||
Softs |
||||||||||||||||||||||
Total futures contracts sold |
( |
) | ( |
) | ||||||||||||||||||
Net unrealized appreciation on open futures contracts |
$ | |
|
% | ||||||||||||||||||
Unrealized Appreciation on Open Forward Contracts |
||||||||||||||||||||||
Currencies |
$ |
$ | % | |||||||||||||||||||
Metals |
||||||||||||||||||||||
Total unrealized appreciation on open forward contracts |
||||||||||||||||||||||
Unrealized Depreciation on Open Forward Contracts |
||||||||||||||||||||||
Currencies |
$ |
$ | ( |
) | ( |
) | ||||||||||||||||
Metals |
( |
) | ( |
) | ||||||||||||||||||
Total unrealized depreciation on open forward contracts |
( |
) | ( |
) | ||||||||||||||||||
Net unrealized depreciation on open forward contracts |
$ | ( |
) | ( |
) | % | ||||||||||||||||
Options Purchased |
||||||||||||||||||||||
Puts |
||||||||||||||||||||||
Indices |
$ | % | ||||||||||||||||||||
Total options purchased (premiums paid $ |
$ | % | ||||||||||||||||||||
Investment in the Funds |
||||||||||||||||||||||
CMF NL Master Fund LLC |
$ | % | ||||||||||||||||||||
CMF Drakewood Master Fund LLC |
||||||||||||||||||||||
Total investment in the Funds |
$ | % | ||||||||||||||||||||
Number of Contracts |
Fair Value |
% of Partners’ Capital |
||||||||||||||||||||
Futures Contracts Purchased |
||||||||||||||||||||||
Currencies |
$ | % | ||||||||||||||||||||
Energy |
( |
) | ( |
) | ||||||||||||||||||
Grains |
||||||||||||||||||||||
Indices |
||||||||||||||||||||||
Interest Rates U.S. |
||||||||||||||||||||||
Interest Rates Non-U.S. |
||||||||||||||||||||||
Livestock |
||||||||||||||||||||||
Metals |
||||||||||||||||||||||
Softs |
||||||||||||||||||||||
Total futures contracts purchased |
||||||||||||||||||||||
Futures Contracts Sold |
||||||||||||||||||||||
Currencies |
( |
) | ( |
) | ||||||||||||||||||
Energy |
||||||||||||||||||||||
Grains |
( |
) | ( |
) | ||||||||||||||||||
Indices |
( |
) | ( |
) | ||||||||||||||||||
Interest Rates U.S. |
( |
) | ( |
) | ||||||||||||||||||
Interest Rates Non-U.S. |
( |
) | ( |
) | ||||||||||||||||||
Livestock |
( |
) | ( |
) | ||||||||||||||||||
Metals |
( |
) | ( |
) | ||||||||||||||||||
Softs |
||||||||||||||||||||||
Total futures contracts sold |
( |
) | ( |
) | ||||||||||||||||||
Net unrealized appreciation on open futures contracts |
$ | |
|
% | ||||||||||||||||||
Unrealized Appreciation on Open Forward Contracts |
||||||||||||||||||||||
Currencies |
$ |
$ | % | |||||||||||||||||||
Metals |
||||||||||||||||||||||
Total unrealized appreciation on open forward contracts |
||||||||||||||||||||||
Unrealized Depreciation on Open Forward Contracts |
||||||||||||||||||||||
Currencies |
$ |
( |
) | ( |
) | |||||||||||||||||
Metals |
( |
) | ( |
) | ||||||||||||||||||
Total unrealized depreciation on open forward contracts |
( |
) | ( |
) | ||||||||||||||||||
Net unrealized depreciation on open forward contracts |
$ | ( |
) | ( |
) | % | ||||||||||||||||
Options Purchased |
||||||||||||||||||||||
Puts |
||||||||||||||||||||||
Indices |
$ | % | ||||||||||||||||||||
Total options purchased (premiums paid $ |
$ | % | ||||||||||||||||||||
Investment in the Funds |
||||||||||||||||||||||
CMF NL Master Fund LLC |
$ | % | ||||||||||||||||||||
CMF Drakewood Master Fund LLC |
||||||||||||||||||||||
Total investment in the Funds |
$ | % | ||||||||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||||||
2024 |
2023 (1) |
2024 |
2023 (1) | |||||||||||||
Investment Income: |
||||||||||||||||
Interest income |
$ | $ | $ | $ | ||||||||||||
Interest income allocated from the Funds |
||||||||||||||||
Total investment income |
||||||||||||||||
Expenses: |
||||||||||||||||
Expenses allocated from the Funds |
||||||||||||||||
Clearing fees related to direct investments |
||||||||||||||||
Ongoing selling agent fees |
||||||||||||||||
Management fees |
||||||||||||||||
General Partner fees |
||||||||||||||||
Incentive fees |
( |
) | ||||||||||||||
Professional fees |
||||||||||||||||
Total expenses |
||||||||||||||||
Net investment income (loss) |
( |
) | ( |
) | ( |
) | ||||||||||
Trading Results: |
||||||||||||||||
Net gains (losses) on trading of commodity interests and investment in: the Funds: |
||||||||||||||||
Net realized gains (losses) on closed contracts |
( |
) | ( |
) | ( |
) | ||||||||||
Net realized gains (losses) on closed contracts allocated from the Funds |
( |
) | ||||||||||||||
Net change in unrealized gains (losses) on open contracts |
( |
) | ||||||||||||||
Net change in unrealized gains (losses) on open contracts allocated from the Funds |
( |
) | ( |
) | ||||||||||||
Total trading results |
( |
) | ||||||||||||||
Net income (loss) |
$ | ( |
) | $ | $ | $ | ||||||||||
Net income (loss) per Redeemable Unit*: |
||||||||||||||||
Class A |
$ | ( |
) | $ | $ | $ | ||||||||||
Class Z |
$ | ( |
) | $ | $ | $ | ||||||||||
Weighted average Redeemable Units outstanding: |
||||||||||||||||
Class A |
|
|||||||||||||||
Class Z |
||||||||||||||||
(1) |
Not consolidated. |
| * | Represents the change in net asset value per Redeemable Unit during the period. |
Class A |
Class Z |
Total | ||||||||||||||||||||||
Amount |
Redeemable Units |
Amount |
Redeemable Units |
Amount |
Redeemable Units | |||||||||||||||||||
| Partners’ Capital, December 31, 2022 (1) |
$ | |
$ | |
$ | |
||||||||||||||||||
| Subscriptions - Limited Partners |
||||||||||||||||||||||||
| Redemptions - Limited Partners |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Net income (loss) |
- | - | - | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Partners’ Capital, June 30, 2023 (1) |
$ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Partners’ Capital, March 31, 2023 (1) |
$ | $ | $ | |||||||||||||||||||||
| Subscriptions - Limited Partners |
||||||||||||||||||||||||
| Redemptions - Limited Partners |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Net income (loss) |
- | - | - | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Partners’ Capital, June 30, 2023 (1) |
$ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Class A |
Class Z |
Total | ||||||||||||||||||||||
Amount |
Redeemable Units |
Amount |
Redeemable Units |
Amount |
Redeemable Units | |||||||||||||||||||
| Partners’ Capital, December 31, 2023 |
$ | $ | $ | |||||||||||||||||||||
| Subscriptions - Limited Partners |
||||||||||||||||||||||||
| Redemptions - General Partner |
- | - | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
| Redemptions - Limited Partners |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Net income (loss) |
- | - | - | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Partners’ Capital, June 30, 2024 |
$ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Partners’ Capital, March 31, 2024 |
$ | $ | $ | |||||||||||||||||||||
| Subscriptions - Limited Partners |
- | - | ||||||||||||||||||||||
| Redemptions - General Partner |
- | - | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
| Redemptions - Limited Partners |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Net income (loss) |
( |
) | - | ( |
) | - | ( |
) | - | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Partners’ Capital, June 30, 2024 |
$ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
(1) |
Not consolidated. |
1. |
Organization: |
2. |
Basis of Presentation and Summary of Significant Accounting Policies: |
3. |
Financial Highlights: |
Three Months Ended June 30, 2024 |
Three Months Ended June 30, 2023 (1) |
Six Months Ended June 30, 2024 |
Six Months Ended June 30, 2023 (1) |
|||||||||||||||||||||||||||||||||||||||||||||
Class A |
Class Z |
Class A |
Class Z |
Class A |
Class Z |
Class A |
Class Z |
|||||||||||||||||||||||||||||||||||||||||
Per Redeemable Unit performance (for a unit outstanding throughout the period):* |
||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gains (losses) |
$ | ( |
) | $ | ( |
) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) for the period |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Net asset value per Redeemable Unit, beginning of period |
||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value per Redeemable Unit, end of period |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2024 |
Three Months Ended June 30, 2023 (1) |
Six Months Ended June 30, 2024 |
Six Months Ended June 30, 2023 (1) |
|||||||||||||||||||||||||||||||||||||||||||||
Class A |
Class Z |
Class A |
Class Z |
Class A |
Class Z |
Class A |
Class Z |
|||||||||||||||||||||||||||||||||||||||||
Ratios to Average Limited Partners’ Capital:** |
||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss)*** |
% | % | % | % | % | % | ( |
) | % | % | ||||||||||||||||||||||||||||||||||||||
Operating expenses |
% | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
Incentive fees |
( |
) | % | ( |
) | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||
Total expenses |
% | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
Total return: |
||||||||||||||||||||||||||||||||||||||||||||||||
Total return before incentive fees |
( |
) | % | ( |
) | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||
Incentive fees |
% | % | ( |
) | % | ( |
) | % | ( |
) | % | ( |
) | % | ( |
) | % | ( |
) | % | ||||||||||||||||||||||||||||
Total return after incentive fees |
( |
) | % | ( |
) | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||||
(1) |
Not consolidated. |
| * | Net investment income (loss) per Redeemable Unit is calculated by dividing the interest income less total expenses by the average number of Redeemable Units outstanding during the period. The net realized and unrealized gains (losses) per Redeemable Unit is a balancing amount necessary to reconcile the change in net asset value per Redeemable Unit with the other per unit information. |
| ** | Annualized (except for incentive fees). |
| *** | Interest income less total expenses. |
4. |
Trading Activities: |
Gross Amounts Offset in the Consolidated |
Amounts Presented in the Consolidated |
Gross Amounts Not Offset in the Consolidated Statements of Financial Condition |
||||||||||||||||||||||||
June 30, 2024 |
Gross Amounts Recognized |
Statements of Financial Condition |
Statements of Financial Condition |
Financial Instruments |
Cash Collateral Received/ Pledged* |
Net Amount |
||||||||||||||||||||
Assets |
||||||||||||||||||||||||||
MS&Co. |
||||||||||||||||||||||||||
Futures |
$ | $ | ( |
) | $ | $ | $ | $ | ||||||||||||||||||
Forwards |
( |
) | ||||||||||||||||||||||||
| ( |
) | |||||||||||||||||||||||||
JPMorgan |
||||||||||||||||||||||||||
Forwards |
( |
) | ||||||||||||||||||||||||
Total assets |
$ | |
$ | ( |
) | $ | |
$ | $ | $ | ||||||||||||||||
Liabilities |
||||||||||||||||||||||||||
MS&Co. |
||||||||||||||||||||||||||
Futures |
$ | ( |
) | $ | $ | $ | $ | $ | ||||||||||||||||||
Forwards |
( |
) | ( |
) | ||||||||||||||||||||||
| ( |
) | ( |
) | |
||||||||||||||||||||||
JPMorgan |
||||||||||||||||||||||||||
Forwards |
( |
) | ( |
) | ||||||||||||||||||||||
Total liabilities |
$ | ( |
) | $ | |
$ | ( |
) | $ | $ | $ | |||||||||||||||
Net fair value |
$ | |
* | |||||||||||||||||||||||
Gross Amounts Offset in the Consolidated |
Amounts Presented in the Consolidated |
Gross Amounts Not Offset in the Consolidated Statements of Financial Condition |
||||||||||||||||||||||||
December 31, 2023 |
Gross Amounts Recognized |
Statements of Financial Condition |
Statements of Financial Condition |
Financial Instruments |
Cash Collateral Received/ Pledged* |
Net Amount |
||||||||||||||||||||
Assets |
||||||||||||||||||||||||||
MS&Co. |
||||||||||||||||||||||||||
Futures |
$ | $ | ( |
) | $ | $ | $ | $ | ||||||||||||||||||
Forwards |
( |
) | ||||||||||||||||||||||||
| ( |
) | |||||||||||||||||||||||||
JPMorgan |
||||||||||||||||||||||||||
Forwards |
( |
) | ||||||||||||||||||||||||
Total assets |
$ | $ | ( |
) | $ | $ | $ | $ | ||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||
MS&Co. |
||||||||||||||||||||||||||
Futures |
$ | ( |
) | $ | $ | $ | $ | $ | ||||||||||||||||||
Forwards |
( |
) | ( |
) | ||||||||||||||||||||||
| ( |
) | ( |
) | |||||||||||||||||||||||
JPMorgan |
||||||||||||||||||||||||||
Forwards |
( |
) | ( |
) | ||||||||||||||||||||||
Total liabilities |
$ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||
Net fair value |
$ | * | ||||||||||||||||||||||||
| * | In the event of default by the Partnership, MS&Co., the Partnership’s commodity futures broker and the sole counterparty to the Partnership’s non-exchange-traded contracts, as applicable, has the right to offset the Partnership’s obligation with the Partnership’s cash and/or U.S. Treasury bills held by MS&Co., thereby minimizing MS&Co.’s risk of loss. In certain instances, MS&Co. may not post collateral and as such, in the event of default by MS&Co., the Partnership is exposed to the amount shown in the Statements of Financial Condition. In the case of exchange-traded contracts, the Partnership’s exposure to counterparty risk may be reduced since the exchange’s clearinghouse interposes its credit between buyer and seller and the clearinghouse’s guarantee funds may be available in the event of a default. In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
June 30, 2024 |
||||||
Assets |
||||||
Futures Contracts |
||||||
Currencies |
$ | |||||
Energy |
||||||
Grains |
||||||
Indices |
||||||
Interest Rates U.S. |
||||||
Interest Rates Non-U.S. |
||||||
Livestock |
||||||
Metals |
||||||
Softs |
||||||
Total unrealized appreciation on open futures contracts |
|
|||||
Liabilities |
||||||
Futures Contracts |
||||||
Currencies |
( |
) | ||||
Energy |
( |
) | ||||
Grains |
( |
) | ||||
Indices |
( |
) | ||||
Interest Rates U.S. |
( |
) | ||||
Interest Rates Non-U.S. |
( |
) | ||||
Livestock |
( |
) | ||||
Metals |
( |
) | ||||
Softs |
( |
) | ||||
Total unrealized depreciation on open futures contracts |
( |
) | ||||
Net unrealized appreciation on open futures contracts |
$ | * | ||||
Assets |
||||||
Forward Contracts |
||||||
Currencies |
$ | |||||
Metals |
||||||
Total unrealized appreciation on open forward contracts |
||||||
Liabilities |
||||||
Forward Contracts |
||||||
Currencies |
$ | ( |
) | |||
Metals |
( |
) | ||||
Total unrealized depreciation on open forward contracts |
( |
) | ||||
Net unrealized depreciation on open forward contracts |
$ | ( |
) | ** | ||
Assets |
||||||
Options Purchased |
||||||
Indices |
$ | |||||
Total options purchased |
$ | *** | ||||
| * | This amount is in “Net unrealized appreciation on open futures contracts” in the Consolidated Statements of Financial Condition. |
| ** | This amount is in “Net unrealized depreciation on open forward contracts” in the Consolidated Statements of Financial Condition. |
| *** | This amount is in “Options purchased, at fair value” in the Consolidated Statements of Financial Condition. |
December 31, 2023 |
||||||
Assets |
||||||
Futures Contracts |
||||||
Currencies |
$ | |||||
Energy |
||||||
Grains |
||||||
Indices |
||||||
Interest Rates U.S. |
||||||
Interest Rates Non-U.S. |
||||||
Livestock |
||||||
Metals |
||||||
Softs |
||||||
Total unrealized appreciation on open futures contracts |
||||||
Liabilities |
||||||
Futures Contracts |
||||||
Currencies |
( |
) | ||||
Energy |
( |
) | ||||
Grains |
( |
) | ||||
Indices |
( |
) | ||||
Interest Rates U.S. |
( |
) | ||||
Interest Rates Non-U.S. |
( |
) | ||||
Livestock |
( |
) | ||||
Metals |
( |
) | ||||
Softs |
( |
) | ||||
Total unrealized depreciation on open futures contracts |
( |
) | ||||
Net unrealized appreciation on open futures contracts |
$ | |
* | |||
Assets |
||||||
Forward Contracts |
||||||
Currencies |
$ | |||||
Metals |
||||||
Total unrealized appreciation on open forward contracts |
||||||
Liabilities |
||||||
Forward Contracts |
||||||
Currencies |
$ | ( |
) | |||
Metals |
( |
) | ||||
Total unrealized depreciation on open forward contracts |
( |
) | ||||
Net unrealized depreciation on open forward contracts |
$ | ( |
) | ** | ||
Assets |
||||||
Options Purchased |
||||||
Indices |
$ | |||||
Total options purchased |
$ | *** | ||||
| * | This amount is in “Net unrealized appreciation on open futures contracts” in the Consolidated Statements of Financial Condition. |
| ** | This amount is in “Net unrealized depreciation on open forward contracts” in the Consolidated Statements of Financial Condition. |
| *** | This amount is in “Options purchased, at fair value” in the Consolidated Statements of Financial Condition. |
Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||||||||||||||
Sector |
2024 |
2023 (1) |
2024 |
2023 (1) |
||||||||||||||||||||
Currencies |
$ | ( |
) | $ | |
$ | |
$ | |
|||||||||||||||
Energy |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Grains |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Indices |
( |
) | ||||||||||||||||||||||
Interest Rates U.S. |
( |
) | ( |
) | ||||||||||||||||||||
Interest Rates Non-U.S. |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Livestock |
( |
) | ( |
) | ||||||||||||||||||||
Metals |
( |
) | ( |
) | ||||||||||||||||||||
Softs |
|
|||||||||||||||||||||||
Total |
$ | ( |
) | **** | $ | **** | $ | **** | $ | ( |
) | **** | ||||||||||||
(1) |
Not consolidated. |
| **** | This amount is included in “Total trading results” in the Statements of Income and Expenses. |
5. |
Fair Value Measurements: |
June 30, 2024 |
Total |
Level 1 |
Level 2 |
Level 3 | ||||||||||||
Assets |
||||||||||||||||
Futures |
$ | $ | $ | $ | ||||||||||||
Forwards |
||||||||||||||||
Options purchased |
||||||||||||||||
Total assets |
$ | $ | $ | $ | ||||||||||||
Liabilities |
||||||||||||||||
Futures |
$ | $ | $ | $ | ||||||||||||
Forwards |
||||||||||||||||
Total liabilities |
$ | $ | $ | $ | ||||||||||||
December 31, 2023 |
Total |
Level 1 |
Level 2 |
Level 3 | ||||||||||||
Assets |
||||||||||||||||
Futures |
$ | $ | $ | |
$ | |
||||||||||
Forwards |
||||||||||||||||
Options purchased |
||||||||||||||||
Total assets |
$ | $ | $ | $ | ||||||||||||
Liabilities |
||||||||||||||||
Futures |
$ | |
$ | |
$ | $ | ||||||||||
Forwards |
||||||||||||||||
Total liabilities |
$ | $ | $ | $ | ||||||||||||
6. |
Investment in the Funds: |
June 30, 2024 | ||||||||||||
Total Assets |
Total Liabilities |
Total Capital | ||||||||||
Transtrend Master |
$ | $ | |
$ | |
|||||||
NL Master |
||||||||||||
Drakewood Master |
||||||||||||
December 31, 2023 | ||||||||||||
Total Assets |
Total Liabilities |
Total Capital | ||||||||||
Transtrend Master |
$ | |
$ | $ | ||||||||
NL Master |
||||||||||||
Drakewood Master |
||||||||||||
For the three months ended June 30, 2024 | ||||||||||||
Net Investment Income (Loss) |
Total Trading Results |
Net Income (Loss) | ||||||||||
Transtrend Master |
$ | |
$ | ( |
) | $ | ( |
) | ||||
NL Master |
( |
) | ( |
) | ||||||||
Drakewood Master |
( |
) | ( |
) | ||||||||
For the six months ended June 30, 2024 | ||||||||||||
Net Investment Income (Loss) |
Total Trading Results |
Net Income (Loss) | ||||||||||
Transtrend Master |
$ | ( |
) | $ | |
$ | ||||||
NL Master |
( |
) | ( |
) | ||||||||
Drakewood Master |
( |
) | ||||||||||
For the three months ended June 30, 2023 | ||||||||||||
Net Investment Income (Loss) |
Total Trading Results |
Net Income (Loss) | ||||||||||
Transtrend Master |
$ | ( |
) | $ | $ | |
||||||
NL Master |
||||||||||||
Drakewood Master |
( |
) | ( |
) | ||||||||
For the six months ended June 30, 2023 | ||||||||||||
Net Investment Income (Loss) |
Total Trading Results |
Net Income (Loss) | ||||||||||
Transtrend Master |
$ | $ | $ | |||||||||
NL Master |
( |
) | ( |
) | ||||||||
Drakewood Master |
( |
) | ( |
) | ||||||||
June 30, 2024 |
For the three months ended June 30, 2024 |
|||||||||||||||||||||||||||||||||||
% of |
Expenses |
Net |
||||||||||||||||||||||||||||||||||
Funds |
Partners’ Capital |
Fair Value |
Income (Loss) |
Clearing Fees |
Professional Fees |
Management Fees |
Incentive Fee |
Income (Loss) |
Investment Objective |
Redemptions Permitted | ||||||||||||||||||||||||||
Transtrend Master |
% | $ | $ | ( |
) | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
NL Master |
% | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||
Drakewood Master |
% | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||
Total |
$ | $ | ( |
) | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||
June 30, 2024 |
For the six months ended June 30, 2024 |
|||||||||||||||||||||||||||||||||||
% of |
Expenses |
Net |
||||||||||||||||||||||||||||||||||
Funds |
Partners’ Capital |
Fair Value |
Income (Loss) |
Clearing Fees |
Professional Fees |
Management Fees |
Incentive Fee |
Income (Loss) |
Investment Objective |
Redemptions Permitted | ||||||||||||||||||||||||||
Transtrend Master |
% | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
NL Master |
% | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||
Drakewood Master |
% | - | - | |||||||||||||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
December 31, 2023 |
For the three months ended June 30, 2023 |
|||||||||||||||||||||||||||||||||||
% of |
Expenses |
Net |
||||||||||||||||||||||||||||||||||
Funds |
Partners’ Capital |
Fair Value |
Income (Loss) |
Clearing Fees |
Professional Fees |
Management Fees |
Incentive Fee |
Income (Loss) |
Investment Objective |
Redemptions Permitted | ||||||||||||||||||||||||||
Transtrend Master |
% | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
NL Master |
% | - | - | |||||||||||||||||||||||||||||||||
Drakewood Master |
% | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
December 31, 2023 |
For the six months ended June 30, 2023 |
|||||||||||||||||||||||||||||||||||
% of |
Expenses |
Net |
||||||||||||||||||||||||||||||||||
Funds |
Partners’ Capital |
Fair Value |
Income (Loss) |
Clearing Fees |
Professional Fees |
Management Fees |
Incentive Fee |
Income (Loss) |
Investment Objective |
Redemptions Permitted | ||||||||||||||||||||||||||
Transtrend Master |
% | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
NL Master |
% | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||
Drakewood Master |
% | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||
Total |
$ | |
$ | |
$ | |
$ | |
$ | $ | $ | |
||||||||||||||||||||||||
7. |
Financial Instrument Risks: |
8. |
Subsequent Events: |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Liquidity and Capital Resources
The Partnership does not have, nor does it expect to have, any capital assets. The Partnership does not engage in sales of goods or services. Its assets are its (i) investment in the Funds, (ii) redemptions receivable from the Funds, (iii) its equity in trading account, consisting of unrestricted cash, restricted cash, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts, options purchased at fair value and investment in U.S. Treasury bills at fair value, if applicable and (iv) interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investment in the Funds and direct investments. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the second quarter of 2024.
The Partnership’s/Funds’ investment in futures, forwards and options may, from time to time, be illiquid. Most U.S. futures exchanges limit fluctuations in prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” Trades may not be executed at prices beyond the daily limit. If the price for a particular futures or option contract has increased or decreased by an amount equal to the daily limit, positions in that futures or option contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. These market conditions could prevent the Partnership and/or the Funds from promptly liquidating their futures or option contracts and result in restrictions on redemptions.
There is no limitation on daily price movements in trading forward contracts on foreign currencies. The markets for some world currencies have low trading volume and are illiquid, which may prevent the Partnership and/or the Funds from trading in potentially profitable markets or prevent the Partnership and/or the Funds from promptly liquidating unfavorable positions in such markets, subjecting them to substantial losses. Either of these market conditions could result in restrictions on redemptions. For the periods covered by this report, illiquidity has not materially affected the Partnership’s or the Funds’ assets.
Other than the risks inherent in commodity futures, forwards, options, swaps and other derivatives trading and U.S. Treasury bills and money market mutual fund securities, the Partnership and the Funds know of no trends, demands, commitments, events or uncertainties at the present time that are reasonably likely to result in the Partnership’s or the Funds’ liquidity increasing or decreasing in any material way.
The Partnership’s capital consists of the capital contributions of the partners as increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, subscriptions and redemptions of Redeemable Units and distributions of profits, if any.
For the six months ended June 30, 2024, the Partnership’s capital decreased 0.8% from $329,200,714 to $326,688,355. This decrease was attributable to redemptions of 5,547.3590 Class A limited partner Redeemable Units totaling $19,714,577, redemptions of 54.4910 Class Z limited partner Redeemable Units totaling $84,219 and redemptions of 203.1170 Class Z General Partner Redeemable Units totaling $300,430 which was partially offset by subscriptions of 143.3690 Class A limited partner Redeemable Units totaling $526,180 and a net income of $17,060,687. Future redemptions can impact the amount of funds available for investment in subsequent periods.
Other than as discussed above, there are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Partnership’s capital resource arrangements at the present time.
Off-Balance Sheet Arrangements and Contractual Obligations
The Partnership does not have any off-balance sheet arrangements, nor does it have contractual obligations or commercial commitments to make future payments, that would affect its liquidity or capital resources.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting periods. The General Partner believes that the estimates utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Financial Statements.
The Partnership and the Funds record all investments at fair value in their financial statements, with changes in fair value reported as a component of net realized gains (losses) and net change in unrealized gains (losses) in the Statements of Income and Expenses.
23
Results of Operations
During the Partnership’s second quarter of 2024, the net asset value per Redeemable Unit for Class A decreased 4.6% from $3,685.56 to $3,517.65, as compared to an increase of 4.5% in the second quarter of 2023. During the Partnership’s second quarter of 2024, the net asset value per Redeemable Unit for Class Z decreased 4.4% from $1,546.79 to $1,479.10, as compared to an increase of 4.7% in the second quarter of 2023. The Partnership experienced a net trading loss before fees and expenses in the second quarter of 2024 of $16,925,339. Losses were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in currencies, energy, grains, indices, non-U.S. interest rates and livestock and were partially offset by gains in metals, U.S. interest rates and softs. The Partnership experienced a net trading gain before fees and expenses in the second quarter of 2023 of $16,994,227. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in currencies, energy, indices, livestock, non-U.S. interest rates and softs and were partially offset by losses in grains, metals and U.S. interest rates.
During the second quarter, the Partnership’s largest losses for the quarter were recorded in the energies from long positions in West Texas Intermediate crude oil futures and its refined products during April, May, and June as prices fell amid data indicating growing inventories due to increased U.S. oil production. Additional losses in the energy sector were incurred throughout the quarter from long positions in global carbon emission futures and European electrical power futures during April and June. In the global stock index markets, losses were recorded during April from long positions in U.S., Asian, and European stock index futures amid a “risk-off” move by investors. Losses in the agriculturals were experienced from short positions in wheat futures during April and June as prices advanced amid high demand for U.S. grain exports. Further losses were experienced within the global fixed income markets from short positions in European fixed income futures during April and June and from short positions in U.S. Treasury bond and Treasury note futures during May and June as the outlook for global central banks’ future interest rate cuts became clearer. In the currencies, losses were incurred primarily during June from long positions in the Mexican peso as the value of peso dropped after proposed government reform’s spooked investors. A portion of the losses for the second quarter was offset by gains achieved within the metals sector during April and May from long positions in copper futures as prices rallied amid speculation Chinese stimulus measures to prop up their housing market would potentially increase demand for industrial metals. Further gains in the metals were recorded during April and May from long positions in gold and silver futures. Additional gains were experienced during April from long positions in global shipping freight index futures as continued attacks on tankers in the Red Sea boosted prices.
During the Partnership’s six months ended June 30, 2024, the net asset value per Redeemable Unit for Class A increased 5.1% from $3,346.39 to $3,517.65, as compared to an increase of 1.4% during the six months ended June 30, 2023. During the Partnership’s six months ended June 30, 2024, the net asset value per Redeemable Unit for Class Z increased 5.5% from $1,401.81 to $1,479.10, as compared to an increase of 1.8% during the six months ended June 30, 2023. The Partnership experienced a net trading gain before fees and expenses for the six months ended June 30, 2024 of $17,074,119. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in currencies, indices, metals, U.S. interest rates and softs and were partially offset by losses in energy, grains, non-U.S. interest rates and livestock. The Partnership experienced a net trading gain before fees and expenses for the six months ended June 30, 2023 of $6,188,789. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in currencies, indices, livestock and softs and were partially offset by losses in energy, grains, U.S. and non-U.S. interest rates and metals.
During the first six months of the year, the Partnership’s largest gains were achieved within the currency markets during January, February and March primarily from short positions in the Japanese yen versus the U.S. dollar as the yen weakened amid an outlook Japan’s central bank would be less aggressive on interest policies than the Federal Reserve. Gains were recorded within the agricultural markets during the first four months of the year from long positions in cocoa futures as cocoa prices surged to record highs amid concerns extremely hot weather in key West African growing regions would severely damage crops. Further gains in the agricultural markets were recorded from short positions in wheat futures during January and February and from long positions in coffee futures during January and March. Gains within the global stock index sector were also achieved during each month of the first quarter from long positions in Asian, European, and U.S. equity index futures as the outlook for global central banks, most notably the Fed, to be aggressive in cutting interest rates in 2024 spurred investor demand for stock buying. In the metals, gains were experienced during March, April, and May from long positions in gold and silver futures as easing inflationary pressures boosted demand for precious metals. Gains were also achieved throughout the first half of the year from long positions in shipping freight index futures as turmoil and attacks on shipping tankers in the Red Sea pushed prices higher. A portion of the Partnership’s overall for the first six months of the year was offset by losses incurred within the global fixed income sector during January and February from long positions in European fixed income futures amid a murky outlook on Eurozone central bank actions in battling inflation. Further losses were experienced within the global fixed income futures markets from short positions in European fixed income futures during April and June and from short positions in U.S. Treasury bond and Treasury note futures during May and June. Losses were recorded in the energies from long positions in West Texas Intermediate crude oil futures and its refined products during April, May and June as prices fell amid data indicating growing inventories due to increased U.S. oil production. Additional losses in the energy sector were incurred throughout the second quarter from long futures positions in global carbon emission contracts and European electrical power during April and June.
24
Commodity markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility for profit. The profitability of the Partnership/Funds depends on the existence of major price trends and the ability of the Advisors to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, public health epidemics, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisors are able to identify them, the Partnership/Funds expect to increase capital through operations.
As of June 30, 2024, interest income was earned on 100% of the average daily equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of a Fund’s, except for Transtrend Master’s) brokerage account during each month at the rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate. MS&Co. will pay monthly interest to Transtrend Master on 100% of the average daily equity maintained in cash in Transtrend Master’s brokerage account during each month at the rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate less 0.15% during such month but in no event less than zero. When the effective rate is less than zero, no interest is earned. For the avoidance of doubt, the Partnership/Funds will not receive interest on amounts in the futures brokerage account that are committed to margin. Any interest earned on the Partnership’s and/or each Fund’s cash account in excess of the amounts described above, if any, will be retained by MS&Co. and/or shared with the General Partner. All interest earned on U.S. Treasury bills and money market mutual fund securities will be retained by the Partnership and/or the Funds, as applicable. Any interest income earned on collateral or excess cash deposited by certain of the Funds and held by JPMorgan in its capacity as such Funds’ forward foreign currency counterparty will be retained by such Funds, and the Partnership will receive its allocable portion of such interest from the applicable Fund. Interest income earned by the Partnership for the three and six months ended June 30, 2024 decreased by $119,023 and increased by $224,594, respectively, as compared to the corresponding periods in 2023. The decrease in interest income was primarily due to lower 4-week U.S. Treasury bill discount rates during the three months ended June 30, 2024 as compared to the corresponding period in 2023. The increase in interest income was primarily due to higher 4-week U.S. Treasury bill discount rates during the six months ended June 30, 2024 as compared to the corresponding period in 2023. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on (1) the average daily equity maintained in cash in the Partnership’s and/or the Funds’ accounts, (2) the amount of U.S. Treasury bills and/or money market mutual fund securities held by the Partnership and/or the Funds and (3) interest rates over which none of the Partnership, the Funds, MS&Co. or JPMorgan has control.
Certain clearing fees are based on the number of trades executed by the Advisors for the Partnership/Funds. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees related to direct investments for the three and six months ended June 30, 2024 decreased by $27,040 and $76,984, respectively, as compared to the corresponding periods in 2023. The decrease in these clearing fees was primarily due to a decrease in the number of direct trades made by the Partnership during the three and six months ended June 30, 2024 as compared to the corresponding periods in 2023.
Ongoing selling agent fees are calculated as a percentage of the Partnership’s adjusted net asset value for Class A Redeemable Units as of the end of each month and are affected by trading performance, subscriptions and redemptions. Ongoing selling agent fees for the three and six months ended June 30, 2024 decreased by $80,872 and $164,906, respectively, as compared to the corresponding periods in 2023. The decrease in ongoing selling agent fees was primarily due to lower average adjusted net assets during the three and six months ended June 30, 2024 as compared to the corresponding periods in 2023.
Management fees, except fees payable to Transtrend, are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Management fees payable to Transtrend are charged at the Transtrend Master level and are affected by trading performance, subscriptions and redemptions of Transtrend Master. Management fees for the three and six months ended June 30, 2024 increased by $46,914 and $58,077, respectively, as compared to the corresponding periods in 2023. The increase in management fees was due to higher average adjusted net assets during the three and six months ended June 30, 2024 as compared to the corresponding periods in 2023.
Fees are paid to the General Partner for administering the business and affairs of the Partnership including, among other things, (i) selecting, appointing and terminating the Partnership’s commodity trading advisors, (ii) allocating and reallocating the Partnership’s assets among the commodity trading advisors and (iii) monitoring the activities of the commodity trading advisors. These fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. The General Partner fees for the three months ended June 30, 2024 decreased by $81,868 and $168,406, respectively, as compared to the corresponding periods in 2023. The decrease in the General Partner fees was due to lower average adjusted net assets during the three and six months ended June 30, 2024 as compared to the corresponding periods in 2023.
25
Incentive fees paid by the Partnership are based on the new trading profits, as defined in the respective management agreements among the Partnership, the General Partner/Trading Manager and each Advisor, generated by each Advisor at the end of the quarter, calendar half year or annually, as applicable. Trading performance for the three and six months ended June 30, 2024 resulted in a reversal of incentive fees of $(781,220) and incentive fees of $1,013,156, respectively. Trading performance for the three and six months ended June 30, 2023 resulted in incentive fees of $0 and $172,212. To the extent an Advisor incurs a loss for the Partnership, the Advisor will not be paid an incentive fee until such Advisor recovers any net loss incurred by the Advisor and earns additional new trading profits for the Partnership.
In allocating the assets of the Partnership among the Advisors, the General Partner considers, among other factors, each Advisor’s past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets among the Advisors and may allocate assets to additional advisors at any time.
As of June 30, 2024 and March 31, 2024, the Partnership’s assets were allocated among the Advisors in the following approximate percentages:
| Advisor |
June 30, 2024 | June 30, 2024 (percentage of Partners’ Capital) |
March 31, 2024 | March 31, 2024 (percentage of Partners’ Capital) |
||||||||||||
| Transtrend |
$ | 77,089,682 | 24 | % | $ | 80,834,608 | 23 | % | ||||||||
| Northlander |
$ | 23,812,557 | 7 | % | $ | 27,618,907 | 8 | % | ||||||||
| Drakewood |
$ | 29,183,666 | 9 | % | $ | 25,607,209 | 7 | % | ||||||||
| JSCL |
$ | 105,885,596 | 32 | % | $ | 121,016,033 | 35 | % | ||||||||
| Quantica |
$ | 49,211,831 | 15 | % | $ | 51,122,043 | 15 | % | ||||||||
| Breakout |
$ | 25,641,077 | 8 | % | $ | 24,650,410 | 7 | % | ||||||||
| Unallocated |
$ | 15,863,946 | 5 | % | $ | 16,544,712 | 5 | % | ||||||||
26
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk. |
The Partnership/Funds are speculative commodity pools. The market sensitive instruments held by the Partnership/Funds are acquired for speculative trading purposes, and all or substantially all of the Partnership’s/Funds’ assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s/Funds’ main line of business.
The limited partners will not be liable for losses exceeding the current net asset value of their investment.
Market movements result in frequent changes in the fair value of the Partnership’s/Funds’ open contracts and, consequently, in their earnings and cash balances. The Partnership’s/Funds’ market risk is influenced by a wide variety of factors. These primarily include factors which affect energy price levels, including supply factors and weather conditions, but could also include the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Partnership’s/Funds’ open contracts and the liquidity of the markets in which they trade.
The Partnership/Funds rapidly acquire and liquidate both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s/Funds’ past performances is not necessarily indicative of their future results.
Quantifying the Partnership’s and the Funds’ Trading Value at Risk
The following quantitative disclosures regarding the Partnership’s and the Funds’ market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.
The Partnership and the Funds account for open positions on the basis of fair value accounting principles. Any loss in the market value of the Partnership’s and each Fund’s open positions is directly reflected in the Partnership’s and each Fund’s earnings and cash flow.
The Partnership’s and the Funds’ risk exposure in the market sectors traded by the Advisors is estimated below in terms of Value at Risk. Please note that the Value at Risk model is used to numerically quantify market risk for historic reporting purposes only and is not utilized by either the General Partner or the Advisors in their daily risk management activities.
“Value at Risk” is a measure of the maximum amount which the Partnership/Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s/Funds’ speculative trading and the recurrence in the markets traded by the Partnership/Funds of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership’s/Funds’ experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Partnership’s/Funds’ losses in any market sector will be limited to Value at Risk or by the Partnership’s/Funds’ attempts to manage their market risk.
Exchange margin requirements have been used by the Partnership/Funds as the measure of their Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. The margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.
Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. JSCL, Quantica and Breakout directly trade managed accounts in the name of the Partnership. As of June 30, 2024, Transtrend, Northlander and Drakewood traded the Partnership’s assets indirectly in master fund managed accounts established in the name of the master funds over which they had been granted limited authority to make trading decisions. The first two trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly and through its investment in the Funds. The remaining trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly (i.e. in the managed accounts in the Partnership’s name traded by JSCL, Quantica and Breakout) and indirectly by each Fund separately. There has been no material change in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2023.
27
The following tables indicate the trading Value at Risk associated with the Partnership’s open positions by market category as of June 30, 2024 and December 31, 2023. As of June 30, 2024, the Partnership’s total capitalization was $326,688,355.
| June 30, 2024 |
|
|||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
||||||||||||||||
| Currencies |
$ | 15,644,459 | 4.79 | % | ||||||||||||||
| Energy |
11,445,556 | 3.50 | ||||||||||||||||
| Grains |
4,313,058 | 1.32 | ||||||||||||||||
| Indices |
11,885,667 | 3.64 | ||||||||||||||||
| Interest Rates U.S. |
2,574,713 | 0.79 | ||||||||||||||||
| Interest Rates Non-U.S. |
4,895,550 | 1.50 | ||||||||||||||||
| Livestock |
1,042,030 | 0.32 | ||||||||||||||||
| Metals |
7,491,579 | 2.29 | ||||||||||||||||
| Softs |
4,231,957 | 1.30 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||
| Total |
$ | 63,524,569 | 19.45 | % | ||||||||||||||
|
|
|
|
|
|||||||||||||||
As of December 31, 2023, the Partnership’s total capitalization was $329,200,714.
| December 31, 2023 |
|
|||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
||||||||||||||||
| Currencies |
$ | 8,417,014 | 2.56 | % | ||||||||||||||
| Energy |
20,046,438 | 6.09 | ||||||||||||||||
| Grains |
5,169,656 | 1.57 | ||||||||||||||||
| Indices |
14,118,622 | 4.29 | ||||||||||||||||
| Interest Rates U.S. |
3,341,889 | 1.02 | ||||||||||||||||
| Interest Rates Non-U.S. |
5,382,386 | 1.63 | ||||||||||||||||
| Livestock |
669,653 | 0.20 | ||||||||||||||||
| Metals |
9,288,466 | 2.82 | ||||||||||||||||
| Softs |
2,654,922 | 0.81 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||
| Total |
$ | 69,089,046 | 20.99 | % | ||||||||||||||
|
|
|
|
|
|||||||||||||||
28
The following tables indicate the trading Value at Risk associated with the Partnership’s direct investments and indirect investments in the Funds by market category as of June 30, 2024 and December 31, 2023, and the highest, lowest and average values during the three months ended June 30, 2024 and the twelve months ended December 31, 2023, as applicable. All open position trading risk exposures have been included in calculating the figures set forth below.
At June 30, 2024, the Partnership’s Value at Risk for the portion of its assets that are traded directly was as follows:
June 30, 2024
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* | |||||||||||||||||||||||||||||||||||
| Currencies |
$ | 5,692,868 | 1.74 | % | $ | 5,692,868 | $ | 3,790,326 | $ | 4,783,559 | ||||||||||||||||||||||||||||||
| Energy |
7,899,757 | 2.42 | 10,008,053 | 6,677,216 | 7,872,651 | |||||||||||||||||||||||||||||||||||
| Grains |
2,095,073 | 0.64 | 3,369,761 | 1,232,306 | 2,007,515 | |||||||||||||||||||||||||||||||||||
| Indices |
8,042,471 | 2.46 | 10,982,037 | 4,974,039 | 6,626,825 | |||||||||||||||||||||||||||||||||||
| Interest Rates U.S. |
1,676,457 | 0.51 | 4,159,563 | 1,549,348 | 2,808,365 | |||||||||||||||||||||||||||||||||||
| Interest Rates Non-U.S. |
2,537,995 | 0.78 | 2,774,536 | 1,720,066 | 2,127,958 | |||||||||||||||||||||||||||||||||||
| Livestock |
791,395 | 0.24 | 791,395 | 572,963 | 668,149 | |||||||||||||||||||||||||||||||||||
| Metals |
2,683,674 | 0.82 | 5,237,520 | 2,209,898 | 3,392,020 | |||||||||||||||||||||||||||||||||||
| Softs |
2,692,659 | 0.82 | 3,620,646 | 2,425,598 | 3,009,958 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total |
$ | 34,112,349 | 10.43 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| * | Average of daily Values at Risk. |
At December 31, 2023, the Partnership’s Value at Risk for the portion of its assets that are traded directly was as follows:
December 31, 2023
| Twelve Months Ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* | |||||||||||||||||||||||||||||||||||
| Currencies |
$ | 3,685,615 | 1.12 | % | $ | 9,642,187 | $ | 3,145,564 | $ | 5,387,331 | ||||||||||||||||||||||||||||||
| Energy |
16,471,138 | 5.00 | 17,355,253 | 4,908,703 | 9,738,993 | |||||||||||||||||||||||||||||||||||
| Grains |
1,761,099 | 0.53 | 4,524,557 | 1,276,438 | 2,559,094 | |||||||||||||||||||||||||||||||||||
| Indices |
10,022,931 | 3.04 | 19,578,791 | 3,769,917 | 8,061,401 | |||||||||||||||||||||||||||||||||||
| Interest Rates U.S. |
1,779,309 | 0.54 | 5,873,265 | 373,928 | 2,414,140 | |||||||||||||||||||||||||||||||||||
| Interest Rates Non-U.S. |
2,460,006 | 0.75 | 6,606,019 | 1,029,342 | 2,929,148 | |||||||||||||||||||||||||||||||||||
| Livestock |
269,170 | 0.08 | 1,044,560 | 156,478 | 651,607 | |||||||||||||||||||||||||||||||||||
| Metals |
4,634,724 | 1.41 | 8,601,091 | 1,558,883 | 4,065,094 | |||||||||||||||||||||||||||||||||||
| Softs |
1,443,017 | 0.44 | 4,281,104 | 1,353,582 | 2,083,574 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total |
$ | 42,527,009 | 12.91 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| * | Annual average of daily Values at Risk. |
29
At June 30, 2024, Transtrend Master’s total capitalization was $77,089,981 and the Partnership owned 100.0% of Transtrend Master. As of June 30, 2024, Transtrend Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Transtrend for trading) was as follows:
June 30, 2024
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* | |||||||||||||||||||||||||||||||||||
| Currencies |
$ | 9,893,509 | 12.83 | % | $ | 9,893,509 | $ | 7,503,984 | $ | 8,500,001 | ||||||||||||||||||||||||||||||
| Energy |
991,780 | 1.29 | 2,768,692 | 221,450 | 1,419,029 | |||||||||||||||||||||||||||||||||||
| Grains |
2,217,985 | 2.88 | 3,406,119 | 1,475,817 | 2,052,719 | |||||||||||||||||||||||||||||||||||
| Indices |
3,843,196 | 4.99 | 4,608,804 | 3,843,196 | 4,212,439 | |||||||||||||||||||||||||||||||||||
| Interest Rates U.S. |
898,256 | 1.17 | 2,851,300 | 432,710 | 1,753,336 | |||||||||||||||||||||||||||||||||||
| Interest Rates Non-U.S. |
2,357,555 | 3.06 | 3,392,189 | 2,357,555 | 2,869,924 | |||||||||||||||||||||||||||||||||||
| Livestock |
250,635 | 0.33 | 497,338 | 211,239 | 302,904 | |||||||||||||||||||||||||||||||||||
| Metals |
1,427,791 | 1.85 | 1,556,098 | 969,709 | 1,233,239 | |||||||||||||||||||||||||||||||||||
| Softs |
1,539,298 | 2.00 | 1,669,468 | 1,175,631 | 1,471,827 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total |
$ | 23,420,005 | 30.40 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| * | Average of daily Values at Risk. |
At December 31, 2023, Transtrend Master’s total capitalization was $68,745,931 and the Partnership owned 100.0% of Transtrend Master. As of December 31, 2023, Transtrend Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Transtrend for trading) was as follows:
December 31, 2023
| Twelve Months Ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* | |||||||||||||||||||||||||||||||||||
| Currencies |
$ | 4,632,920 | 6.74 | % | $ | 7,669,295 | $ | 3,414,047 | $ | 5,796,343 | ||||||||||||||||||||||||||||||
| Energy |
1,942,649 | 2.83 | 2,464,257 | 506,523 | 1,480,316 | |||||||||||||||||||||||||||||||||||
| Grains |
3,408,557 | 4.96 | 3,547,377 | 735,363 | 2,311,443 | |||||||||||||||||||||||||||||||||||
| Indices |
4,095,691 | 5.96 | 4,404,360 | 2,369,487 | 3,442,180 | |||||||||||||||||||||||||||||||||||
| Interest Rates U.S. |
1,562,580 | 2.27 | 2,803,620 | 608,998 | 1,397,228 | |||||||||||||||||||||||||||||||||||
| Interest Rates Non-U.S. |
2,922,380 | 4.25 | 4,004,932 | 1,453,313 | 2,486,104 | |||||||||||||||||||||||||||||||||||
| Livestock |
400,483 | 0.58 | 612,425 | 207,433 | 335,917 | |||||||||||||||||||||||||||||||||||
| Metals |
1,280,032 | 1.86 | 1,533,528 | 382,213 | 1,016,166 | |||||||||||||||||||||||||||||||||||
| Softs |
1,211,905 | 1.76 | 1,988,310 | 982,191 | 1,489,521 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total |
$ | 21,457,197 | 31.21 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| * | Annual average of daily Values at Risk. |
30
At June 30, 2024, NL Master’s total capitalization was $31,795,891 and the Partnership owned approximately 71.5% of NL Master. As of June 30, 2024, NL Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Northlander for trading) was as follows:
| June 30, 2024 |
| |||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* |
|||||||||||||||||||||||||||
| Energy |
$ | 3,572,055 | 11.23 | % | $ | 5,473,070 | $ | 3,111,535 | $ | 4,337,373 | ||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Total |
$ | 3,572,055 | 11.23 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||||||||
| * | Average of daily Values at Risk. |
At December 31, 2023, NL Master’s total capitalization was $40,737,626 and the Partnership owned approximately 71.7% of NL Master. As of December 31, 2023, NL Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Northlander for trading) was as follows:
| December 31, 2023 |
| |||||||||||||||||||||||||||||||
| Twelve Months Ended December 31, 2023 | ||||||||||||||||||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* |
|||||||||||||||||||||||||||
| Energy |
$ | 2,277,059 | 5.59 | % | $ | 4,647,914 | $ | 832,520 | $ | 2,281,544 | ||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Total |
$ | 2,277,059 | 5.59 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||||||||
| * | Annual average of daily Values at Risk. |
31
At June 30, 2024, Drakewood Master’s total capitalization was $48,752,393 and the Partnership owned approximately 57.6% of Drakewood Master. As of June 30, 2024, Drakewood Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Drakewood for trading) was as follows:
| June 30, 2024 |
| |||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* |
|||||||||||||||||||||||||||
| Currencies |
$ | 100,837 | 0.21 | % | $ | 140,800 | $ | 71,005 | $ | 92,650 | ||||||||||||||||||||||
| Metals |
5,868,254 | 12.04 | 9,052,374 | 5,557,973 | 7,744,863 | |||||||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Total |
$ | 5,969,091 | 12.25 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||||||||
| * | Average of daily Values at Risk. |
At December 31, 2023, Drakewood Master’s total capitalization was $46,153,273 and the Partnership owned approximately 64.5% of Drakewood Master. As of December 31, 2023, Drakewood Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Drakewood for trading) was as follows:
| December 31, 2023 |
| |||||||||||||||||||||||||||||||
| Twelve Months Ended December 31, 2023 | ||||||||||||||||||||||||||||||||
| Market Sector |
Value at Risk | % of Total Capitalization |
High Value at Risk |
Low Value at Risk |
Average Value at Risk* |
|||||||||||||||||||||||||||
| Currencies |
$ | 152,680 | 0.33 | % | $ | 355,410 | $ | 108,130 | $ | 205,414 | ||||||||||||||||||||||
| Metals |
5,230,558 | 11.33 | 7,224,155 | 2,376,417 | 4,343,085 | |||||||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||||||||
| Total |
$ | 5,383,238 | 11.66 | % | ||||||||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||||||||
| * | Annual average of daily Values at Risk. |
32
| Item 4. | Controls and Procedures. |
The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to management, including the President and Chief Financial Officer (“CFO”) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.
The General Partner is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.
The General Partner’s President and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2024 and, based on that evaluation, the General Partner’s President and CFO have concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.
The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s President and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. These controls include policies and procedures that:
| • | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; |
| • | provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and (ii) the Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and |
| • | provide reasonable assurance regarding prevention or timely detection and correction of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements. |
There were no changes in the Partnership’s internal control over the financial reporting process during the fiscal quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
33
PART II. OTHER INFORMATION
| Item 1. | Legal Proceedings. |
This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which Morgan Stanley & Co. LLC or its subsidiaries is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.
On June 1, 2011, Morgan Stanley & Co. Incorporated converted from a Delaware corporation to a Delaware limited liability company. As a result of that conversion, Morgan Stanley & Co. Incorporated is now named Morgan Stanley & Co. LLC (“MS&Co.” or “the Company”).
The Company is a wholly-owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley files periodic reports with the SEC as required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) which include current descriptions of material litigation and material proceedings and investigations, if any, by governmental and/or regulatory agencies or self-regulatory organizations concerning Morgan Stanley and its subsidiaries, including the Company. As a consolidated subsidiary of Morgan Stanley, the Company does not file its own periodic reports with the SEC that contain descriptions of material litigation, proceedings and investigations. As a result, we refer you to the “Legal Proceedings” section of Morgan Stanley’s SEC 10-K filings for 2023, 2022, 2021, 2020, and 2019. In addition, the Company annually prepares an Audited, Consolidated Statement of Financial Condition (“Audited Financial Statement”) that is publicly available on Morgan Stanley’s website at www.morganstanley.com. We refer you to the Commitments, Guarantees and Contingencies – Legal section of the Company’s 2023 Audited Financial Statement.
In addition to the matters described in those filings, in the normal course of business, each of Morgan Stanley and the Company has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the third-party entities that are, or would otherwise be, the primary defendants in such cases are bankrupt, in financial distress, or may not honor applicable indemnification obligations. These actions have included, but are not limited to, antitrust claims, claims under various false claims act statutes, and matters arising from our sales and trading businesses and our activities in the capital markets.
Each of Morgan Stanley and the Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding the Company’s business and involving, among other matters, sales, trading, financing, prime brokerage, market-making activities, investment banking advisory services, capital market activities, financial products or offerings sponsored, underwritten, or sold by the Company, wealth and investment management services, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions, limitations on our ability to conduct certain business, or other relief.
The Company is a Delaware limited liability company with its main business office located at 1585 Broadway, New York, New York 10036. Among other registrations and memberships, the Company is registered as a futures commission merchant and is a member of the National Futures Association.
34
During the preceding five years, the following administrative, civil, or criminal actions pending, on appeal or concluded against the Company or any of its principals are material within the meaning of CFTC Rule 4.24(l)(2) or 4.34(k)(2):
Regulatory and Governmental Matters
On January 12, 2024, the U.S. Attorney’s Office for the Southern District of New York (“USAO”) and the SEC announced they had reached settlement agreements with the Company in connection with their investigations into the Company’s blocks business. Specifically, the Company entered into a three-year non-prosecution agreement (“NPA”) with the USAO that included the payment of forfeiture, restitution, and a criminal fine for making false statements in connection with the sale of certain block trades from 2018 through August 2021. The NPA required the Company to admit responsibility for certain acts of its employees and to continue to cooperate with and provide certain information to the USAO for the term of the agreement. Additionally, the SEC charged the Company with violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder for the disclosure of confidential information about block trades and also violations of Section 15(g) of the Exchange Act for the failure to enforce its policies concerning the misuse of material non-public information related to block trades. As part of the SEC agreement, the Company paid disgorgement and a civil penalty. After the agreed-upon credits were applied, the Company paid a total amount of approximately $249 million under both settlements. The Company also faces potential civil liability arising from claims that have been or may be asserted by, among others, block transaction participants who contend they were harmed or disadvantaged including, among other things, as a result of a share price decline allegedly caused by the activities of the Company and/or its employees, or as a result of the Company’s and/or its employees’ failure to adhere to applicable laws and regulations. In addition, the Company has responded to demands from shareholders under Section 220 of the Delaware General Corporation Law for books and records concerning the investigations.
On September 30, 2020, the SEC entered into a settlement order with the Company settling an administrative action which relates to the Company’s violations of the order marking requirements of Regulation SHO of the Exchange Act resulting from its improper use of aggregation units in structuring the Firm’s equity swaps business. The order found that the Company improperly operated its equity swaps business without netting certain “long” and “short” positions as required by Rule 200(c) of Regulation SHO. The order found that the long exposure to an equity security (the “Long Unit”) and the short exposure to an equity security (the “Short Unit”) were not independent from one another and did not have separate trading strategies or objectives without regard to each other, and that the Long and Short Units were not eligible for the exception in Rule 200(f) of Regulation SHO. The order found that the Company willfully violated Section 200(g) of Regulation SHO. The Company consented, without admitting or denying the findings and without adjudication of any issue of law or fact, to a censure; to cease and desist from committing or causing future violations; to pay a civil penalty of $5 million; and to comply with the undertaking enumerated in the order.
The Firm has reached agreements in principle with two regulatory agencies—the SEC for $125 million and the CFTC for $75 million— to resolve record-keeping related investigations by those agencies relating to business communications on messaging platforms that had not been approved by the Firm. The Company was one of the entities involved in these investigations, and has recognized a provision of $63 million in anticipation of concluding the settlement with the SEC. On September 27, 2022, the Firm’s settlements with the SEC and the CFTC became effective.
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Civil Litigation
On May 17, 2013, the plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Company and certain affiliates in the Supreme Court of the State of New York, New York County (“Supreme Court of NY”). The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs was approximately $133. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Company’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiffs by the Company was approximately $116. On August 11, 2016, the Appellate Division affirmed the trial court’s order denying in part the Company’s motion to dismiss the complaint. On July 15, 2022, the Company filed a motion for summary judgment on all remaining claims. On March 1, 2023, the court granted in part and denied in part the Company’s motion for summary judgment, narrowing the alleged misrepresentations at issue in the case. On March 26, 2024, the Appellate Division affirmed the trial court’s summary judgment order. On October 1, 2024, trial is scheduled to begin.
Beginning in February of 2016, the Company was named as a defendant in multiple purported antitrust class actions now consolidated into a single proceeding in the United States District Court for the Southern District of New York (“SDNY”) styled In Re: Interest Rate Swaps Antitrust Litigation. Plaintiffs allege, inter alia, that the Company, together with a number of other financial institution defendants, violated U.S. and New York state antitrust laws from 2008 through December of 2016 in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for interest rate swaps trading. Complaints were filed both on behalf of a purported class of investors who purchased interest rate swaps from defendants, as well as on behalf of three operators of swap execution facilities that allegedly were thwarted by the defendants in their efforts to develop such platforms. The consolidated complaints seek, among other relief, certification of the investor class of plaintiffs and treble damages. On July 28, 2017, the court granted in part and denied in part the defendants’ motion to dismiss the complaints. On December 15, 2023, the court denied the class plaintiffs’ motion for class certification. On December 29, 2023, the class plaintiffs petitioned the United States Court of Appeals for the Second Circuit for leave to appeal that decision. On February 28, 2024, the parties reached an agreement in principle to settle the class claims. On July 11, 2024, the court granted preliminary approval of the settlement.
On August 13, 2021, the plaintiff in Camelot Event Driven Fund, a Series of Frank Funds Trust v. Morgan Stanley & Co. LLC, et al. filed in the Supreme Court of NY a purported class action complaint alleging violations of the federal securities laws against ViacomCBS (“Viacom”), certain of its officers and directors, and the underwriters, including the Company, of two March 2021 Viacom offerings: a $1,700 Viacom Class B Common Stock offering and a $1,000 offering of 5.75% Series A Mandatory Convertible Preferred Stock (collectively, the “Offerings”). The complaint alleges, inter alia, that the Viacom offering documents for both issuances contained material omissions because they did not disclose that certain of the underwriters, including the Company, had prime brokerage relationships and/or served as counterparties to certain derivative transactions with Archegos Capital Management LP (“Archegos”), a fund with significant exposure to Viacom securities across multiple prime brokers. The complaint, which seeks, among other things, unspecified compensatory damages, alleges that the offering documents did not adequately disclose the risks associated with Archegos’s concentrated Viacom positions at the various prime
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brokers, including that the unwind of those positions could have a deleterious impact on the stock price of Viacom. On November 5, 2021, the complaint was amended to add allegations that defendants failed to disclose that certain underwriters, including the Company, had intended to unwind Archegos’s Viacom positions while simultaneously distributing the Offerings. On February 6, 2023, the court issued a decision denying the motions to dismiss as to the Company and the other underwriters, but granted the motion to dismiss as to Viacom and the Viacom individual defendants. On February 15, 2023, the underwriters, including the Company, filed their notices of appeal of the denial of their motions to dismiss. On March 10, 2023, the plaintiff appealed the dismissal of Viacom and the individual Viacom defendants. On April 4, 2024, the Appellate Division upheld the lower court’s decision as to the Company and other underwriter defendants that had prime brokerage relationships and/or served as counterparties to certain derivative transactions with Archegos, dismissed the remaining underwriters, and upheld the dismissal of Viacom and its officers and directors. On July 25, 2024, the Appellate Division denied the plaintiff’s and the Company’s respective motions for leave to reargue or appeal the April 4, 2024 decision. On January 4, 2024, the court granted the plaintiff’s motion for class certification. On February 14, 2024, the defendants filed their notice of appeal of the court’s grant of class certification.
The Company is a defendant in three antitrust class action complaints which have been consolidated into one proceeding in the United States District Court for the SDNY under the caption City of Philadelphia, et al. v. Bank of America Corporation, et al. Plaintiffs allege, inter alia, that the Company, along with a number of other financial institution defendants, violated U.S. antitrust laws and relevant state laws in connection with alleged efforts to artificially inflate interest rates for Variable Rate Demand Obligations (“VRDO”). Plaintiffs seek, among other relief, treble damages. The class action complaint was filed on behalf of a class of municipal issuers of VRDO for which defendants served as remarketing agent. On November 2, 2020, the court granted in part and denied in part the defendants’ motion to dismiss the consolidated complaint, dismissing state law claims, but denying dismissal of the U.S. antitrust claims. On September 21, 2023, the court granted plaintiffs’ motion for class certification. On October 5, 2023, defendants petitioned the United States Court of Appeals for the Second Circuit for leave to appeal that decision, which was granted on February 5, 2024.
An affiliate of the Company is engaging with the U.K. Competition and Markets Authority in connection with its investigation of suspected anti-competitive arrangements in the financial services sector, specifically regarding its activities concerning certain liquid fixed income products between 2009 and 2012. On May 24, 2023, the U.K. Competition and Markets Authority issued a Statement of Objections setting out its provisional findings that the affiliate had breached U.K. competition law by sharing competitively sensitive information in connection with gilts and gilt asset swaps between 2009 and 2012.The affiliate is contesting the provisional findings. Separately, on June 16, 2023, the affiliate and the Company, together with a number of other financial institutions, were named as defendants in a purported antitrust class action in the United States District Court for the SDNY styled Oklahoma Firefighters Pension and Retirement System v. Deutsche Bank Aktiengesellschaft, et al., alleging, inter alia, that they violated U.S. antitrust laws in connection with their alleged effort to fix prices of gilts traded in the United States between 2009 and 2013. On September 28, 2023, the defendants filed a joint motion to dismiss the complaint, which has been fully briefed.
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Settled Civil Litigation
On August 18, 2009, Relators Roger Hayes and C. Talbot Heppenstall, Jr., filed a qui tam action in New Jersey state court styled State of New Jersey ex. rel. Hayes v. Bank of America Corp., et al. The complaint, filed under seal pursuant to the New Jersey False Claims Act, alleged that the Company and several other underwriters of municipal bonds had defrauded New Jersey issuers by misrepresenting that they would achieve the best price or lowest cost of capital in connection with certain municipal bond issuances. On March 17, 2016, the court entered an order unsealing the complaint. On November 17, 2017, Relators filed an amended complaint to allege the Company mispriced certain bonds issued in twenty-three bond offerings between 2008 and 2017, having a total par amount of $6,900 million. The complaint seeks, among other relief, treble damages. On February 22, 2018, the Company moved to dismiss the amended complaint, and on July 17, 2018, the court denied the Company’s motion. On October 13, 2021, following a series of voluntary and involuntary dismissals, Relators limited their claims to certain bonds issued in five offerings the Company underwrote between 2008 and 2011, having a total par amount of $3,900 million. On August 22, 2023, the Firm reached an agreement in principle to settle the litigation. The final agreement became effective on January 30, 2024.
On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Company, styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., in the Supreme Court of NY. The complaint related to a $275 million credit default swap (“CDS”) referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserted claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew that the assets backing the CDO were of poor quality when it entered into the CDS with CDIB. On March 22, 2021, the parties entered into a settlement agreement. On April 16, 2021, the court entered a stipulation of voluntary discontinuance, with prejudice.
On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company and other defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011, which alleged that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by the Company at issue in the action was approximately $203 million. The complaint sought, among other things, to rescind the plaintiff’s purchase of such certificates. On November 4, 2021, the Firm entered into an agreement to settle the litigation.
On April 1, 2016, the California Attorney General’s Office filed an action against the Company in California state court styled California v. Morgan Stanley, et al., on behalf of California investors, including the California Public Employees’ Retirement System and the California Teachers’ Retirement System. The complaint alleged that the Company made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV, and asserted violations of the California False Claims Act and other state laws and sought treble damages, civil penalties, disgorgement, and injunctive relief. On April 24, 2019, the parties reached an agreement to settle the litigation.
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In August of 2017, the Company was named as a defendant in a purported antitrust class action in the United States District Court for the SDNY styled Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al. Plaintiffs allege, inter alia, that the Company, together with a number of other financial institution defendants, violated U.S. antitrust laws and New York state law in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for securities lending. The class action complaint was filed on behalf of a purported class of borrowers and lenders who entered into stock loan transactions with the defendants. The class action complaint seeks, among other relief, certification of the class of plaintiffs and treble damages. On September 27, 2018, the court denied the defendants’ motion to dismiss the class action complaint. Plaintiffs’ motion for class certification was referred by the District Court to a magistrate judge who, on June 30, 2022, issued a report and recommendation that the District Court certify a class. The motion for class certification and the parties’ objections to the report and recommendation are pending before the District Court. On May 20, 2023, the Firm reached an agreement in principle to settle the litigation. On September 1, 2023, the court granted preliminary approval of the settlement.
Beginning on March 25, 2019, the Company was named as a defendant in a series of putative class action complaints filed in the United States District Court for the SDNY, the first of which is styled Alaska Electrical Pension Fund v. BofA Secs., Inc., et al. Each complaint alleged a conspiracy to fix prices and restrain competition in the market for unsecured bonds issued by the following Government-Sponsored Enterprises: the Federal National Mortgage Association; the Federal Home Loan Mortgage Corporation; the Federal Farm Credit Banks Funding Corporation; and the Federal Home Loan Banks. The purported class period for each suit is from January 1, 2012 to June 1, 2018. Each complaint raised a claim under Section 1 of the Sherman Act and sought, among other things, injunctive relief and treble compensatory damages. On May 23, 2019, plaintiffs filed a consolidated amended class action complaint styled In re GSE Bonds Antitrust Litigation, with a purported class period from January 1, 2009 to January 1, 2016. On June 13, 2019, the defendants filed a joint motion to dismiss the consolidated amended complaint. On August 29, 2019, the court denied the Company’s motion to dismiss. On December 15, 2019, the Company and certain other defendants entered into a stipulation of settlement to resolve the action as against each of them in its entirety. On June 16, 2020, the court granted final approval of the settlement.
Additional lawsuits containing claims similar to those described above may be filed in the future. In the course of its business, the Company, as a major futures commission merchant, is party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of the Company. The Company may establish reserves from time to time in connections with such actions.
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Item lA. |
Risk Factors . |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds . |
Period |
Class A (a) Total Number of Redeemable Units Purchased* |
Class A (b) Average Price Paid per Redeemable Unit** |
Class Z (a) Total Number of Redeemable Units Purchased* |
Class Z (b) Average Price Paid per Redeemable Unit** |
(c) Total Number of Redeemable Units Purchased as Part of Publicly Announced Plans or Programs |
(d) Maximum Number (or Approximate Dollar Value) of Redeemable Units that May Yet Be Purchased Under the Plans or Programs |
||||||||||||||||||
April 1, 2024 - April 30, 2024 |
446.2090 | $ | 3,710.60 | N/A | N/A | N/A | N/A | |||||||||||||||||
May 1, 2024 - May 31, 2024 |
391.9550 | $ | 3,677.99 | 54.4910 | $ | 1,545.55 | N/A | N/A | ||||||||||||||||
June 1, 2024 - June 30, 2024 |
561.3990 | $ | 3,517.65 | N/A | N/A | N/A | N/A | |||||||||||||||||
| 1,399.5630 | $ | 3,624.07 | 54.4910 | $ | 1,545.55 | |||||||||||||||||||
| * | Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner may compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for limited partners. |
| ** | Redemptions of Redeemable Units are effected as of the end of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions. |
Item 3. |
Defaults Upon Senior Securities . — |
Item 4. |
Mine Safety Disclosures . — |
Item 5. |
Other Information . |
| Item 6. | Exhibits. |
Exhibit 31.1 — Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director) (filed herewith).
Exhibit 31.2 — Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer) (filed herewith).
Exhibit 32.1 — Section 1350 Certification (Certification of President and Director) (filed herewith).
Exhibit 32.2 — Section 1350 Certification (Certification of Chief Financial Officer) (filed herewith).
101.INS Inline XBRL Instance Document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CERES ORION L.P. | ||
| By: | Ceres Managed Futures LLC | |
| (General Partner) | ||
| By: | /s/ Patrick T. Egan | |
| Patrick T. Egan | ||
| President and Director | ||
| Date: August 9, 2024 | ||
| By: | /s/ Brooke Lambert | |
| Brooke Lambert | ||
| Chief Financial Officer | ||
| (Principal Accounting Officer) | ||
| Date: August 9, 2024 | ||
The General Partner which signed the above is the only party authorized to act for the registrant. The registrant has no principal executive officer, principal financial officer, controller, or principal accounting officer and has no Board of Directors.
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