2. FAIR VALUE

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

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

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

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

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

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

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

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

During the three and six months ended June 30, 2020 and 2019, there were no transfers of assets or liabilities between Level 1 and Level 2. The following tables represent the Partnership’s investments by hierarchical level as of June 30, 2020 and December 31, 2019 in valuing the Partnership’s investments at fair value. At June 30, 2020 and December 31, 2019, the Partnership held no assets or liabilities in Level 3.


Financial assets at fair value as of June 30, 2020

		Level 1		Level 2		Total

U.S. Treasury Notes (1)	$	112,213,660	$	-	$	112,213,660
Short-Term Money Market Fund*		8,697,580		-		8,697,580
Exchange-Traded Futures Contracts
Energies		(6,728)		-		(6,728)
Grains		129,266		-		129,266
Interest rates		822,460		-		822,460
Livestock		(1,260)		-		(1,260)
Metals		(449,560)		-		(449,560)
Softs		(27,199)		-		(27,199)
Stock indices		388,003		-		388,003

Total exchange-traded futures contracts		854,982		-		854,982

Over-the-Counter Forward Currency Contracts		-		(192,485)		(192,485)

Total futures and forward currency contracts (2)		854,982		(192,485)		662,497

Total financial assets and liabilities at fair value	$	121,766,222	$	(192,485)	$	121,573,737


Per line item in the Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral					$	10,032,348
Investments in U.S. Treasury notes						102,181,312
Total investments in U.S. Treasury notes					$	112,213,660

(2)
Net unrealized appreciation on open futures and forward currency contracts					$	854,982
Net unrealized depreciation on open futures and forward currency contracts						(192,485)
Total net unrealized appreciation on open futures and forward currency contracts					$	662,497

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


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

		Level 1		Level 2		Total

U.S. Treasury Notes (1)	$	133,560,635	$	-	$	133,560,635
Short-Term Money Market Fund*		13,861,142		-		13,861,142
Exchange-Traded Futures Contracts
Energies		312,136		-		312,136
Grains		(187,779)		-		(187,779)
Interest rates		394,563		-		394,563
Livestock		(140)		-		(140)
Metals		295,006		-		295,006
Softs		(3,723)		-		(3,723)
Stock indices		287,409		-		287,409

Total exchange-traded futures contracts		1,097,472		-		1,097,472

Over-the-Counter Forward Currency Contracts		-		(1,196,064)		(1,196,064)

Total futures and forward currency contracts (2)		1,097,472		(1,196,064)		(98,592)

Total financial assets and liabilities at fair value	$	148,519,249	$	(1,196,064)	$	147,323,185


Per line item in Statements of Financial Condition
(1)
Investments in U.S. Treasury notes held in equity trading accounts as collateral					$	19,975,068
Investments in U.S. Treasury notes						113,585,567
Total investments in U.S. Treasury notes					$	133,560,635

(2)
Net unrealized appreciation on open futures and forward currency contracts					$	1,097,472
Net unrealized depreciation on open futures and forward currency contracts						(1,196,064)
Total net unrealized depreciation on open futures and forward currency contracts					$	(98,592)

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