Campbell & Company has sole discretion in determining what distributions, if any, the Registrant will make to its Unitholders. Campbell & Company has not made any distributions as of the date hereof.
The Registrant has no securities authorized for issuance under equity compensation plans.
Item 6. | Selected Financial Data. |
Not Applicable.
Dollars in thousands, except per Unit amounts
The following summarized financial information is for the years ended December 31, 2018, 2017, 2016, 2015 and 2014.
| | For the Year Ended December 31, | |
| | 2018 | | | 2017 | | | 2016 | | | 2015 | | | 2014 | |
Total Assets | | $ | 345,838 | | | $ | 557,246 | | | $ | 774,793 | | | $ | 939,508 | | | $ | 771,758 | |
Total Unitholders' Capital | | | 333,892 | | | | 545,823 | | | | 740,734 | | | | 928,081 | | | | 748,010 | |
Total Net Trading Gain (Loss) (includes brokerage commissions) | | | (33,681 | ) | | | 34,258 | | | | (82,812 | ) | | | (18,089 | ) | | | 146,182 | |
Net Income (Loss) | | | (42,882 | ) | | | 16,053 | | | | (111,115 | ) | | | (64,565 | ) | | | 100,079 | |
| | | | | | | | | | | | | | | | | | | | |
Net Income (Loss) Per Managing Operator and Other Unitholder Unit* | | | | | | | | | | | | | | | | | | | | |
Series A | | | (241.12 | ) | | | 55.84 | | | | (356.40 | ) | | | (238.56 | ) | | | 396.43 | �� |
Series B | | | (268.63 | ) | | | 64.98 | | | | (377.21 | ) | | | (206.02 | ) | | | 407.50 | |
Series D** | | | (55.90 | ) | | | 38.87 | | | | - | | | | - | | | | - | |
Series W | | | (226.75 | ) | | | 147.87 | | | | (336.84 | ) | | | (163.31 | ) | | | 537.90 | |
Increase (Decrease) in Net Asset Value per Managing Operator and Other Unitholder Unit | | | | | | | | | | | | | | | | | | | | |
Series A | | | (236.45 | ) | | | 65.85 | | | | (366.47 | ) | | | (209.95 | ) | | | 429.84 | |
Series B | | | (246.07 | ) | | | 85.28 | | | | (379.71 | ) | | | (207.47 | ) | | | 530.82 | |
Series D** | | | (85.71 | ) | | | 52.25 | | | | - | | | | - | | | | - | |
Series W | | | (216.72 | ) | | | 131.44 | | | | (351.30 | ) | | | (171.60 | ) | | | 498.98 | |
Weighted Average Number of Units Outstanding | | | | | | | | | | | | | | | | | | | | |
Series A | | | 136,862.599 | | | | 190,971.399 | | | | 244,644.947 | | | | 214,825.352 | | | | 166,969.696 | |
Series B | | | 20,850.911 | | | | 30,486.440 | | | | 40,919.198 | | | | 45,553.446 | | | | 56,725.207 | |
Series D** | | | 1,054.474 | | | | 164.537 | | | | - | | | | - | | | | - | |
Series W | | | 18,617.272 | | | | 22,999.170 | | | | 25,201.596 | | | | 24,073.255 | | | | 20,026.066 | |
* | Based on weighted average number of units outstanding during the year. |
** | Series D Units commenced trading on October 1, 2017. |
The following summarized quarterly financial information (unaudited) presents the results of operations for the three-month periods ended March 31, June 30, September 30 and December 31, 2018 and 2017.
| | 1st Qtr. 2018 | | | 2nd Qtr. 2018 | | | 3rd Qtr. 2018 | | | 4th Qtr. 2018 | |
Total Net Trading Gain (Loss) (includes brokerage commissions) | | $ | (17,465 | ) | | $ | (7,003 | ) | | $ | (1,532 | ) | | $ | (7,681 | ) |
Net Income (Loss) | | | (21,009 | ) | | | (9,144 | ) | | | (3,232 | ) | | | (9,497 | ) |
Net Income (Loss) per Managing Operator and Other Unitholder Unit * | | | | | | | | | | | | | | | | |
Series A | | | (103.07 | ) | | | (48.51 | ) | | | (19.89 | ) | | | (63.13 | ) |
Series B | | | (112.70 | ) | | | (51.01 | ) | | | (27.76 | ) | | | (69.40 | ) |
Series D | | | (53.66 | ) | | | (11.52 | ) | | | (5.09 | ) | | | (14.62 | ) |
Series W | | | (103.67 | ) | | | (40.67 | ) | | | (5.64 | ) | | | (78.04 | ) |
| | | | | | | | | | | | | | | | |
Increase (Decrease) in Net Asset Value per Managing Operator and Other Unitholder Unit | | | | | | | | | | | | | | | | |
Series A | | | (107.58 | ) | | | (47.75 | ) | | | (20.08 | ) | | | (61.04 | ) |
Series B | | | (113.26 | ) | | | (50.45 | ) | | | (19.08 | ) | | | (63.28 | ) |
Series D | | | (41.96 | ) | | | (16.82 | ) | | | (5.22 | ) | | | (21.71 | ) |
Series W | | | (107.95 | ) | | | (42.47 | ) | | | (9.58 | ) | | | (56.72 | ) |
| | | | | | | | | | | | | | | | |
Net Asset Value per Managing Operator and Other Unitholder Unit at the End of the Period | | | | | | | | | | | | | | | | |
Series A | | | 2,512.21 | | | | 2,464.46 | | | | 2,444.38 | | | | 2,383.34 | |
Series B | | | 2,728.16 | | | | 2,677.71 | | | | 2,658.63 | | | | 2,595.35 | |
Series D | | | 1,010.29 | | | | 993.47 | | | | 988.25 | | | | 966.54 | |
Series W | | | 2,870.68 | | | | 2,828.21 | | | | 2,818.63 | | | | 2,761.91 | |
| | | | | | | | | | | | | | | | |
Weighted Average Number of Units Per Period | | | | | | | | | | | | | | | | |
Series A | | | 154,223.168 | | | | 145,474.670 | | | | 129,372.124 | | | | 118,380.433 | |
Series B | | | 24,352.679 | | | | 22,878.199 | | | | 19,710.876 | | | | 16,461.891 | |
Series D | | | 336.849 | | | | 1,084.928 | | | | 1,311.521 | | | | 1,484.598 | |
Series W | | | 22,677.194 | | | | 22,297.407 | | | | 18,480.544 | | | | 11,013.942 | |
| | 1st Qtr. 2017 | | | 2nd Qtr. 2017 | | | 3rd Qtr. 2017 | | | 4th Qtr. 2017 | |
Total Net Trading Gain (Loss) (includes brokerage commissions) | | $ | 1,863 | | | $ | (22,981 | ) | | $ | 13,158 | | | $ | 42,218 | |
Net Income (Loss) | | | (3,562 | ) | | | (27,734 | ) | | | 9,177 | | | | 38,172 | |
Net Income (Loss) per Managing Operator and Other Unitholder Unit * | | | | | | | | | | | | | | | | |
Series A | | | (13.75 | ) | | | (106.56 | ) | | | 38.29 | | | | 174.63 | |
Series B | | | (14.53 | ) | | | (111.75 | ) | | | 38.71 | | | | 189.31 | |
Series D** | | | - | | | | - | | | | - | | | | 38.87 | |
Series W | | | (1.31 | ) | | | (112.99 | ) | | | 53.05 | | | | 210.54 | |
| | | | | | | | | | | | | | | | |
Increase (Decrease) in Net Asset Value per Managing Operator and Other Unitholder Unit | | | | | | | | | | | | | | | | |
Series A | | | (15.81 | ) | | | (116.14 | ) | | | 30.28 | | | | 167.52 | |
Series B | | | (13.63 | ) | | | (122.20 | ) | | | 36.08 | | | | 185.03 | |
Series D** | | | - | | | | - | | | | - | | | | 52.25 | |
Series W | | | (4.50 | ) | | | (116.43 | ) | | | 47.96 | | | | 204.41 | |
| | | | | | | | | | | | | | | | |
Net Asset Value per Managing Operator and Other Unitholder Unit at the End of the Period | | | | | | | | | | | | | | | | |
Series A | | | 2,538.13 | | | | 2,421.99 | | | | 2,452.27 | | | | 2,619.79 | |
Series B | | | 2,742.51 | | | | 2,620.31 | | | | 2,656.39 | | | | 2,841.42 | |
Series D** | | | - | | | | - | | | | 1,000.00 | | | | 1,052.25 | |
Series W | | | 2,842.69 | | | | 2,726.26 | | | | 2,774.22 | | | | 2,978.63 | |
| | | | | | | | | | | | | | | | |
Weighted Average Number of Units Per Period | | | | | | | | | | | | | | | | |
Series A | | | 219,166.365 | | | | 202,463.071 | | | | 179,814.990 | | | | 162,441.172 | |
Series B | | | 35,666.446 | | | | 31,776.749 | | | | 28,337.449 | | | | 26,165.117 | |
Series D** | | | - | | | | - | | | | - | | | | 164.537 | |
Series W | | | 23,368.768 | | | | 23,085.060 | | | | 22,533.621 | | | | 23,009.231 | |
* | Based on weighted average number of units outstanding during the period. |
** | Series D Units commenced trading on October 1, 2017. |
Item 7. | Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations. |
Introduction
The Campbell Fund Trust (the "Trust"“Trust”) is a business trust organized on January 2, 1996 under the Delaware Business Trust Act, which was replaced by the Delaware Statutory Trust Act as of September 1, 2002. The Trust is a successor to the Campbell Fund Limited Partnership (formerly known as the Commodity Trend Fund) which began trading operations in January 1972. The Trust currently trades in the U.S. and international futures, forward and forwardcentrally cleared swap markets under the sole direction of Campbell & Company, LP, the managing operator of the Trust. Specifically, the Trust trades in a diverse array of global assets, including global interest rates, stock indices, currencies, credit and commodities. The Trust is an actively managed account with speculative trading profits as its objective.
Effective August 31, 2008, the Trust began offering Series A, Series B, and Series W Units. The units in the Trust prior to that date became Series B Units. Series B Units are only available for additional investment by existing holders of Series B Units. Effective August 1, 2017, the Trust began offering Series D units.
As of December 31, 2018,2021, the aggregate capitalization of the Trust was $333,891,934$297,382,219 with Series A, Series B, Series D and Series W comprising $265,715,642, $40,954,227, $1,517,078$222,737,822, $32,886,235, $8,222,341 and $25,704,987,$33,535,821, respectively, of the total. The Net Asset Value per Unit was $2,383.34$2,902.95 for Series A, $2,595.35$3,209.12 for Series B, $966.54$1,195.88 for Series D and $2,761.91$3,572.68 for Series W.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Trust'sTrust’s significant accounting policies are described in detail in Note 1 of the Financial Statements.
The Trust records all investments at fair value in its financial statements, with changes in fair value reported as a component of realized and change in unrealized trading gain (loss) in the Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, estimates are involved in determining fair value in the absence of an active market closing price (i.e., forward contracts which are traded in the inter-bank market).
Capital Resources
The Trust will raise additional capital only through the sale of Units offered pursuant to the continuing offering, and does not intend to raise any capital through borrowing. Due to the nature of the Trust'sTrust’s business, it will make no capital expenditures and will have no capital assets which are not operating capital or assets.
The Trust generally maintains 60% to 75% of its net asset value in cash, cash equivalents or other liquid positions in its cash management program over and above that needed to post as collateral for trading. These funds are available to meet redemptions each month. After redemptions and additions are taken into account each month, the trade levels of the Trust are adjusted and positions in the instruments the Trust trades are added or liquidated on a pro-rata basis to meet those increases or decreases in trade levels.
Liquidity
Most United States futures exchanges limit fluctuations in futures contracts prices during a single day by regulations referred to as "daily“daily price fluctuation limits"limits” or "daily“daily limits."” During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has reached the daily limit for that day, positions in that contract can neither be taken nor liquidated. Futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Similar occurrences could prevent the Trust from promptly liquidating unfavorable positions and subject the Trust to substantial losses which could exceed the margin initially committed to such trades. In addition, even if futures prices have not moved the daily limit, the Trust may not be able to execute futures trades at favorable prices, if little trading in such contracts is taking place. Other than these limitations on liquidity, which are inherent in the Trust'sTrust’s futures trading operations, the Trust'sTrust’s assets are expected to be highly liquid.
The entire offering proceeds, without deductions, will be credited to the Trust'sTrust’s bank, custodial and/or cash management accounts. The Trust meets margin requirements for its trading activities by depositing cash and U.S. government securities with the futures broker and the over-the-counter counterparty. This does not reduce the risk of loss from trading activities.futures, forward and swap contracts. The Trust receives all interest earned on its assets. No other person shall receive any interest or other economic benefits from the deposit of Trust assets.
Approximately 10% to 30% of the Trust'sTrust’s assets normally are committed as required margin for futures contracts and held by the futures brokers, although the amount committed may vary significantly. Such assets are maintained in the form of cash or U.S. Treasury Bills in segregated accounts with the futures brokers pursuant to the Commodity Exchange Act and regulations thereunder. Approximately 5% to 15% of the Trust'sTrust’s assets are deposited with the over-the-counter counterparty or centrally cleared in order to initiate and maintain forward contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is registered as a futures commission merchant. These assets are held either in U.S. government securities or short-term time deposits with U.S.-regulated bank affiliates of the over-the-counter counterparty.
The managing operator deposits the majority of those assets of the Trust that are not required to be deposited as margin with the futures brokers and over-the-counter counterparties in a custodial account with Northern Trust Company. The assets deposited in the custodial account with Northern Trust Company are segregated. Such custodial account constitutes approximately 60% to 75% of the Trust'sTrust’s assets and are invested directly by PNC Capital Advisors, LLC ("PNC"(“PNC”). PNC is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. PNC does not guarantee any interest or profits will accrue on the Trust'sTrust’s assets in the custodial account. PNC invest the assets according to agreed upon investment guidelines that first preserve capital, second allow for sufficient liquidity, and third provide a yield beyond the risk-free rate. Investments can include, but are not limited to, (i) U.S. Government Securities, Government Agency Securities, Municipal Securities, banker acceptances and certificates of deposits; (ii) commercial paper; (iii) short-term investment grade corporate debt; and (iv) Asset Backed Securities.
The Trust occasionally receives margin calls (requests to post more collateral) from its futures brokers or over-the-counter counterparty, which are met by moving the required portion of the assets held in the custody account at Northern Trust Company to the margin accounts. In the past three years, the Trust has not needed to liquidate any position as a result of a margin call.
The Trust'sTrust’s assets are not and will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested in or loaned to Campbell & Company or any affiliated entities.
Off-Balance Sheet Risk
The term "off-balance“off-balance sheet risk"risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. The Trust trades in futures, forward and forwardswap contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a risk to the Trust, market risk, that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions of the Trust at the same time, and if the Trust'sTrust’s trading advisor was unable to offset futures interests positions of the Trust, the Trust could lose all of its assets and the Unitholders would realize a 100% loss. Campbell & Company, the managing operator (who also acts as trading advisor), minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 30% however, these precautions may not be effective in limiting the risk of loss.
In addition to market risk, in entering into futures, forward and forwardswap contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Trust. The counterparty for futures contracts and centrally cleared swap contracts traded in the United States and on most foreign exchanges is the clearinghouse associated with such exchange. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members, like some foreign exchanges, it is normally backed by a consortium of banks or other financial institutions.
In the case of forward contracts, which are traded on the interbank market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a group of financial institutions; thus there may be a greater counterparty credit risk. Campbell & Company trades for the Trust only with those counterparties which it believes to be creditworthy. All positions of the Trust are valued each day at fair value. There can be no assurance that any clearing member, clearinghouse or other counterparty will be able to meet its obligations to the Trust.
Disclosures About Certain Trading Activities that Include Non-Exchange Traded Contracts Accounted for at Fair Value
The Trust invests in futures, and forward currency, and centrally cleared swap contracts. The market value of futures (exchange-traded) contracts is determined by the various futures exchanges, and reflects the settlement price for each contract as of the close of the last business day of the reporting period. The fair value of forward (non-exchange traded) contracts is extrapolated on a forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) of the last business day of the reporting period. The fair value of centrally cleared swap contracts is determined by using currency market quotations provided by an independent external pricing source.
Results of Operations
The returns for the years ended December 31, 2018, 20172021, 2020 and 20162019 for Series A were (9.03)%12.52%, 2.58%0.46% and (12.55)%7.75%, Series B were (8.66)%13.09%, 3.09%0.97% and (12.11)%8.29%, Series D (commenced trading on October 1, 2017) were (8.15)%12.83%, 5.23%1.73% and 0.00%7.79% and Series W were (7.28)%14.80%, 4.62%2.50% and (10.98)%,9.93% respectively.
During the years ended December 31, 2018, 20172021, 2020 and 2016,2019, the Trust accrued management fees in the amounts of $16,863,539, $24,073,819,$5,813,446, $8,472,866, and $33,624,425,$12,792,990, respectively, and paid management fees in the amounts of $17,499,643, $24,786,294,$5,795,404, $8,990,885, and $34,153,352,$12,901,756, respectively. During the years ended December 31, 2018, 20172021, 2020 and 2016,2019, the Trust accrued sales commissions in the amounts of $5,162,106, $2,990,891, and $0, respectively, and paid sales commissions in the amounts of $5,159,066, $2,573,244, and $0, respectively. During the years ended December 31, 2021, 2020 and 2019, the Trust accrued performance fees in the amounts of $54,801, $0, $3,207, and $0,$21,165 respectively, and paid performance fees in the amounts of $3,207,$54,801, $0, and $0.$21,165.
2021 (For the Year Ended December 31)
Of the (9.03)%12.52% return for the year ended December 31, 20182021 for Series A, approximately (5.87)%17.93% was due to trading lossesgains (before commissions) and approximately (5.14)0.39% due to investment income, offset by approximately (5.80)% due to brokerage fees, management fees, sales commissions, offering costs and operating costs offset by approximately 1.98% due to investment income earnedborne by Series A.
Of the (8.66)%13.09% return for year ended December 31, 20182021 for Series B, approximately (5.87)%17.93% was due to trading lossesgains (before commissions) and approximately (4.77)0.39% due to investment income, offset by approximately (5.23)% due to brokerage fees, management fees, sales commissions and operating costs offset by approximately 1.98% due to investment income earnedborne by Series B.
Of the (8.15)%12.83% return for the year ended December 31, 20182021 for Series D, approximately (5.87)%17.93% was due to trading lossesgains (before commissions) and approximately (4.26)0.39% due to investment income, offset by approximately (5.49)% due to brokerage fees, management fees, performance fees, sales commissions, offering costs and operating costs offset by approximately 1.98% due to investment income earnedborne by Series D.
Of the (7.28)%14.80% return for the year ended December 31, 20182021 for Series W, approximately (5.87)%17.93% was due to trading lossesgains (before commissions) and approximately (3.39)0.39% due to investment income, offset by approximately (3.52)% due to brokerage fees, management fees, sales commissions, offering costs and operating costs offset by approximately 1.98% due to investment income earnedborne by Series W.
An analysis of the (5.87)%17.93% gross trading lossesgains for the Trust for the year by sector is as follows:
Sector | | % Gain (Loss) | |
Credit | | | (0.59 | )% |
Commodities | | | (2.0011.16 | )% |
CurrenciesForeign Exchange | | | 3.478.25 | |
Interest Rates | | | 1.79(9.78 | ) |
StockEquity Indices | | | 8.89 | |
| | | 17.93 | % |
The Trust showed a decline in January with losses coming from interest rate, foreign exchange (FX), stock index, and credit positions, while commodity holdings produced some partially offsetting gains. Interest rate positions produced the largest losses during the month with declines most pronounced in long-dated instruments. Long positions on US rate markets suffered as the Democrats took control of the Senate which sent yields higher (prices lower) amid increased expectations for a large scale fiscal stimulus package being passed. Long positioning on Australian and Canadian rates also generated losses when prices fell (yields rose). Australian inflation was higher than expected and the Bank of Canada indicated the country would not need as much quantitative easing as initially expected. Foreign exchange trading contributed additional losses during January. The largest FX losses came from long emerging market positions (against the USD), specifically in the Colombian peso and Brazilian real. The Latin American currencies were the top underperformers during the month, sinking on regional spreading of the COVID-19 virus and slow vaccine rollouts in the region. Global stock index trading also added losses to the Trust during the month. Long positioning on many global stock indexes saw gains early in the month, however late month risk aversion erased those gains and ultimately generated losses. Concerns about liquidity induced asset bubbles, retail driven stock volatility in companies with high levels of short interest, and limited vaccine availability and distribution hurdles all contributed to the risk-off sentiment late in the month. In credit trading, short protection positions generated losses as European and US credit spreads widened amid risk-off sentiment, especially within Europe. Commodities generated some partially offsetting gains for the Trust. Long positions on the grain complex profited as strong Chinese demand linked with supply concerns pushed prices to multi-year highs during the month. A long holding on gasoline also added to gains as prices rose driven by fiscal stimulus payments to consumers and hopes for economic reopening on the back of mass COVID-19 vaccinations.
In February, the Trust showed a gain with profits coming from commodity, stock index, foreign exchange, and credit positions, while interest rate holdings produced some partially offsetting losses. Commodities trading produced the largest Trust gains during February. Long holdings on the petroleum complex, specifically on gasoline, Brent, and WTI, generated gains on declining COVID infection trends and a deep freeze in Texas that negatively impacted production. Long positioning on the grains, softs, and industrial metals also proved profitable amid US dollar weakness and strong expected demand from healing world economies. Global stock indexes generated additional profits during the month. Long positioning on many global stock indexes profited as most major equity indexes advanced during the month. Declining COVID infection rates, improving COVID vaccine distribution trends, and expectations for the passage of President Biden’s large US fiscal stimulus package all served as major tailwinds for global stock markets. Foreign exchange trading in the developed markets produced gains for the Trust. A long British pound holding (against short USD) was among the best performers as the GBP benefited from an efficient vaccine roll-out and optimism about the economic recovery in the United Kingdom. Mixed positioning in the FX markets proved beneficial as a short holding on the Japanese yen (versus long the greenback) benefited from the strength in the US markets relative to those in Japan. Interest rate positions produced the largest offsetting losses during the month with declines most pronounced in long-dated instruments. Long positioning on long-dated rate instruments in Australia and Canada led sector losses as note prices in those countries fell sharply (yields rose) during February. Growing global concerns about mounting inflationary pressures sparked by pent-up demand from COVID lockdowns linked with massive monetary and fiscal stimulus sent most global yields sharply higher, depressing bond prices and generating losses for the Trust.
March saw all the Trust’s asset classes produce gains with profits coming from foreign exchange, stock index, commodity, interest rate, and credit positions. Foreign exchange trading in both the developed and emerging markets produced the largest Trust gains during March. A short Japanese yen holding (against long USD) was the best performing FX position as the JPY sank to its lowest level in a year. The move was primarily driven by the stronger greenback as the COVID-19 vaccine rollout and stimulus efforts in the US caused the dollar to strengthen. Short positioning on the Australian and New Zealand dollars (against long USD) was also profitable after the Reserve Bank of Australia (RBA) continued its bond purchase program and following the New Zealand government’s efforts to curb property speculation. Global stock indexes generated additional profits for the Trust. Long positioning on many global stock indexes profited as most major equity indexes advanced during the month. Positive progress with the COVID-19 vaccine rollout along with fiscal and monetary stimulus support continued to underpin the rally in most global equities. Commodity holdings also produced gains during March. The Trust’s nimble short-term suite of models profitably traded the intra-month volatility within the petroleum complex. A short natural gas position benefited from warmer domestic weather forecasts which led to additional energy sub-sector gains. Long grain positions also produced profits for the Trust as the grain complex advanced sharply into month-end after a USDA report showed planting estimates below market expectations. Interest rate positions contributed small additional profits during the month with gains most notable in long-dated instruments. Long positioning on Australian 3- and 10-year notes produced profits after the RBA doubled down on bond purchases and policymakers expressed concern over the speed of the nation’s economic recovery. Credit trading was also profitable during March as short protection positions generated gains as most US and European credit spreads narrowed amid the risk-on environment.
In April, the Trust showed a gain with profits coming from commodity, stock index, and credit holdings, while foreign exchange and fixed income positions created some partially offsetting losses. Commodity holdings produced the best Trust gains during April. Long grain holdings provided profits as the complex rallied sharply throughout the month amid crop concerns in key planting regions and strong demand from top importer China. Long positions on the petroleum and industrial metal complexes proved profitable as prices rose during April driven by rising demand expectations as global economies begin to emerge from the COVID-19 pandemic. Global stock indexes generated additional profits for the Trust. Long positioning on many global stock indexes profited as most major equity indexes advanced during the month. Ongoing fiscal and monetary stimulus, especially from the US, along with strong corporate earnings and improving COVID-19 vaccination rates created an ideal environment for equity appreciation. Credit trading was also profitable during April as short protection positions generated gains as most US and European credit spreads narrowed amid the risk-on environment. Foreign exchange trading in both the developed and emerging markets produced losses for the Trust. The US dollar experienced a wide-breadth selloff given the Fed’s dovish assurances and President Biden’s expansionary fiscal policy measures. While a long CAD position (versus short USD) further benefited from the Bank of Canada acting as the first G10 central bank to formally begin a monetary policy normalization process, it was more than offset by losses elsewhere in the FX portfolio. Interest rate positions contributed additional losses during the month. Long positioning on German 5- and 10-year notes suffered while short holdings on US Treasuries produced some partially offsetting gains as most global yields rose (prices fell) due to growing inflation concerns.
The Trust produced a gain in May with profits coming from commodity, foreign exchange, stock index, and credit holdings, while fixed income positions created some partially offsetting losses. Commodity holdings produced the best Trust gains during May. In the precious metals sub-sector, a long position on gold proved profitable amid a drumbeat of dovish commentary from FOMC officials who insisted that any inflationary pressures will be transitory which helped weaken the US dollar and sent gold futures higher by over 7% during the month. Other commodity sub-sectors that contributed to monthly gains included grains, energies, softs, and industrial metals. Foreign exchange trading in both the emerging and developed market currencies was profitable for the Trust. A long South African rand holding (against short USD) was the best performer in the EM space as the ZAR rose to its highest level in almost two years, helped along by strong demand for energies and metals. Long positioning on the Canadian dollar (against short USD) was also profitable on back of the bid in commodities as well as the Bank of Canada’s pivot to a more hawkish stance. The overall weaker greenback benefited other short USD holdings, adding to sector gains. Global stock indexes generated additional profits for the Trust. Long positioning on many global stock indexes profited as most major equity indexes advanced during the month. Economic reopening progress from the pandemic linked with ongoing monetary and fiscal stimulus created a risk-on backdrop for stocks. Credit trading was also profitable during May as short protection positions produced gains as most US and European credit spreads narrowed amid the risk-on environment. Interest rate positions created some partially offsetting losses during the month. Short positioning on some European and US instruments suffered as prices rose (yields fell) as multiple ECB and Federal Reserve officials pushed back against market expectations that both central banks were close to considering reducing quantitative easing measures.
The Trust was down slightly in June with profits coming from commodity, stock index, and credit holdings, while interest rate and foreign exchange positions created some partially offsetting losses for the Trust. Commodity holdings produced the best Trust profits during June. The dominant gains were found in long positioning on the petroleum and natural gas markets. WTI and Brent crude oil rallied amid improving demand dynamics linked with tighter supplies. Natural gas rose sharply on the back of a US heat wave that saw increased gas demand for electric generation for air conditioning. Global stock indexes generated additional gains for the Trust. Long positioning in the United States and Canada generated the best sector profits. Ongoing monetary and fiscal stimulus, accompanied by improving COVID vaccination rates and expanding economic reopening, provided a tailwind for equities. The US NASDAQ and S&P 500 indexes, along with the Canadian S&P/TSX index, printed new all-time highs during the month benefitting our long positioning. Credit trading was also profitable during June as short protection positions generated gains as US and European credit spreads narrowed amid the risk-on environment. Interest rate positions generated the largest partially offsetting losses during the month. Short positioning on the US 10-year note, US 30-year bond, and UK Gilts led sector losses as reassuring commentary from the FOMC and the Bank of England on the transitory nature of higher inflation sent long-term yields lower (prices higher). A long position on the policy-sensitive US 2-year note suffered when the FOMC turned surprisingly hawkish mid-month sending short-term yields higher (prices lower). Foreign exchange trading in the emerging market (EM) currencies was a drag on the Trust as well. Long EM currency positions (versus short the US dollar) suffered after the mid-month FOMC meeting. Chairman Powell surprised markets with an unexpected hawkish shift which sent the greenback sharply higher, hurting our US dollar shorts.
The Trust, which consists of momentum, macro, and short-term strategies, produced a gain during July. Profits came from interest rate and commodity holdings, while foreign exchange (FX), stock index, and credit positions produced some partially offsetting losses. Interest rate positions contributed the best Trust profits during the month with gains most notable in long-dated instruments. The growing risks to economic growth due to rising Delta variant infections, inflation, and supply-side disruptions prompted buying of safe-haven assets. Long positioning on German notes were profitable after the ECB raised its inflation goal and made a dovish shift on forward guidance. Commodity holdings produced additional gains for the Trust in July. Long energy positions generated profits for the Trust as the energy complex advanced amid increasing demand and rising inflation concerns. Long nickel positioning outperformed as the base metal rallied to multi-year highs on booming demand for the metal used in stainless steel and electric-vehicle batteries. Foreign exchange trading, primarily in the developed market currencies, produced offsetting losses for the Trust. The Federal Reserve said the US job market still had “some ground to cover” which contributed to losses in short US dollar holdings (against long foreign currencies). Short positioning on the Japanese yen, our biggest loser on the month, strengthened on the Fed commentary as well as the bid for safe-haven assets given the concerns about the Delta variant. Global stock indexes generated additional offsetting losses for the Trust. Long positioning on Asian stock index holdings were a drag for the Trust as concerns that the spread of the Delta variant could dampen recovery momentum and additional Chinese tech regulation weighed on prices. However, long positioning in the United States provided some counteracting gains as ongoing policy accommodation and strong Q2 earnings results provided a tailwind for US equities. Credit positions had little impact on performance as spreads remained range-bound amid a lack of meaningful directional drivers.
The Trust, which consists of momentum, macro, and short-term strategies, produced a loss during August. Losses came from commodity, interest rate, and foreign exchange holdings, while stock index and credit positions produced some partially offsetting gains during the month.
Commodity holdings produced the largest losses for the Trust in August. Long positioning on the petroleum and industrial metal complexes suffered as the surging Delta variant of the COVID-19 virus called into question the outlook for global economic growth which helped to send the prices of those commodities lower. In the grain subsector, long holdings on the soy complex created losses amid prospects for higher production from Brazil and beneficial rain in the US Farm Belt. Interest rate positions contributed additional losses for the Trust with declines most notable in long-dated instruments. Long positioning on US and German notes produced losses as the US Federal Reserve and European Central Bank began to prepare markets for a possible scaling back of quantitative easing measures amid elevated inflation readings. Foreign exchange trading across both emerging market (EM) and developed market (DM) currencies produced additional losses for the Trust during the month. After the US dollar’s slightly weaker July, the greenback had mixed returns over the month. Risk markets generally fared well in August despite the spread of the Delta variant and many EM currencies outperformed (versus the USD) as a result, hurting Trust short positions in those markets. Global stock indexes generated the best partially offsetting gains. Long positioning on a variety of global equity indexes drove sector profits as most major global stock indexes finished August with gains. The ongoing fiscal and monetary support globally continued to provide a tailwind behind equities even as the Delta variant surged. An increase in vaccination rates also helped drive risk-on buying. Credit trading was also profitable as short protection positions generated gains as US and European credit spreads narrowed amid the risk-on environment.
The Trust, which consists of momentum, macro, and short-term strategies, produced a loss during September. Losses came from interest rate and stock index positions, while commodity and foreign exchange (FX) holdings produced some partially offsetting gains during the month. Interest rate positions contributed the largest partially offsetting losses for the Trust with declines most notable in long-dated instruments. Long positioning on German and Australian notes produced losses as major central banks began to prepare markets for a scaling back of quantitative easing measures amid elevated inflation readings which sent yields higher as bond prices fell. Global stock indexes also generated losses in September. Long positioning on a variety of global equity indexes drove sector declines as most major global stock indexes finished the month with losses. The general risk-off sentiment that intensified during the month put an end to the relentless equity rally seen for most of 2021. Commodity holdings produced the largest gains for the Trust. Long positioning on the petroleum complex created some of the best profits. Brent and WTI crude both showed strong monthly gains as a significant percentage of US Gulf Coast output remained offline following Hurricane Ida, while at the same time, the UK grappled with a fuel shortage crisis. A long position on cotton was also profitable. Cotton advanced sharply during the month as adverse US weather and strong demand from China, Turkey, and Pakistan threatened to further tighten global supplies. Foreign exchange trading produced additional gains. Long US dollar exposure proved profitable as the greenback saw a sharp rally over the month, trading stronger against most developed and emerging market currencies. The dollar benefitted from flight-to-safety buying as some major central banks turned more hawkish, supply chain bottlenecks kept inflation concerns elevated, contagion fears surrounding Chinese company Evergrande were heightened, and as dysfunction among US lawmakers threatened to derail fiscal stimulus. Credit trading was relatively flat as short protection positions generated losses as US and European credit spreads widened amid the risk-off environment.
The Trust produced a gain during October with profits coming from commodity and stock index positions. Interest rate positions and foreign exchange holdings produced some partially offsetting losses while credit index trading contributed positive returns during the month. Commodity holdings produced the largest gains for the Trust during October. Long positioning on the petroleum complex provided the best sector gains. Rising demand for energy products amid falling stockpiles fueled strong gains for the complex with WTI crude rising to levels not seen since 2014. Long holdings on the industrial metal complex added to sector profits. Power shortages in production regions and supply woes sent the complex rocketing to all-time highs during the month. Global stock indexes also generated profits for the Trust. Long holdings in the United States and Europe produced the bulk of the monthly gains. Equity markets benefitted from a strong third quarter corporate earnings season. Inflationary pressures linked to supply-chain woes have not yet hit corporate earnings with many companies reporting high demand as the COVID-19 pandemic begins to recede. Foreign exchange trading produced small losses. The US dollar was mixed versus the other G10 currencies. A short position on the Japanese yen (vs long US dollar) proved profitable as the yen fell to its lowest level in about three years versus the greenback on interest rate differentials. A long position on the Canadian dollar (vs short US dollar) added to profits as the Canadian dollar appreciated amid strong energy prices and a hawkish shift from the Bank of Canada. Interest rate positions produced partially offsetting losses during October, with declines concentrated in short-dated instruments. Persistent, elevated inflation data and growing concerns over imminent monetary policy tightening pushed yields higher (prices lower) across most global yield curves. Long positioning on US Eurodollar and 2-year notes produced the largest losses as prices fell (yields rose) throughout the month. Credit offered gains to the Trust as the CDX and iTraxx indices experienced mixed performance.
The Trust produced a loss during November with losses coming from commodity, stock index, interest rate and credit index holdings, while foreign exchange positions produced partially offsetting gains. Commodity positions generated the largest losses during the month. The dominant losses were found in long positioning on the petroleum markets as the complex weakened amid demand concerns with the new Omicron strain sparking fears of renewed lockdowns and threatening the recovery outlook. Grain holdings produced additional losses for the Trust, driven by the soybean complex which weakened alongside other commodities as investors weighed the impact of the new coronavirus variant on global demand. A long cotton holding produced additional losses as cotton futures slid amid favorable US harvest conditions. Largely long positioning in global stock indices detracted from performance in November as markets sold-off sharply on Black Friday amid the potential threat of the new Covid-19 variant. Concerns about the efficacy of existing vaccines against the new coronavirus strain, as well as comments from Fed Chair Powell that it may be appropriate for the Fed to consider wrapping up its taper a few months sooner, pressured global stocks even lower into month-end. Interest rate positions added modest losses as rising Covid cases and the emergence of a new variant rattled markets, sparking flight to safety which pushed prices higher (yields lower). Mixed global positioning helped contain sector losses as gains made on German Bund holdings were offset by losses from UK Gilts and Canadian bonds. Credit trading was also unprofitable as short protection positions generated losses as US and European credit spreads widened amid the risk-off environment. Foreign exchange trading produced offsetting gains for the Trust in November. The US dollar experienced a strong rally for most of the month but was stopped in its tracks when Omicron news hit the tapes on Thanksgiving. The greenback held on to its gains versus most of its trading peers on back of sticky US inflation and a faster normalization schedule from the Federal Reserve, benefiting the Trust’s long USD positions.
December brought a gain for the Trust with profits coming from stock index, commodity, and credit positions, while interest rate and foreign exchange holdings produced some partially offsetting losses. Largely long positioning in global stock indices produced gains for the Trust in December, with most major benchmarks logging gains for the month. The risk-on appetite returned into month-end as more studies showed Omicron causes mild illness in most cases. Strong 2022 margin outlooks and a still-accommodative monetary policy backdrop also supported prices, though concerns remain about lingering inflationary pressures. Commodity trading provided additional profits for the Trust during December. Long holdings on the energy complex generated the best commodity sub-sector returns as energy markets advanced with the Omicron Covid-19 variant appearing to be less severe than previous strains, easing demand concerns. Additional gains were produced from long corn and soy holdings. Grains rose during the months as prices were bolstered amid mounting concerns over the crop outlook in South America. In credit trading, short protection positions generated gains as US and European credit spreads tightened alongside stock indices and other risky assets. Interest rate positions produced some partially offsetting losses during the month with declines most pronounced in long-dated instruments. Long positioning in the German 10-year notes contributed the largest losses as prices fell (yields rose) on the potential that loose monetary policy will come to an end and the PEPP (Pandemic Emergency Purchase Programme) will stop in March. Foreign exchange trading contributed modest losses during December with the largest detraction coming from developed FX markets. While most of the G-10 currencies started the month trading lower versus the US dollar, they experienced a reversal to close out the year, rallying alongside the broader move in risk assets. The one exception was the low-yielding Japanese yen, which weakened on the month and provided some gains to the Trust.
2020 (For the Year Ended December 31)
Of the 0.46% return for the year ended December 31, 2020 for Series A, approximately 5.03% was due to trading gains (before commissions) and approximately 1.10% due to investment income, offset by approximately (5.67)% due to brokerage fees, management fees, sales commissions, offering costs and operating costs borne by Series A.
Of the 0.97% return for year ended December 31, 2020 for Series B, approximately 5.03% was due to trading gains (before commissions) and approximately 1.10% due to investment income, offset by approximately (5.16)% due to brokerage fees, management fees, sales commissions and operating costs borne by Series B.
Of the 1.73% return for the year ended December 31, 2020 for Series D, approximately 5.03% was due to trading gains (before commissions) and approximately 1.10% due to investment income, offset by approximately (4.40)% due to brokerage fees, management fees, sales commissions, offering costs and operating costs borne by Series D.
Of the 2.50% return for the year ended December 31, 2020 for Series W, approximately 5.03% was due to trading gains (before commissions) and approximately 1.10% due to investment income, offset by approximately (3.63)% due to brokerage fees, management fees, sales commissions, offering costs and operating costs borne by Series W.
An analysis of the 5.03% gross trading gains for the Trust for the year by sector is as follows:
Sector | | % Gain (Loss) | |
Credit | | | 0.08 | % |
Commodities | | | 10.33 | |
Foreign Exchange | | | 4.31 | |
Interest Rates | | | 2.63 | |
Equity Indices | | | (9.1312.32 | ) |
| | | (5.875.03 | )% |
The Trust showedhad a profit in January asstrong start to 2020 with gains camecoming from interest rate, commodity, and foreign exchange positions, while stock index and interest rate holdings. Commodity positions showedholdings provided some partially offsetting losses. Foreign exchangeLong positioning in both developedAustralia, Europe, and emerging FX markets, generated gains during January. The Trust was predominately positionedthe United States benefited as prices advanced on a flight to safety bid sparked by the worsening Wuhan coronavirus outbreak. A short the US dollar against other traded currencies and benefitted from a weaker greenback during the month. The weakness can be attributed to a few different themes, including expected hawkish central bank policy shifts outside the US as growth exceeds expectations, trade tensions, and US deficit concerns. The best gains came from long positioningposition on the British pound, Norwegian krone, and euro all versus short the US dollar. Long positioningCanadian 10-year note created some partially offsetting losses, which were accelerated by downward pressure on global stock indices also droveyields prompted by a dovish shift by Bank of Canada policymakers. Commodity holdings produced additional profits for the Trust. Most global stock indices welcomed 2018Trust in January, with robustthe energy sub-sector realizing the best results. Short positioning on natural gas proved profitable as milder weather across the US weighed on demand prospects. Additional gains drivenwere generated from short industrial metal holdings. The base metal complex traded weaker as the coronavirus epidemic raised investor concerns about its negative impact on the Chinese economy. Downward price pressure was further intensified by a variety of factors. A synchronized upswing of global economic growth, stronger than expected corporate earnings results, and a major tailwind fromstrong dollar as well as technical selling. In the recently passed tax reform in the US all drove equities higher. The so-called “fear of missing out” dynamic only intensified the demand for equity exposure. The best profitsforeign exchange sector, positive returns were generated in the United Statesdeveloped market currencies. Short positions on the Norwegian krone and across Asia, specifically in Hong Kong and Taiwan. Interest rate positions, from long-dated and short-dated bond markets, created additional gains forAustralian dollar (against long the Trust. Short positioning on US markets, specifically the 10-year and 5-year notes along with 90-day Eurodollar and 2-year notes, drove a bulkdollar) provided some of the profits in the sector. US yields marched higher throughout the monthbest profits. The commodity-linked currencies came under pressure as bondcommodity prices dropped amid expectationssold-off on concerns that the US Federal Reserve will continue its gradual interest rate policy tightening, as US inflation expectations continue to firm against a positive economic backdrop. Commodity holdingsworsening coronavirus outbreak would pare Chinese demand for raw materials. A long Brazilian real holding produced some partially offsetting losses during the month. Profits from long positioning on preciousafter risk fell out of favor and industrial metals and energy markets were overwhelmed by losses from short grain holdings. The weaker US dollar and stronger economic environment helped the metal and energy longs while strong export sales data hurt the grain shorts.
The Trust declined in February due to losses frominvestors sold emerging market currencies. Global stock index commodity, and foreign exchange holdings. Fixed income positions showed partially offsetting gains. Long positioning on global stock indices drovetrading produced losses for the Trust. After extending the long-term rally to start 2018, global equity markets spiked lower in the first half of the month. The sell-off was led by US stocks as markets experienced a sharp increase in volatility. While crowded equity positions sold off on profit-taking, the VIX (a measure of volatility on the S&P 500) had its largest ever daily climb on February 5th. The largest Trust loss came out of the US, specifically on the short VIX contract. Commodity holdings produced additional losses. The biggest commodity sub-sector losses were found within the energy markets as longduring January. Long positioning across the complex suffered on the back of increasing US supplies. Additionally, short grain positions generated losses as those markets rallied on strong export sales activity and weather concerns in key growing regions. Long precious metal positions also produced losses amid the stronger US dollar, firmer inflation, and quicker Fed tightening expectations. Foreign exchange positioning, in both developed and emerging FX markets, generated losses during February. After the recent trend of a weakening US dollar, the Trust was positioned short the USD against all of our traded currencies and suffered from a broad correction in the greenback during the month. The reaction from the FX markets to the equity sell-offmost global stock indexes profited early in the month was relatively muted, andamid the market instead focused on higher US yields and heightened inflation expectations. Interest rate positions created some offsetting gains for the Trust. Short positioning on US markets drove the bulkratification of the “phase one” US-China trade deal, renewed central bank balance sheet expansion, Brexit clarity, and some better than expected US earnings releases. However, profits were relinquished in the sector. After global fixed income markets rallied on the risk-off trade early in February, Treasuries saw a greater correction than other government bond markets. US yields ultimately moved higher onsecond-half of the month amid expectations thatas stocks traded lower following risk-off trading as the Federal Reserve will continue its path of tightening, while inflation expectations continue to firm against a positive economic backdrop.coronavirus outbreak intensified.
March for the Trust was comprised of gains from commodity holdings while stock index and foreign exchange positions showed partially offsetting losses. Interest rate positions had little impact on the Trust during the month. Commodity holdings produced the best gains during March. Long positioning on the crude complex within the energy sub-sector generated profits. Geopolitical concerns around the US potentially pulling out of the Iran nuclear deal, bullish inventory data, and speculation that the Organization of Petroleum Exporting Countries (“OPEC”) might extend existing production cuts all combined to push energy prices higher during the month. Mixed positioning across the softs sub-sector proved profitable in March as well. A short sugar position gained amid ongoing global surplus concerns while a long cocoa holding also experienced profits as output worries from the Ivory Coast lifted prices. Long positioning on global stock indices produced some losses for the Trust. Holdings in Australia, Singapore, Hong Kong, Japan, and the US contributed to some of the worst performance within the sector. Fear over a potential global trade war, tightening financial conditions after the US Federal Reserve raised interest rates, and concern over additional turnover among senior members of President Trump’s inner circle all put pressure on global equity markets during the month. Foreign exchange positioning on developed FX markets drove the sector’s losses during March. A late month rally in the US dollar produced losses from short dollar positions. The largest loss came from short US dollar versus a long euro holding. Dampening of concerns around a global trade war and quarter-end flows into the greenback both helped to boost the currency in the waning days of the month. Positioning on emerging market currencies produced almost no P&L effect for the Trust during March. Interest rate positions contributed a negligible P&L impact for the Trust. Gains from long-term markets were offset by losses in short-term markets leaving the sector nearly unchanged for the month.
The Trust had losses in April which came frominterest rate, foreign exchange, and commodity positions led to a profitable February for the Trust, while fixed income and stock index holdings produced some partially offsetting losses. Long positioning in Australia and the United States continued to benefit as prices advanced on flight to safety buying sparked by the worsening COVID-19 coronavirus epidemic. Investors aggressively sought the safety of fixed income instruments, sending global yields tumbling and expectations for further central bank stimulus soaring. In the foreign exchange sector, positive returns were generated in the developed and emerging market currencies. Short positions on the Australian dollar and Norwegian krone (against long the US dollar) provided some of the best profits for the sector. These commodity-linked currencies came under renewed selling pressure during February. The widening spread of COVID-19 to countries outside of China, such as Japan, South Korea, and Italy, sparked new concerns that global economic growth would slow materially, thus blunting the demand for raw materials. Short positioning on the industrial metal, energy, and meat complexes profited from a decline in prices. The expanding COVID-19 outbreak is widely expected to negatively impact demand for base metal, petroleum, and beef products. Downward price pressure was further intensified by a strong US dollar as well as technical selling. Global stock index trading produced losses for the Trust during February with the greatest declines seen in Australia, Japan, and the United States. Long positioning across most global stock indexes generally profited during the first two-thirds of the month. However, late in February global stock indexes experienced steep sell-offs sparked by the coronavirus’s quick spread to countries outside of China where it initially began. World economic growth fears and supply chain disruption concerns spread rapidly, sending most global stock indexes sharply lower.
The Trust had an unprofitable March, with losses coming from stock index and interest rate holdings, while foreign exchange and commodity positions contributed some partially offsetting gains during the month. Global stock index trading produced the largest losses for the Trust, with the greatest declines seen in the United States, Australia, and Canada. Long positioning across most global stock indexes suffered severely as equity indexes experienced very sharp sell-offs during the month. The COVID-19 virus spread quickly throughout Europe and North America prompting containment measures in the form of “stay at home” directives, closures, and shutdowns that sharply curtailed economic activity. Global central banks and governments took unprecedented steps in an effort to soften the financial impact from the virus, but fear over the length and depth of the growth slowdown sent risky assets sharply lower. Interest rate positions from long-dated instruments contributed small additional losses during the month. Short positioning on US 10-year notes and US long bonds suffered amid the flight-to-safety scramble that ensued due to the severe economic upheaval wrought by the COVID-19 virus. Long positioning across global short-dated instruments helped to partially offset losses within the sector. Profits were dominated by short positions on the commodity currencies (versus long the USD), specifically in the Norwegian krone. The US dollar was sharply higher during the month amid the extreme flight-to-quality moves. Adding further downward pressure on oil-linked currencies, the petroleum markets sold off severely when tensions escalated between OPEC and Russia, and Saudi Arabia made the decision to ramp up production. Commodity holdings produced additional profits for the Trust during the month. Short positioning on the industrial metal, energy, and meat complexes profited from a decline in prices. The expanding COVID-19 pandemic is widely expected to negatively impact demand for base metal, petroleum, and beef products. Downward price pressure was further intensified by a strong US dollar as well as technical selling.
The Trust’s losses in April came from foreign exchange and interest rate holdings, while stock index and commodity positions contributed some partially offsetting gains during the month. Short positioning on several of the developed market currencies, namely the Australian dollar and New Zealand dollar, produced losses when those currencies rallied on a partial lifting of COVID-19 containment measures in those countries. Interest rate positions from long-dated instruments contributed additional losses to the portfolio. Long positions on Australian 10-year bonds suffered after the RBA tapered bond-buying operations and the country became one of the first to meaningfully ease lockdown restrictions. Short German Bund positions added to losses as Germany’s debt rallied versus periphery European bonds with Germany weathering the effects of COVID-19 better than their Eurozone counterparts. Stock indexes rebounded considerably from the oversold conditions seen during March as the United States and other countries laid out plans to reopen their economies from the COVID-19 lockdown that has proven to be very damaging to local, regional, and global economic growth. The Trust held a mixture of long and short positioning across global stock indexes during the month. Ultimately the gains on long positions more than offset losses experienced on any short holdings, leading to positive net P&L within the sector. Commodity holdings produced additional partially offsetting profits for the Trust during the month. Short positioning on the petroleum complex produced a bulk of the sector’s profits. Crude oil sold off sharply on the lethal combination of COVID-19 “stay at home” induced demand destruction linked with a shortage of available storage capacity. The May WTI futures contract went below zero for the first time in history as long holders scrambled to sell before contract expiration in order to avoid taking physical delivery given the scarcity of demand and lack of available storage space.
Losses in May once again came from foreign exchange, as well as commodity and stock index holdings, while interest rate positions contributed some gains. May’s short positioning on several of the so-called commodity currencies, namely the Norwegian krone and Australian dollar, produced losses when those currencies rallied strongly. Fueling the run-up was a sharp rebound in many beaten down commodity markets, specifically the energy complex, as optimism grew that the worst of the COVID-19 crisis was over. A long position on the Canadian dollar (versus short the US dollar) contributed some partially offsetting gains for the Trust. Foreign exchange positioning, in both developed and emerging FX markets, generated losses in April. Aftersector on the recent trend of a weakening US dollar, the Trust was positioned short the US dollar against most of our traded currencies and suffered from a broad correction in the greenback. Early in the month, FX markets focused more on trade frictions and geopolitical tension but as those concerns eased, the market instead looked to higher US interest rates and heightened inflation expectations, causing a US dollar rally.same commodity currency drivers cited above. Commodity holdings produced additional losses for the Trust during April. The biggest sub-sector detractor was found within the industrial metals complex.month. Short positioning on aluminum suffered when the commodity pushed higher on supply worries following Russian sanctionsenergy, grain, and industrial metal complexes showed losses as those markets rallied driven by the White House. Energyimproving COVID-19 crisis. A long holding on precious metals, specifically silver, produced some partially offsetting gains for the sector as expected industrial demand overwhelmed limited supplies of the metal. Short positioning on stock indexes in Europe and Japan suffered as most global stock indices continued to bounce higher from the March COVID-19 crisis lows. Regional economic re-openings linked with no new major spikes in coronavirus cases fueled the equity optimism. A long position on the Hong Kong Hang Seng index added to sector losses as that market was one of the few global indexes to sell-off during May. China’s legislature approved a proposal to impose a highly contentious national security law in the semi-autonomous territory which sparked the regional equity sell-off. Interest rate positions from both long and short-dated instruments contributed partially offsetting gains to the Trust in May. A short position on the German 10-year note was one of the most profitable markets in the sector. The German Bund sold-off during the month (prices lower and yields higher) as signs of improvement in the coronavirus crisis caused traders to shun safe haven assets in favor of riskier ones.
Foreign exchange trading in both the emerging and developed markets produced losses for the Trust during June. The greatest declines were seen in the Norwegian krone, Australian dollar, and certain Latin American currencies. These commodity-linked currencies strengthened to start the month, causing some strategies to cover their previously held long positions, only to reverse those moves later in June. The investor exuberance over additional government stimulus and the economic re-openings quickly wore off on reports of increasing COVID-19 infection outbreaks. Short soft commodity and industrial metal holdings suffered as the dollar weakened early in the month and as optimism over a rapid recovery in economic growth bolstered prices. Short grain positions produced losses on the last trading day of the month as the grain complex rallied sharply after the USDA reported acreage that trailed estimates. Within the energy sub-sector, a short natural gas holding provided some offsetting gains amid plummeting US gas exports as well as shifting weather and market supply dynamics. Meanwhile, stock index trading generated some offsetting gains. The Trust held a mix of long and short positions across the traded universe of indexes and showed a gain in Asia and North America, but partially offsetting gains. Long positioning across the crude complex generated profits as the sub-sector rose to multi-year highs on supply disruptions.losses were realized in Europe. Most global indexes experienced a choppy month amid mixed coronavirus news coupled with hopes for more stimulus from central banks. Interest rate positions from long-dated instruments also contributed small offsetting gains during the month. The Bank of Japan signaled plans to buy more shorter-maturity bonds which caused the yield curve to steepen and short-dated bondbenefited our short positioning on longer-dated Japanese government bonds.
July saw losses for the Trust, driven primarily from stock index holdings and foreign exchange trading in the emerging and developed markets. The United States’ inability to get the COVID-19 virus under control in the face of other nations of the world seemingly better able to handle the crisis generated concern that US economic growth would lag other countries, leading the FOMC to keep highly accommodative monetary easing in place longer. This dichotomy weakened the US dollar to two-year lows hurting the Trust’s long US dollar positioning against many other currencies. Stock index trading also generated losses for the Trust during July. Long positioning, primarily in Asia-Pacific and Europe, produced the bulk of the sector’s decline. Late in the month both the Asia-Pacific and European regions began to see an uptick in COVID-19 virus cases. Regional governments were quick to discuss the possibility of once again needing to shutdown economies to halt the spread which led to rapid risk-off sentiment in equity markets created gainsleading to lower prices. Commodity trading generated the best partially offsetting profits for the Trust. Long positioning on silver and gold proved profitable as both metals showed strong monthly gains. The aforementioned drivers of US dollar weakness were the primary cause of precious metal subsector gains. Some partially offsetting losses came from the grain and energy subsectors. Short grain holdings generated losses as the grain complex rallied during the month on poor crop conditions in the US Plains. Short positioning on US markets, specifically the 10-year and 5-year notes along with Eurodollar and 2-year notes, drove profits in the sector. US bond prices fell and yields trended higher with the 10-year note yield piercing the widely scrutinized 3% level intra-month. Firming inflation expectations and the reboundnatural gas suffered as high summer electric demand in the US dollar provided supportsparked high price volatility that the systematic models failed to yields.trade profitably. Interest rate positions from both short-dated and long-dated instruments also contributed gains during July. Long positioning on several stock indices produced additional gainsfixed income instruments profited as global stock marketsprices rose in April. Reduced tariff(yields fell) amid US/Chinese geopolitical tensions strong US earnings, and eased geopolitical concerns onas high uncertainty over the Korean peninsula provided a tailwindcourse of the COVID-19 crisis led to demand for equities during the month. Additionally, European stocks were supported after the European Central Bank (“ECB”) steered away from any surprises during their April meeting.safe haven assets.
Losses in May came from all four asset classes traded by the Trust – Interest Rates, FX, Commodities, and Stock Indices. Interest rate positions generatedfrom both short-dated and long-dated instruments contributed some of the largest losses for the Trust during May. Long positioning on the Italian 10-year note suffered amid a sharp sell-off due to political turmoil in the country which sparked speculation that Italy might leave the European Union. That same turmoil sent US interest rate markets higher due to safe-haven buying which hurt the Trust as it was positioned short across the entire US interest rate curve in anticipation of further FOMC rate hikes later this year. Foreign exchange positioning, in both developed and emerging FX markets, also generated losses during the month. A long position on the British pound (versus short US dollar) declined in value as the ongoing BREXIT impasse, weaker UK economic data, and fading Bank of England rate-hike expectations all conspired to push the currency lower. A long position on the Turkish lira added to sector losses as economic and political woes in that country sent the EM currency to record lows against the dollar. Commodity holdings produced additional losses as well. A short sugar position suffered as the soft commodity advanced as Brazilian supply concerns boosted prices amid a trucker strike in the country. Other sub-sector losses were experienced in the grains, meats, and precious metals. The energy sub-sector, however, provided some partially offsetting gains. Long positioning across the crude complex benefitted as prices generally stayed in the uptrend that began almost one year ago.August. Long positioning on a variety of global stock indices producedfixed income instruments suffered as prices fell (yields rose). The COVID-19 crisis and related emergency fiscal spending has created the need for many governments around the world to finance this spending with new and, in some good profitscases, record levels of debt issuance. That issuance put downward pressure on most global sovereign bond instruments which created losses for the Trust early in the month as most world indicesTrust. Commodity trading also experienced gains. Unfortunately, later in May, the political concerns that flared in Italy and renewed trade tensions between the US and China trigged a sharp reversal in prices, especially in Europe and Asia, which resulted insizeable losses for some of the holdings.Trust. A longshort position on the Italian stock index was one of the worst performing markets for the sector.
Gains in June came from all four asset classes traded by the Trust – FX, Interest Rates, Commodities, and Stock Indices. Foreign exchange positioningnatural gas generated some of the strongest gainslarge losses as that commodity rose over 30% during the month. WhileHot temperatures across the positive returnsUnited States drove demand for natural gas for electricity generation to power air conditioning while inventory data showed storage at lower than expected levels. Some partially offsetting gains were dominated by our short developed market positions (versusexperienced in long industrial metals positioning. Longs on copper and nickel profited as prices rose amid signs of a global supply shortage in the USD), we also saw gains across various emerging market currenciesface of rising demand from countries such as well. The US dollar saw choppyChina. Stock index trading early in June but ultimately continued the uptrend from the first two months of the second quarter. The DXY dollar index hit fresh 2018 highs and the greenback finished the month stronger versus the majority of our tradeable currencies. The back and forth headlines on a potential global trade war, coupled with dovish policies outside of the US, proved to be the major macro themes driving foreign exchange markets during the month. Interest rate positions generated additionalpartially offsetting gains for the Trust during June. ShortAugust. Long positioning, especially in US markets, specifically the 90-day EurodollarUnited States, Canada, Japan, and 2-year notes, createdGermany, produced profits as indexes in those countries experienced strong gains. A lessening of COVID-19 infections, signs that some governments were less willing to renew economic shutdowns to manage the bulkvirus crisis, and ongoing monetary and fiscal stimulus actions were all supportive of fixed income gains as yields rose (prices fell) onglobal stocks during the back of a 25 basis point FOMC rate hike, hawkish US Fed commentary, and a higher-than-expected projection for two additional US rate hikes this year. Policy divergence between the Fed and other central banks, such as the ECB and the Bank of Japan, benefitted our positioning. Commodity holdings producedmonth. Lastly, foreign exchange trading contributed small additional gains during the month. Losses in emerging FX markets were more than offset by gains in developed FX positions, leading to a net profit within the asset class.
The Trust showed a small loss in September, with interest rate positions from long-dated securities once again contributing some of the largest Trust profits as well. A short corn position experienced strong profits as the grain fell to multi-month lows amid above-average crop progress and on concerns that trade tensions between the US and China could hurt US exports. Long energy positions produced profits after a larger-than-expected reduction in US oil inventories.during September. Long positioning on a variety of global stock indices added slightlyfixed income instruments gained as prices rose (yields fell). September had a pronounced risk-off tone that benefitted fixed income holdings due to their attractive safe haven qualities. Overbought conditions in US tech stocks, a lack of progress on another US fiscal stimulus package, some signs that the global economic recovery was stalling, US Presidential election uncertainty, and signs that a new wave of COVID-19 cases was emerging in a variety of regions around the globe all led to the positive monthly result.general risk-off malaise. Commodity trading also added gains for the Trust. A short position on natural gas generated profits as that market fell over 10% during the month. Swelling inventories linked with cooler temperatures in much of the United States were the catalyst to lower natural gas prices. A short position on gasoil also proved profitable amid anemic demand as the COVID-19 pandemic crimped diesel fuel purchases. Some partially offsetting losses were experienced in long industrial metal and long grain holdings. Prices in these two subsectors were depressed during the month by a strengthening US dollar on flight to safety buying. Foreign exchange trading contributed small losses during the month. Gains in emerging FX markets were more than offset by losses in developed FX positions, leading to a small net loss within the asset class. Stock index returns ebbedtrading generated the largest losses for the Trust during September. Long positioning, especially in Europe, Australia, the UK, and flowedCanada, produced losses as indexes in those countries declined amid the risk-off environment that dominated the month. Fresh virus outbreaks in the UK and Europe linked with concerns that the UK and the European Union were headed for a “no deal” Brexit weighed on the numerous headlines surrounding trade tensions between theequities in those countries. Falling commodity markets due to US dollar strength and her trading partners. Some of the best monthlyconcern over global growth prospects depressed equities in Australia and Canada.
The Trust showed a gain in October with profits coming from commodity and FX positions, while stock index gains were found in Australia, Canada, and the United States.
Losses in July came from commodities, FX and interest rates, while stock indices providedrate holdings produced some partially offsetting gains.losses. Commodity holdings produced some of the largest monthly lossestrading drove gains for the Trust. Long energy positions declined as the complex fell from multi-year highs amid a myriad of bearish developments including global trade tensions and climbing output from OPEC. Short grain positions suffered as the agricultural complex rallied sharply sparking a short squeeze amid supply concerns. Long positioning on the industrial metals also created losses due to a sell-off created by fearscomplex profited as prices rallied across the subsector with strengthening fundamentals outweighing concerns over a global trade warnew wave of COVID-19 infections in Europe and related concerns about future demand from China.the US. Nickel led monthly gains as multiple typhoons in the Philippines threatened exports and COVID-induced mine closures dented supply. Long holdings on the soft commodities also proved profitable. Sugar and cotton both advanced on poor crop conditions driven by adverse weather in their respective growing regions. Foreign exchange trading contributed additional profits during October. Gains were concentrated in emerging FX markets. Short positioning generated additional losses duringon the month. Short commodity currency holdingsPolish Zloty (versus long US dollar) producedprofited amid renewed COVID-19 lockdown measures across Europe. Long holdings on the Korean won and Chinese renminbi (versus short US dollar) experienced gains as both currencies appreciated due to improving economic growth as many Asian countries maintained better control over new COVID-19 outbreaks. Stock index trading generated the largest partially offsetting losses for the Trust. Regionally, stock index performance varied widely and many indexes experienced volatile price action amid a cross current of news and events. European indices saw steep losses and to a lesser extent so did US indexes, while many markets in Asia actually produced gains. This varied and erratic price action proved difficult for the Trust’s systematic trading systems to successfully navigate. Interest rate positions also contributed losses during the month with declines most pronounced in short-dated instruments. Short positioning on European short-end paper was hurt as prices advanced after a resurgence of COVID-19 infections in the region prompted flight-to-safety buying as governments announced new lockdown measures in an attempt to slow the viral outbreak.
The Trust showed a gain in November with profits coming from stock index, commodity, and credit positions, while interest rate and FX holdings produced some partially offsetting losses. Long positioning on global stock indexes drove profits for the Trust during November. Stock markets around the globe started the month strong after the US presidential and congressional election results indicated a divided government in the US and as thoseconcerns over a disputed presidential election result began to fade. Bull market optimism continued through the second half of the month as several pharmaceutical companies reported promising results from COVID-19 vaccine trials. Commodity trading also generated gains. Long grain holdings were additive to the Trust with the soy complex providing the largest gains. Soy prices advanced on a bearish supply outlook and expectations that Chinese demand for soybeans will climb next year. Long positioning on the industrial metals complex also generated gains, driven by a weaker US dollar and improving Chinese economic data which sparked a rally as base metal demand expectations improved. In credit trading, short protection positions generated gains as US and European credit spreads narrowed on the same risk-on drivers that drove global stocks higher during the month. Interest rate positions contributed losses during November with declines most pronounced in long-dated instruments. Long positioning on Australian and UK 10-year notes were hurt as yields surged (prices fell) as the flight-to-safety bid dried up following encouraging announcements from COVID-19 vaccine trials. The absence of US election surprises also saw the US long bond sell-off (yields rose) which generated a loss for long positioning on that market as well FX trading contributing small additional losses during November. Losses were realized from trading both the developed and emerging FX markets roseagainst the US dollar, which continued its long-term bear trend lower during the month.
The Trust showed a gain in December with profits coming from commodity, stock index, FX, and credit positions, while interest rate holdings produced some partially offsetting losses. Commodity trading drove profits for the Trust during December. Long holdings on the soy complex produced the best results within the sector. Soybeans and related products rallied to multiyear highs on dry weather in key growing regions as trade war fears dampened somewhatChinese demand continues to rise. Long positioning on the precious metals, softs, and industrial metals generated gains driven by a weaker US dollar and expectations for improving global demand. A short position on natural gas added to profits as warmer weather and abundant supply pushed prices lower in the second half of the month. ShortLong positioning on global stock indexes also generated gains amid a risk-on environment. Stock markets around the globe mostly rallied as COVID-19 vaccines began to be distributed, the US Congress passed a long-awaited COVID fiscal stimulus package that President Trump signed into law, and as the UK and European foreignUnion came to a settlement on a Brexit separation agreement late in the month. In credit trading, short protection positions generated gains as US and European credit spreads narrowed on the same risk-on drivers that drove most global stocks higher. Foreign exchange positioning (versus longtrading contributed additional gains during December. Profits were realized from trading both the emerging and developed FX markets against the US dollar) also experienced losses, most notably from the Swedish kronadollar, which rallied after the Riksbank (Sweden’s central bank) turned more hawkish amid stronger economic data in that countrycontinued its long-term bear trend lower during the month. Interest rate positions were also a drag on the Trust during July. Long positioning in Europe and the APAC region suffered as bond investors grew more concerned that global central banks are beginning to slowly withdraw stimulus with an eye towards higher interest rates in the future. Short positioning across much of the US interest rate curve provided some partially offsetting gains as US fixed income prices fell with other global bond markets. Long positioning on a variety of global stock indices added some partially offsetting gains to the Trust during the month. Most stock indices enjoyed a bullish tailwind from a stronger-than-expected second quarter earnings season which eclipsed the uncertainty caused by on-again, off-again international trade tensions.
Profits in August came from commodities and FX while interest rates and stock indices providedproduced some partially offsetting losses during the month. Commodity holdings produced some of the largest monthly gains for the Trust. Short grain positions profited as the sub-sector sold off amid trade turmoil, beneficial weather, and higher yield estimates. Long energy holdings across the crude complex experienced gains as looming US sanctions on Iran, which are expected to cripple the nation’s oil exports, as well as larger than expected US inventory draws, fueled prices higher. The soft commodity sub-sector also added gains to the bottom-line, led by a short coffee holding. Coffee prices were pressured to a 12-year low amid a weaker Brazilian real and record harvest forecastsmonth with declines most pronounced in Brazil. Foreign exchange positioning generated additional profits during the month. Long US dollar positions, against both developed and emerging market currencies, generated the gains. A short New Zealand dollar holding (versus long US dollar) experienced some of the greatest gains as weaker economic data and a dovish central bank caused the kiwi to sell-off. In emerging markets, a short holding on the South African rand (versus long US dollar) provided profits as expectations for further increases in US interest rates continued to put pressure on emerging market currencies. Interest rate positions were a drag on the Trust during August.long-dated instruments. Short positioning on USin UK and United Kingdom fixed income marketsGerman 10-year notes suffered amid flight-to-safety buying and short-covering. Mounting concerns overas Brexit uncertainty throughout the stability of emerging markets, especiallymonth pushed prices higher (yields fell). Long positioning in countries such as Argentina and Turkey, fueled demand for the relative safety ofAustralian fixed income instruments as potential contagion fears spread. Long positioning on a variety of global stock indicesand US Treasuries also detracted from the monthly gains of the Trust. European and Asia long holdings generated most of the losses. Ongoing global trade tensions linked with uncertainty over BREXIT negotiations in the UK, and weaker than expected tech earnings, in Asia pressured those regions lower.
The Trust declined in September due tocreated losses from FX and stock index positions, while commodity and fixed income holdings produced offsetting gains for the Trust. Foreign exchange positioning, in both developed and emerging markets, generated losses in September. After the recent trend of a strengthening US dollar and emerging market weakness, the Trust was positioned long the US dollar against most of our traded currencies and suffered from a correction in the greenback. Early in the month, FX markets focused more on trade frictions and geopolitical tension but those concerns gradually eased and emerging market currencies saw their first monthly gain since March. Stock index holdings produced additional losses for the Trust. Long positioning on a variety of indices suffered from choppy markets that were whipsawed by global trade concerns between the US and her major economic partners. Balancing losses were gains seen from the Nikkei, which posted its best month in a year. Japanese shares were helped by a weaker yen which acted as a tailwind to exporters and a government which may be willing to make a trade deal. Interest rate positions from short US fixed income markets created gains for the Trust during the month. US bond markets fell and yields rose due to firming inflation data, a hike by the US Federal Reserve, and the decreasing risk of emerging market contagion. Providing smaller offsetting losses were our long positions on the long-dated European bond markets. Commodity holdings produced additional offsetting gains for the Trust during the month. The largest sub-sector gains were found in energies as long WTI and Brent oil positions profited. Oil prices rose on the potential for refinery disruptions from tropical storms and fears of a supply crunch from looming US-lead sanctions on Iran, outweighing the bearish effects of escalating disputes over global trade.
Stock index holdings generated steep losses for the Trust during October. Long positioning on a variety of global indices suffered as most world stocks sold-off sharply. A myriad of negative headwinds for global equities contributed to the sudden risk-off tone including peak earnings concerns, tighter financial conditions, trade-war fears, decelerating Chinese economic growth, the strong US dollar, waning benefits from US tax reform, geopolitical tensions on several fronts, a slowdown in corporate buyback activity ahead of Q3 earnings reports, and a weakening US housing market. Commodity holdings caused additional losses for the Trust during October. The energy and softs sub-sectors produced the worst results. Long positioning on the petroleum complex sold-off in sympathy with global stocks. In the softs, a short position on coffee produced losses as that commodity rose about 10% during the month, fueled by Brazilian real strength that triggered a bout of short covering. The grains sub-sector provided some offsetting gains as short holdings profited as the complex traded lower during the month amid the stronger US dollar. Foreign exchange positioning, in both developed and emerging markets, generated some partially offsetting gains in October. Long positioning on the US dollar, the highest yielding G10 currency, profited as key European currencies stumbled following renewed BREXIT-related concerns and some disappointing economic data in the region. In the G10 basket of currencies, only the Japanese yen outperformed the US dollar as safe-haven buying benefitted the yen over the dollar. Interest rate positions from long German and Japanese markets created additional partially offsetting gains. Safe-haven demand pushed fixed income prices up (yields fell) which boosted the Trust’s long holdings, leading to a positive sector outcome during October.
In November, losses came from foreign exchange, fixed income, and stock index positions, while commodity holdings produced some partially offsetting gains for the Trust. Foreign exchange positioning, in both developed and emerging markets, generated the largest losses in November. Long positioning on the US dollar against most of our traded currencies proved to be a headwind for the Trust. After having one of its best months in two years in October, the US dollar saw choppy trading throughout the month of November. A potential shift in US FOMC interest rate policy, trade war headlines, and a softening US inflation outlook helped prevent the dollar from a continuation of its broader move higher. Interest rate positions from short US 2-year notes and short US 90-day Eurodollars led to sector losses. Short-dated fixed income markets rallied in the US (yields fell) as several dovish speeches by US FOMC members, including Chairman Powell, indicated that the Fed might be closer to pausing US interest rate hikes than the market previously expected. Stock index positions also detracted during the month. The Trust held a mix of long and short positioning across the traded universe of global indices. Most global indices experienced a choppy month as traders weighed a mix of news related to trade wars, US Fed policy, global economic growth, and BREXIT. Some small gains were found in North America, but more than offsetting losses were realized in Europe and Asia. Commodity holdings produced some partially offsetting gains for the Trust during November, with the energy sub-sector realizing the best results. Long positioning on natural gas proved profitable as colder than expected temperatures in the US set-off a rally that led to a massive short-squeeze, sending prices higher by almost 40% during the month. A short on gasoline was also profitable as the petroleum complex continued its recent sell-off. Some partially offsetting losses were seen in a short soybean position as hopes for a truce in the US-Chinese trade war sent prices higher.
Profits in December were seen across all major asset classes traded - foreign exchange, commodities, interest rates, and stock indices. Foreign exchange positioning, mostly from developed markets, generated some robust gains in December. Short positioning on several of the so-called commodity currencies, primarily the Australian dollar and Canadian dollar (all versus long the US dollar), produced the best gains. The Canadian dollar sold off in sympathy with the meltdown in prices across the petroleum complex during the month. The Aussie dollar fell in value as China, a major export market for Australian commodities, reported weaker than expected economic data, generating concern about future demand. Commodity holdings also produced solid gains for the Trust during December, with the softs, grains, and industrial metals sub-sectors realizing the best results. Short positioning on cotton profited as prices fell due to concerns surrounding a recent slowdown in export sales activity. A short holding on soybeans proved profitable as prices fell amid a slowdown in(yields rose) with encouraging vaccine news and prospects for US exports due to the ongoing US trade dispute with China. Short positioning on aluminum also produced profits from falling prices fueled by a barrage of weaker than expected economic data out of China. Interest rate positions from short-dated instruments provided additional profits during the month. Long positioning on short-term notes issued by the US, Europe, Canada, and the United Kingdom all generated gains. These positions benefitted from flight-to-safety flows seen during December as investors aggressively sold stocks and sought the relative safety that fixed income instruments provide. Stock index positions also added to gains during December. Short positioning on several global indices generated profits as most global stocks experienced a steep sell-off. A myriad of headwinds sent stocks reeling including higher US interest rates, signs of a global economic slowdown, ongoing tensions between the US and China over trade policies, and a partial US government shutdown fueled by bipartisan tensions.fiscal stimulus outweighing increasing COVID cases.
2017 2019 (For the Year Ended December 31)
Of the 2.58%7.75% return for the year ended December 31, 20172019 for Series A, approximately 6.70%10.78% was due to trading gains (before commissions) and approximately 1.15%2.59% due to investment income, offset by approximately (5.27)(5.62)% due to brokerage fees, management fees, offering costs and operating costs borne by Series A.
Of the 3.09%8.29% return for the year ended December 31, 20172019 for Series B, approximately 6.70%10.78% was due to trading gains (before commissions) and approximately 1.15%2.59% due to investment income, offset by approximately (4.76)(5.08)% due to brokerage fees, management fees and operating costs borne by Series B.
Of the 5.23%7.79% return for the year ended December 31, 20172019 for Series D, which commenced trading on October 1, 2017, approximately 6.92%10.78% was due to trading gains (before commissions) and approximately 0.19%2.59% due to investment income, offset by approximately (1.88)(5.58)% due to brokerage fees, management fees, performance fees, offering costs and operating costs borne by Series D.
Of the 4.62%9.93% return for the year ended December 31, 20172019 for Series W, approximately 6.70%10.78% was due to trading gains (before commissions) and approximately 1.15%2.59% due to investment income, offset by approximately (3.23)(3.44)% due to brokerage fees, management fees, service fees, offering costs and operating costs borne by Series W.
An analysis of the 6.70%10.78% gross trading gains for the Trust for the year by sector is as follows:
Sector | | % Gain (Loss) | |
Commodities | | | (5.048.12 | )% |
CurrenciesForeign Exchange | | | (5.053.76 | ) |
Interest Rates | | | (4.2912.88 | ) |
StockEquity Indices | | | 21.089.78 | |
| | | 6.7010.78 | % |
The Trust was lower in January with losses coming from commodity and commodityforeign exchange positions, while fixed income and stock holdings produced partially offsetting gains for the Trust. Commodity trading generated losses offsetfor the Trust in January. Short energy positions suffered as the complex rebounded from multi-year lows on back of bullish fundamental developments and a general increase in risk sentiment. Short grain positioning also detracted as the sector traded higher amid adverse weather conditions in key growing regions, and some optimism surrounding the latest round of trade talks between the US and China. Foreign exchange positioning produced additional losses, with gains in stock indiceslong emerging market currencies (versus the USD) being overshadowed by losses in the developed markets, where we were net short against the greenback. The USD was broadly weaker on the month with the notable themes being the US government shutdown and leda less hawkish FOMC. Short positioning on several of the commodity currencies produced the largest losses as those currencies rallied on back of the increase in prices across the petroleum complex during the month. Interest rate positions from long-dated instruments provided offsetting profits during the month. Long positioning on bonds issued by Australia, Canada, and France generated the largest gains. The shift in central bank rhetoric to a down January asmore dovish tone caused global fixed income markets to rise to start the year. Stock index positions also produced some offsetting gains during the month. Despite a myriad of global headwinds, stock markets recovered from their December sell-off, encouraged by a resumption of trade talks, dovish Fed takeaways, and the start of US Q4 earnings that mostly met expectations. Shorter term strategies moved from short to long, flipping net Trust positioning in time to capitalize on rallying equity markets, especially in the Hang Seng index.
The Trust showed a profit in February with gains coming from commodity and stock index positions, while interest rate holdings produced some partially offsetting losses. Foreign Exchange (FX) had little P&L impact on the Trust during the month. Commodity trading generated profits for the Trust in February. Short positioning across the grain subsector produced some of the best sector gains. Wheat extended a sell-off to a ten-month low following a year-over-year improvement in winter crop conditions. A long position on palladium led gains in the precious metals subsector. Palladium rose to a record high amid tight supplies and steadily rising demand for the rare metal. Some partially offsetting losses came from the industrial metal subsector. Short positioning on copper and nickel suffered as prices rose, driven by signs of progress on US / Chinese trade talks and amid tight supplies. Stock index positions produced additional gains. Long positioning on European, US, and Asia-Pacific indices produced the best profits within the sector. European stock indices benefitted from signs of progress for a successful Brexit (the UK divorce from the European Union) with the Euro Stoxx 50 and the French CAC 40 producing some of the greatest sector returns. Asia-Pacific stocks rallied amid signs that a US / Chinese trade deal was also making positive progress. President Trump delayed a March 1st tariff increase on China as he cited “significant progress” on the trade talks. Some of the biggest gains within the region came from Australia and Hong Kong. Interest rate positions from both long-dated and short-dated instruments provided some partially offsetting losses during the month. Long positioning on the United Kingdom (UK) gilt (10-year note) contributed the largest losses to the sector. Signs of positive progress on Brexit and hawkish comments from the UK central bank head Mark Carney conspired to send gilt prices down sharply from near-term highs. In the foreign exchange sector, gains in developed market currencies were almost equally offset by losses in the emerging market currencies, leading to negligible P&L for currencies overall. Long US dollar positioning was profitable against developed market currencies but losses in the emerging markets, especially from the Brazilian real and the South African rand, mostly negated any FX sector gains.
The Trust showed a profit in March with gains coming from interest rate and stock index holdings. Foreign exchange positions produced some partially offsetting losses while commodities had little impact on the Trust. Interest rate positions in long- and short-dated instruments spearheaded Trust gains in March. More dovish than expected commentary from central bankers, growing global growth concerns, and persistently weak economic data ignited a sharp rally in bonds worldwide. Long positioning on the UK gilt provided the biggest gain as investors sought safe havens amidst Brexit gridlock. Net long positioning in US bonds generated additional gains after the FOMC scaled back projected interest-rate increases this year to zero and said they would end the drawdown of the central bank bond holdings in September. One of the most discussed bond headlines this month was the inversion of the US yield curve (3-month bills and 10-year note) for the first time since the global financial crisis. Long positioning on a variety of global stock indices also added to the positive monthly result. Stock index returns ebbed and flowed on the various themes of stalling global economy growth, dovish central bank rhetoric, US-China trade talks, and Brexit. Some of the best monthly stock index gains were found in Europe and the United States. Foreign exchange positioning on developed FX markets drove the sector’s losses during the month. The Trust started the month long the Canadian dollar (versus the USD) which ultimately weakened after a worse than expected Canadian GDP release. Small gains in the emerging market currencies helped offset some of the losses. Commodity holdings produced mixed results in March. Long energy positions detracted as upside momentum in the complex stalled alongside a pause in global risk sentiment. Precious metals also registered a negative contribution to the Trust, primarily from a long palladium position. After hitting new all-time highs, palladium prices plummeted in the waning days of the month as slowing global economic growth sparked demand worries. Short grains holdings provided offsetting gains as the complex sold-off into month-end following a bearish USDA grain report.
The Trust showed a profit in April, with gains coming from stock index and commodity positions, while interest rate and foreign exchange holdings produced some partially offsetting losses during the month. Stock index positions produced the best Trust gains. Long positioning on European and Asia-Pacific indexes generated the largest profits within the sector. Global stock indexes generally produced strong gains during April. Those gains were driven by dovish statements from several major central banks, signs of improving economic growth from China, some better-than-expected economic releases from the United States, and amid mostly robust Q1 corporate earnings reports. Commodity trading also generated profits for the Trust in April. Short positioning across the grain subsector produced some of the best sector gains driven by a stronger US dollar and ample global supply expectations. Soybeans traded to a 6-month low while wheat fell to a 6-week low during the month. Long positioning on the energy subsector also added to gains. The subsector benefited from a combination of broad demand for global risk assets and increasing concerns over an undersupplied market. Some partially offsetting losses came from the industrial metals subsector. Long positioning in zinc and copper led losses as the complex suffered its biggest monthly decline on a year-to-date basis. Base metals faced headwinds from a stronger US dollar and climbing inventory stockpiles. Interest rate positions from both long-dated and short-dated instruments provided some partially offsetting losses during the month. Long positioning on the United Kingdom gilt (10-year note) and short sterling (90-day bill) contributed the largest losses to the sector. A 6-month Brexit extension sent UK fixed income prices lower as traders liquidated safe-haven positions as the threat of a “hard” UK separation from the European Union (EU) diminished. In the foreign exchange sector, losses were generated in the emerging market (EM) currencies. The trading strategy failed to successfully navigate some choppy price action in the South African rand (against the US dollar) which contributed more than half of the monthly losses within the EM FX sector.
The Trust showed a loss in May, with losses coming from stock index and commodity positions, while interest rate and foreign exchange holdings produced some partially offsetting gains during the month. Stock index positions produced the largest Trust losses. Global stock indexes generally saw steep sell-offs during the month and long positioning on global indexes generated losses within the sector, particularly across Europe and in the United States. Those losses were driven by a sharp escalation of trade tension between the US and both China and Mexico, signs that global growth is decelerating, and as the inverted US Treasury yield curve signaled a higher-than-normal recession risk. Commodity trading also generated losses for the Trust in May. Short positioning across the grain subsector produced the worst sector losses as heavy rains across the Midwest prevented a considerable amount of crop planting in the US. Weekly USDA crop progress reports painted a bullish outlook for prices, especially for corn, which rose sharply to a near three-year high. Long holdings on the energy subsector also added to losses. The energy complex suffered amid weakening demand and as US inventory levels rose to a 22-month high. Interest rate positions from both long-dated and short-dated instruments provided some partially offsetting gains during the month. Long positioning on 10-year notes from Australia and the United Kingdom were two of the best performing holdings. Australia’s central bank indicated that interest rate cuts were likely in the coming months sending their notes sharply higher (interest rates fell). In the UK, the Brexit impasse became more uncertain as Prime Minister May stepped down and the future leadership of Britain became less clear. Flight to safety flows benefitted the UK gilt. In the foreign exchange sector, gains were generated in the developed market and emerging market currencies. A short position on the Australian dollar drove gains in the developed FX subsector as that currency sold-off amid some weaker than expected economic data releases and dovish comments from the Governor of the Reserve Bank of Australia. A short position on the Chilean peso proved profitable in the EM subsector as that currency weakened on trade angst and weaker copper prices.
The Trust showed a profit in June with gains coming from stock index and interest rate positions, while foreign exchange and commodity holdings produced some partially offsetting losses during the month. Stock index positions produced the largest Trust profits. Global stock indices bounced back sharply from May’s steep sell-off. Long positioning across most global indexes benefited from signs that major central banks stand ready to provide new stimulus to slowing global economies. Fed Chairman Powell at the June FOMC meeting strongly hinted that rate cuts are coming and ECB President Draghi stated that “in the absence of improvement” in inflation data, “additional stimulus will be required.” Interest rate positions from both long-dated and short-dated instruments provided additional gains during the month. Long positioning in Australia, the United States, Japan, and Europe all benefited from the possibility of renewed central bank easing. Early in the month, the Reserve Bank of Australia became one of the first G10 central banks to actually cut interest rates amid sluggish economic growth and a decline in real estate prices in the country, and then strongly hinted that additional cuts might be warranted. In the foreign exchange sector, losses were generated in the developed market currencies. A short position on the Norwegian krone (versus the US dollar) led sector losses. The Norges Bank bucked the dovish central bank trend and actually hiked interest rates during the month. The hike marked the third increase over the past nine months amid a surge in oil investments, low unemployment, and inflation running above the central bank’s target. Commodity trading provided some small losses for the Trust in June. Industrial metals were the worst performing sub-sector. A short holding on nickel suffered on the back of US dollar weakness and mounting optimism over a Trump-Xi trade meeting on the sidelines of the G-20 summit near month-end. Some partially offsetting gains were seen in long energy holdings. A long position on gasoline profited after a massive fire shut-down one of the East Coast’s largest refineries, crimping supply and sending gas prices sharply higher.
The Trust showed a profit in July with interest rate positions from long-dated instruments providing the best gains during the month. Long positioning, especially in Europe and Australia, benefited from mounting global growth concerns, escalating fears over a “hard” UK Brexit from the EU, and ongoing uncertainty over the US/Chinese trade war. This confluence of headwinds worked to keep major global central banks in accommodation mode which has been supportive of most global bond markets (higher prices and lower interest rates). Most notably, the US FOMC cut interest rates on the last day of the month and the European Central Bank has given clear indications that it expects to provide new stimulus in September. In the foreign exchange sector, gains were generated in the developed market currencies. Short positions on the euro, Swedish krona, British pound, and Norwegian krone (all long against the US dollar) provided some of the best profits. US economic data has proven to be more resilient than many other regions of the globe to the benefit of the dollar. Concerns over a “hard” Brexit in the UK increased after hardliner Boris Johnson was elected as Prime Minister. The pound was the worst performing G10 currency (against the US dollar) during the month. Stock index positions produced additional Trust profits. Long positions in the United Kingdom and Australia were two of the most profitable positions in the sector during July. Stocks in both export-heavy countries rallied strongly as falling currency values in their respective countries fueled gains in companies linked to export activity. Commodity trading also provided some gains for the Trust in July. Short positioning on the grains and softs sub-sectors benefitted from the stronger US dollar and some improving growing conditions. Long positioning on gold and silver profited from flight-to-safety flows amid heightened global uncertainty. Some partially offsetting losses were experience in the industrial metals sub-sector as choppy price action during the month proved challenging.
The Trust showed a profit in August, with interest rate positions from long-dated and short-dated instruments provided the best gains during August. Long positioning, especially in Europe, Australia, Japan, and the US benefited from an escalation of trade tensions between the US and China which heightened global growth concerns. Global bond yields sank sharply as safe-haven demand drove bond prices higher. In addition to the above-mentioned growth concerns, markets had plenty to fret about including a growing likelihood of a no-date (aka “hard”) UK Brexit from the EU, civil unrest in Hong Kong, and an inverted US yield curve which could be signaling a looming US recession. Commodity trading also provided some gains for the Trust during the month. Short holdings on grains and softs were two of the best performing sub-sectors. Corn futures sank in value after US government reports sparked concerns about oversupply. Cotton prices fell amid the widening trade war which dampened demand expectations. Some partially offsetting losses were experienced in the energy sub-sector as choppy price action proved challenging for our trading systems to profitably navigate. Stock index positions contributed losses to the portfolio during August. Long positions in the UK and Australia were two of the biggest losing positions within the sector. Global stocks mostly dropped during the month amid the expanding trade war and generally weaker than expected economic data outside the US. A short position on the Hong Kong Hang Seng index provided some partially offsetting gains as civil unrest and threats of Chinese intervention unnerved investors which helped our bearish position. In the foreign exchange sector, losses from the emerging markets (EM) overwhelmed gains from the developed markets. Long positioning on EM currencies, such as the Brazilian real and South African rand, suffered after a landslide result from the Argentinian primary election. A possible return to left-wing populism sparked a sharp sell-off in the Argentine peso and the fear quickly spilled over into other EM currencies.
The Trust showed a loss in September, with losses coming from interest rate and commodity positions, while stock index holdings produced some partially offsetting gains.gains for the portfolio. Foreign exchange (FX) produced some ofholdings had little impact on the portfolio during the month. Interest rate positions from both short-dated and long-dated instruments provided losses during September. Long positioning, especially in Australia and Europe, contributed the largest losses to the sector as progress on the US-Chinese trade talks overshadowed the US political situation. European fixed income markets took an additional leg lower after the ECB’s hawkish rate cut and commentary which emphasized fiscal policy over additional monetary stimulus. Partially offsetting those losses were gains from short positions on the US 10 year and 30 year Treasury bonds. Commodity trading produced additional losses for the portfolio during the month. Positioning withinShort positioning in some energy markets suffered after the petroleum complex initially spiked higher following the September 14th rebel attacks on a Saudi Arabian oil field and processing facility. In the softs, a short sugar holding incurred losses as the commodity was boosted by signs of tightening supplies. Additional losses were produced from our short grain holdings. The grain markets rose as potential purchases of US agricultural goods by China were said to be in focus in discussions between the countries’ trade representatives. Foreign exchange positions had little net P&L impact to the portfolio during September. Gains in our emerging market positions were overwhelmed by a short position on the Australian dollar. The Aussie currency moved higher on back of the improvements in US-Chinese trade talks and the Australian central bank pausing their monetary policy easing measures. Long global stock positioning provided the portfolio with some partially offsetting gains. Stock indexes closed higher in September but ebbed and flowed throughout the month as the markets focused on better US-Chinese trade headlines, improving US macro data, geopolitical concerns, and expectations for more central bank policy support. The best monthly stock index gains were found in Europe.
Losses in October were from foreign exchange, interest rate, commodity, and stock index positions as the Trust’s FX holdings contributed the largest declines during the month. Losses were dominated by short positions in the developed market currencies (versus long the USD), specifically in the British pound, and Australian and New Zealand dollars. The US dollar was broadly longweaker during the month amid a US interest rate cut and as risk-on flows were fueled by improving sentiment around both US-China trade relations and the Brexit outlook. The British pound rallied throughout the month on back of Brexit-related enthusiasm. The Australian and New Zealand dollars benefited from the generally positive progress on US-China trade negotiations. Interest rate positions from both short-dated and long-dated instruments contributed additional losses. Long positioning in Japan, Australia, and Europe all suffered amid improving risk sentiment driven by signs that the US dollar versus most other major currencies. Followingand China were making concrete advancements with “Phase One” of the electiontrade deal. Progress towards an orderly United Kingdom exit from the European Union also helped drive investors out of Donald Trump,fixed income and into riskier assets which hurt the Trust’s rate positioning. Commodity trading also produced losses for the Trust during October. The energy sub-sector was the main detractor as a short position on natural gas suffered amid cooler than expected temperatures in the US, dollar strengthened andwhich sent prices sharply higher. In addition, choppy price action within the petroleum complex proved challenging for our trading systems generally aligned positioning with that momentum. However, January saw a reversal of this trend as investors pared back their bullish bets on the greenback amid worries that President Trump was focusing more on protectionism than on pro-growth economic policies. Our FX holdings suffered as a result of this broad reversal in the US dollar. Commodity holdings added to the January losses. Within the energy sub-sector, long positioning on gasoline produced losses amid bearish inventory data. Short soybean holdings, part of the grains sub-sector, experienced losses due to a weakening US dollar and flood conditions in Argentina. In the softs sub-sector, a short on coffee saw losses due to a stronger Brazilian real and a downgrade to Brazil’s output forecast.profitably navigate. Some partially offsetting gains camewere achieved in the precious metals, meats, and grains sub-sectors. Global stock index trading was also a drag on the Trust during the month. Short-term strategies experienced losses in the United Kingdom’s FTSE 100 index as they were whipsawed by a sharp sell-off early in October, followed by a recovery later in the month. Some partially offsetting gains were seen from the industrial metals sub-sector. Longlong positioning on zinc, copper,US and aluminum all saw gains amid a combination of bullish fundamentals, especially from China,Japanese stock indices which rose driven by the risk-on tailwinds and some supply disruptions. Interest rate holdings also produced losses. Long holdings onbetter than expected earnings reports seen during the German 10-year note saw declines as bond prices fell amid rising inflationmonth. Losses in the Eurozone. Inflation reached a 4-year high and approached the ECB’s stated 2% target. Stock index holdings contributed some offsetting gains. Long holdings across our universe of global stock indices benefited from a continuationUK overwhelmed any gains experienced in other regions of the rally that started with the election of Trump and his expected reflationary policies. Concerns over President Trump’s Executive Order limiting some immigration into the US capped gains lateworld.
The Trust had a gain in the month as some investors became unnervedNovember led by the action.
Gains in stock indices, FX, and interest rates led to a profitable February as profits came from stock indices,index, foreign exchange, and interest rate positions while commodity holdings producedcreated some partially offsetting losses for the Trust. Stockportfolio. Global stock index holdings contributedtrading produced some of the strongestbest gains for the Trust during the month. Long positioning across most global stock indexes proved profitable as equities generally moved higher. Investors were driven to deploy sidelined cash amid positive US-China “phase one” trade deal expectations, traction from the Trust. Long holdings across the Trust’s universeglobal monetary policy pivot, Fed and ECB balance sheet expansion, and some signs of global stock indices benefited from generally better than expected economic data. The Bloomberg US indicator of economic surprises reached its strongest level since 2012. Solid fourth quarter 2016 corporate earnings reports also helped to fuelgrowth stabilization. In the rally, along with a steadily improving US labor market. Stock markets continued to look past the new Trump administration’s lack of policy implementation details and focused more on the potential benefits that tax reform, deregulation, and infrastructure spending might provide to global economies. Foreignforeign exchange (FX) produced some additionalsector, gains as the Trust's models took advantage of the mixed performance amongwere generated in the developed market and emerging FX markets. Long positioning on higher-yielding currencies, such as the South African rand which rallied over 3% in February, proved profitable.market currencies. A short position on the euro also showedAustralian dollar drove gains in the developed FX subsector as that currency sold-off amid weaker than expected employment data and expectations for easier monetary policy in the foreseeable future. A short position on the Chilean peso proved profitable in the emerging market subsector. What started as a gain when it weakened“national strike” in Chile’s capital city quickly developed into rioting and significant social unrest across the country, causing a sharp sell-off in their local currency. Interest rate positions contributed to profits with gains in long-dated bonds overwhelming losses in short-dated notes. The UK parliament voted in favor of a December general election which calmed Brexit jitters and prompted UK 10-year bonds to sell off, creating profits for our short positioning. Partially offsetting losses came from long US 2-year Treasury note holdings which slumped on the back of French election concerns inimproving trade talks. Commodity holdings contributed the EU. Interest rate holdings also produced profits. Long positioning on longer-dated instruments within Germany provided some oflargest declines to the best gains. German 5-year and 10-year notes both rallied on a flight to quality move as investors grew more concerned about the spring French Presidential election. Marine Le Pen, the head of the far-right French Front National Party who has threatened to try to pull France out of the EU if elected, rose in the pollsTrust during the month. Commodity holdings modestly detracted fromLosses were dominated by the February gains for the Trust. Profits from precious metals (mostly from silver)energy and industrial metals (mostly from aluminum) were more than offset bymetal sub-sectors. Choppy price action within the petroleum complex proved challenging for our trading systems to profitably navigate. The industrial metal sub-sector detracted as long nickel and zinc positions suffered losses. Nickel trended lower throughout the month as concerns over tight supply eased, while zinc fell on increasingly bearish fundamentals.
The Trust generated losses in the other sub-sectors. Grains were one of the worst performing sub-sectors as a short position on wheat suffered as the market rose to a 7-month high amid tight global ending stock projections.
Mixed performance across the asset classes traded led to a down March as losses came fromDecember with its interest rate, foreign exchange, and commodity positions, while stock index holdings producedcreated some partially offsetting gains. Interestgains for the Trust. The interest rate holdings producedsector generated some of the largest losses during the month.monthly losses. Long positioning on both long-dated and short-dated instruments within Germanysuffered as prices fell (yields rose) as safe-haven assets were sold offdue to a resurgent risk-on environment driven by positive progress on higher EU inflation readings and as investors grew more comfortable that anti-EU political populism in France anda US-China trade agreement. A long position on the Netherlands was stalling. Short positioningAustralian 10-year note generated the largest losses within the US was hurt when fixed income instruments reversedsector as that instrument sold-off throughout the recent downtrend mid-month amid a less hawkish Federal Open Market Committee (“FOMC”) message communicated after their decision to hike interest rates on March 15th.month. Foreign exchange produced some additional losses as our models failedtrading was also a major detractor to successfully navigate a choppy month of price action for the US dollar. For example, long positioning on the New Zealand dollar (kiwi) suffered early in the month as that currency weakened against the US dollar leading up to the mid-month FOMC meeting which was widely expected to be hawkish. Our models then flipped to short the kiwi only to see the currency begin to strengthen when the US dollar sold off on the more dovish than expected message delivered by the Federal Reserve. Commodity holdings modestly detracted from the Trust during March.December. Short positions on the Norwegian krone and Australian dollar (both versus long US dollar) suffered amid an improvement in risk-on sentiment. A cooling of trade tensions between the US and China helped to fuel monthly gains for both of these so-called “commodity currencies” which hurt the Trust’s short positioning. Some of the largest monthly losses came from the energy, precious metal, industrial metal, and meat sub-sectors. Partiallypartially offsetting gains were found in the soft commodity and grain sub-sectors, with some ofemerging FX sub-sector. A long position on the best profits coming from sugar and wheat. Stock index holdings contributed the strongest profits to the Trust during the month. Some of the best gains were found via long positions on European stock indices which benefited from the ongoing global reflation trade and dampening concerns around anti-EU political populism in the region. Our models also saw success in Asia as long positioning within Australia, Hong Kong, and Taiwan proved profitable as ongoing improvements in the Chinese economy, linked with enduring hopes forBrazilian real (versus short US tax reform and infrastructure spending, supported shares around the globe.
April gains came from stock index, foreign exchange, and interest rate holdings while commodities produced some partially offsetting losses for the Trust. Stock index holdings contributed the strongest profits to the Trust during the month. Global stock markets generally shook off new tensions with North Korea and a US cruise-missile strike on targets in Syria. A market-friendly French election outcome, above-trend US earnings growth, and movement on a number of policies by the White House all provided a positive offset to the worrisome news. Long positioning on global stock indicesdollar) benefitted from the gains shown by equities during the month with some of the best profits coming from the United States and Hong Kong. Foreign exchange holdings added to the Trust gains during April. A short position on the Canadian dollar (versus the US dollar) benefitted as the loonie fell in value after President Trump announced a planned tariff on softwood lumber imports from Canada and also threatened to withdraw from the North American Free Trade Agreement (NAFTA). Some partially offsetting losses were seen from a short on the euro (versus the US dollar) when currency markets cheered the French election outcome and sent the euro sharply higher late in the month. Interest rate positions produced some additional profits. Long positioning on 10-year notes in Canada and Japan saw some of the best monthly gains within the sector as yields fell in those countries which sent bond prices higher.same risk-on dynamic. Commodity holdings produced losses during the month. Long positioning on crude suffered when that market saw a price drop as record US crude stockpiles began to raise doubts about OPEC’s ability to curtail a global supply glut. Long holdings on the industrial metals showed losses when an unwind of the global reflation trade pushed commodity prices lower. Some gains were found in long positioning on live cattle which saw sharp price gains amid supply concerns following declines in slaughter estimates and a drop in cold storage inventories.
May showed losses caused by foreign exchange and commodity positions, while stock index and interest rate holdings produced partially offsetting gains for the Trust. Foreign exchange holdings produced some of the largest losses during May. Long positioning on the US dollar against most developed currencies drove the decline. An ongoing unwind of the Trump-induced reflation-trade, linked with some mixed US economic data and generally stronger European data, conspired to send the greenback lower during the month. The political turmoil that gripped Washington DC added to the US dollar angst while a soothing of political tensions in Europe, due to the election of Emmanuel Macron in France, helped support European currencies. Commodity holdings also produced losses during the month. Long positioning on natural gas suffered when that market saw a price drop as mild weather in the US reduced demand and as a new trade agreement with China is expected to encourage US drillers to produce more of the commodity. A short cocoa position suffered amid flood conditions and unrest in the Ivory Coast which sent prices higher. The grains produced some partially offsetting gains as a short soybean position profited from a sell-off in that market due to continued concerns surrounding increased South American planting expectations and steady US planting progress. Long holdings on global stock indices contributed some of the strongest profits to the Trust. Some of the best gains were seen in Hong Kong and the US as technology stocks performed particularly well. Improving global growth, linked with still-accommodative central banks and ongoing hope the Trump administration will ultimately get tax reform and infrastructure spending passed, kept the buy-the-dip mentality firmly in place. Interest rate positions producedsmall additional profits. Long positioning on 10-year notes in Canada, Australia, and Germany produced gains as central banks in those regions indicated they planned to remain patient with their accommodative policies.
The Trust showed a loss in June led down by Interest Rate Holdings as losses came from interest rate, commodities and foreign exchange positions, while stock index holdings had little impact on the Trust’s profit & loss (P&L) during the month. Interest rate positions produced the largest losses for the Trust during June. Long positioning on European, Australian, United Kingdom, and Canadian interest rate notes were some of the worst performing markets within the sector for the Trust. Late in the month, Mario Draghi, President of the European Central Bank (ECB), gave a speech at the opening of the ECB's Forum on Central Banking which heightened expectations for monetary policy tapering in Europe. In subsequent days, several other major central banks, such as the Bank of England (BOE) and the Bank of Canada (BOC), also delivered more hawkish messages. The US has already embarked on a series of interest rate hikes and the Federal Open Market Committee (FOMC) has indicated that more hikes are likely to come. The specter of an end to ultra-loose monetary policy on both sides of the Atlantic triggered a widespread sell-off in global fixed income markets which sent global yields higher and had a detrimental impact on the Trust. Commodity holdings produced additional losses during June. Some of the worst losses came from short positioning on wheat which rose amid declines in crop conditions, strong export sales, and a weaker US dollar. Partially-offsetting gains were found in short energy positions as the crude complex saw a broad-based sell-off. Short soft commodity holdings benefitted from a decline fueled by ample supply expectations. Foreign exchange markets also contributed to losses this month. Long holdings on the US dollar against the Canadian dollar was one of the worst performing FX positions. The loonie appreciated about 4% versus the US dollar as the BOC kick-started the theme of policy normalization which led to losses. Long holdings on global stock indices ended the month showing little impact on the Trust. Early month gains were given back late in June as investors were unnerved by the global rise in rates which pushed many markets down from recent highs.
The Trust showed a gain in July led by foreign exchange and stock index positions, while commodity and interest rate holdings produced partially offsetting losses during the month. Foreign exchange positions produced some of the strongest monthly gains for the Trust. Broad-based US dollar weakness during July was the result of expectations that the US Federal Reserve would have to pause their recent path of higher interest rates due to weaker inflation readings for the US economy. In addition, the unpredictability of the Trump administration and the general inability of the US Congress to make progress on any substantive policy priorities weighed on the US currency. Some of the best gains were found in long positioning on the Australian dollar, euro, Canadian dollar, and Norwegian krone (all versus short US dollars). Long holdings on global stock indices also contributed to profits. Some of the best returns were found in Hong Kong, the United States, India, and the Netherlands. Second quarter earnings reports were generally stronger than expected and a less hawkish US Federal Reserve both provided a tailwind for stocks. Equities saw a period of unusually low volatility with the S&P VIX index touching an all-time low during July. Commodity holdings produced some of the largest losses during July. A short soybean holding drove losses in the grains sub-sector as the market rallied amid lowered crop conditions. A short position on silver was hurt amid higher demand and a weaker US dollar which conspired to send the price of the precious metal higher. In the softs sub-sector, a coffee short suffered as that market advanced to a 3-month high amid the weaker dollar and falling expectations for the Brazilian crop. Small offsetting gains were found in the energy sub-sector where a long on gasoline benefited from higher prices as crude inventories showed a contraction during the month. Interest rate positions produced some smaller losses for the Trust. Choppy price action was difficult for the trading systems to navigate as rate markets grappled with changing central bank messaging and a consolidation of the sharp sell-off seen in June.
The Trust showed a gain in August led by interest rate and commodity holdings, while foreign exchange and stock index positions produced some partially offsetting losses during the month. Interest rate positions produced the best gains for the Trust. Long positioning on German and Japanese long-term interest rate notes contributed some of the best sector gains. Early in the month, a spike in demand for safe-haven assets drove bond prices higher amid new threats by North Korea to launch missiles at the US territory of Guam. Later in the month, bonds benefitted again when North Korea launched a missile that flew over Japan, triggering a new round of safety-seeking trades. Commodity holdings produced some additional profits during August. Long positioning on copper and zinc experienced gains on the back of strengthening Chinese demand and improving macro conditions. Short wheat positions also produced profits as those markets sold-off amid steady harvest progress and improved crop ratings. The Trust experienced some partially offsetting losses in the energies, precious metals, and meats sub-sectors. Foreign exchange positions produced losses for the Trust. Long positioning on the New Zealand dollar (versus the US dollar) suffered when that country’s central bank took a more dovish tone in the monetary policy statement they issued early in August. The head of their central bank, Graeme Wheeler, then continued to jaw-bone down the currency in speeches later in the month. Long positioning on the British pound (versus the US dollar) also caused losses when that currency fell in value as UK economic data lagged Europe and prospects for higher UK interest rates diminished. Global stock indices also contributed to losses during the month. Short positioning on the S&P 500 Volatility Index (also known as the VIX) produced losses for the Trust as that index shot up more than 30% amid the North Korean missile threats early in August. Some partiallygrain markets, most notably a short on soybeans, were hurt by progress on a new US-Chinese trade accord where China agreed to purchase large quantities of US crops which sent prices higher. Mostly offsetting gains were found in a long holding ongenerated by the Hang Seng Index in Hong Kong which continued its strong year-to-date uptrend.
September shows losses from foreign exchange, commodity, and interest rate holdings, while stock index positions produced some partially offsetting gains during the month. Foreign exchange positions produced losses for the Trust. Short US dollar positioning against a variety of developed market and emerging market currencies drove the Trust declines. The US dollar began to strengthen post the September 20th Federal Open Market Committee (FOMC) interest rate meeting. On balance, the FOMC communication was more hawkish than expected. Later in the month, several FOMC members reinforced the hawkish rhetoric which cemented expectations for one more interest rate hike in 2017 which fueled the US dollar higher, hurting the Trust. Commodity holdings produced additional losses during September. The biggest sub-sector losses were found within the industrial metals complex.energy sub-sector. Long positioning on copperBrent and nickel suffered due to the stronger US dollar and amid several bearish developments in China. Long positioning on gasoline also led to losses when that market sold-off as the impact from Hurricane Harvey on the Gulf Coast refinery infrastructure was less severe than originally expected. Interest rate positions created further losses for the Trust. Long positioning on German government notes produced some of the largest losses within the sector. German notes fell in tandem with US notes as a reflation trade fueled by President Trump’s tax overhaul plan generally pushed global yields higher. Global stock indices contributed some partially offsetting gains for the Trust. Long positioning in Japan, the United States, and continental Europe produced some of the best gains. A weaker yen helped boost shares in Japan. In the US, shares traded higher as prospects for tax reform trumped two major hurricanes and threats from North Korea. A still accommodative European central bank and the reelection of Chancellor Angela Merkel in Germany kept a strong tailwind behind stocks in that region.
The Trust showed gains in October from stock index, commodity, and interest rate holdings, while foreign exchange positions produced some partially offsetting losses during the month. Long positioning on global stock indices drove some of the strongest gains for the Trust during the month. A synchronized upswing in global growth, earnings recovery, and still-supportive global monetary policy have been the key tenets of a fundamental narrative that has boosted stocks this year. All three dynamics were on display during October. Global economic data was generally better-than-expected, as were third quarter corporate earnings reports. Most global central banks continued to maintain a dovish bias. The European Central Bank (ECB) announced a “dovish taper” to their quantitative easing program that was well received by global markets. Traction in Washington DC around US tax reform provided an added tailwind for equity prices. Commodity holdings produced some additional profits during October. A long position on Brent crude produced some of the best gains within the energy sub-sector. A combination of ongoing production cuts from OPEC and supply disruptions combined to push prices higher. Long positioning on copper, nickel, and zinc produced gains as industrial metal prices rose amid bullish dynamics emanating from China. Interest rate positions added to the gains for the Trust. Long holdings on sovereign European notes benefitted when the ECB monetary policy announcement was more dovish than expected which pushed the securities higher as yields fell. Tensions in Spain around Catalonia’s bid for independence also drove flight-to-safety buying in the instruments. Foreign exchange positions contributed some partially offsetting losses for the Trust. Short US dollar positioning (against a variety of currencies) suffered amid a broad-based rise in the greenback during the month. The possibility for tax reform in the US linked with expectations for yet another interest rate hike from the Federal Reserve in December helped to boost the US currency to three-month highs.
November gains came from stock indices, interest rates, and foreign exchange, while commodity positions produced some partially offsetting losses. Long positioning on global stock indices drove the strongest gains for the Trust during the month with the US, Hong Kong, and Japan producing some of the best returns. Positive developments out of Washington DC regarding US tax reform proved to be a major tailwind for many indices, as was a stronger-than-expected third quarter corporate earnings season. European indices produced some partially offsetting losses during the month as a stronger euro and some regional political angst produced underperformance from those markets. Interest rate positions provided small gains to the Trust. Gains in Australia, France, Japan, and Italy were partially offset by losses in the US, Germany, and the United Kingdom. Trendless, range bound price action was seen across most of the global interest rate markets traded within the Trust, leading to subdued profits. Foreign exchange positions contributed some additional profits. A long holding on the euro (versus the US dollar) was one of the best performing positions. The euro rose in value against the US dollar amid steadily improving economic fundamentals in the euro-zone as evidenced by Germany’s economy, Europe’s largest, reporting its best Gross Domestic Product (GDP) number since 2011. Commodity holdings produced the largest offsetting losses during November. Precious metals were one of the worst performing sub-sectors. Both gold and silver experienced choppy intra-month price action caused by conflicting drivers which proved difficult for our quantitative trading systems to successfully navigate. Long positioning on the meat complex suffered as prices fell amid supply concerns. Falling industrial metal prices produced some losses as long positioning suffered from signs of a Chinese economic slowdown as that government looks to reign in growth.
December gains came from commodity and stock index holdings, while interest rate and foreign exchange positions produced some partially offsetting losses. Commodity holdings produced some of the largest Trust gains during the month. Long positioning within the crude complex, specifically on Brent, Gasoil, and WTI Crude, produced some of the best profits. The Brent holding profited as that product rose to two-and-a-half year highs due to supply concerns. Long holdings on the base metals complex, notably on zinc, aluminum, and copper, also showed gains as a slew of Chinese supply disruptions set a year-end rally into motion, benefitting the Trust. Long positioning on global stock indices drove additional profits for the Trust. Global stock indices showed some mixed returns during the month. Long positioning on indices within the United States, the United Kingdom, Australia, and Canada produced some of the best results. Successful passage of US tax reform helped US indices, while bullish commodity price action was supportive of the other indices as they have more concentrated exposure to stocks tied to the oil and metals markets. Interest rate positions, primarily from long-dated bond markets, created some of the largest losses for the Trust. Long positioning on sovereign bond markets in Australia, Germany, Italy, and the United States experienced some of the worst losses amid a synchronized global sell-off which caused yields to rise. The sell-off was sparked by an amalgamation of bearish drivers including more hawkish central banks, higher expected issuance by governments, and growing concern that US tax reform, linked with persistently stronger global growth, will start to increase inflationary pressures. Foreign exchange positioning, specifically in developed FX markets, also generated losses during December. Short positioning across some of the commodity currencies, the New Zealand dollar, Australian dollar, and Canadian dollar (all versus the US dollar) suffered as those currencies appreciated in value. Intra-month strength in the energy and industrial metal complexes provided a tailwind for these currencies.
2016 (For the Year Ended December 31)
Of the (12.55)% return for year ended 2016 for Series A, approximately (8.19)% was due to trading losses (before commissions) and approximately (5.18)% due to brokerage fees, management fees, offering costs and operating costs borne by Series A, offset by approximately 0.82% due to investment income.
Of the (12.11)% return for year ended 2016 for Series B, approximately (8.19)% was due to trading losses (before commissions) and approximately (4.74)% due to brokerage fees, management fees and operating costs borne by Series B, offset by approximately 0.82% due to investment income.
Of the (10.98)% return for year ended 2016 for Series W, approximately (8.19)% was due to trading losses (before commissions) and approximately (3.61)% due to brokerage fees, management fees, service fees, offering costs and operating costs borne by Series W, offset by approximately 0.82% due to investment income.
An analysis of the (8.19)% gross trading losses for the Trust for the year by sector is as follows:
Sector | | % Gain (Loss) | |
Commodities | | | (11.69 | )% |
Currencies | | | (0.74 | ) |
Interest Rates | | | 3.30 | |
Stock Indices | | | 0.94 | |
| | | (8.19 | )% |
The Trust showed a gain during January as profits cameproducts benefitted from foreign exchange, interest rate, and commodity holdings while stock indices provided small offsetting losses during the month. Foreign exchange positions from both trend following and non-trend strategies produced some of the best gains. Long US dollar positioning versus short commodity currencies, such as the Mexican peso, Canadian dollar, and South African rand, showed gains as the commodity sell-off continued, especially within the energy complex. Short positioning on the British pound versus the US dollar also benefitted as global growth concerns reduced the likelihood of a Bank of England interest rate hike and on heightened speculation of a UK exit from the European Union (the so-called "BREXIT"). Interest rate positions provided additional gains to the Trust during January, particularly from the non-trend systems. Long positioning on both long-dated and short-dated instruments experienced profits. The sharp sell-off in global stock indices fueled safe-haven buying in interest rate products. In addition, ongoing dovish commentary from global central banks added to the upward price pressure. In fact, near month-end, the Bank of Japan adopted a new, and unexpected, negative interest rate policy that fueled additional buying of global interest rate markets. Some additional gains during the month came from commodity positions, with both trend and non-trend strategies contributing. Short positioning within the energy complex, namely on WTI and Brent, produced some of the best gains. Oil prices touched a 12-year low during the month as Iranian export sanctions were lifted which only added to the persistent oversupply within global markets as world demand continued to wane. Short positioning on copper returned profits as that metal saw lower prices amid ongoing economic weakness within China. A short position on gold produced some offsetting losses as risk-off sentiment produced safe-haven buying of the metal. Stock indices showed losses as long positioning from the trend systems suffered amid the steep sell-off in equities as global growth concerns persisted to start the New Year.
February for the Trust comprised of profits from interest rate, commodity, and stock index holdings while foreign exchange positions provided some offsetting losses during the month. Interest rate positions provided some of the best gains to the Trust during February, particularly from the non-trend systems. Long positioning on long-dated instruments experienced profits, while short-dated products saw small losses. The best sector gains were found within Germany and the UK. Concerns about European bank stocks were a major contributor to the risk-off sentiment during February which provided a tailwind to interest rate markets in the region. Anxieties over a possible BREXIT also drove safe-haven buying. Additional gains during the month came from commodity positions, with both trend and non-trend strategies contributing. Shorts within the energy complex, namely on natural gas, produced some of the best gains. Natural gas prices fell to a 17-year low amid milder temperatures and abundant production. Short positioning on the grains, especially corn and wheat, benefitted when prices dropped due to weaker export sales and healthy global supplies. Short positions on gold and silver produced some offsetting sector losses as the risk-off environment produced safe-haven buying of those metals. Stock index holdings showed a very small gain. A short position on the Hang Seng index in Hong Kong was one of the best performing trades as that index fell amid ongoing concerns over the health of the Chinese economy. Foreign exchange positions from both trend following and non-trend strategies produced losses for the Trust. February saw some very choppy price action within the various currency pairs making for a difficult trading environment. The Trust was short the Japanese yen versus the US dollar and experienced losses when the yen strengthened despite the Bank of Japan's recent negative interest rate policy announcement. Trend following systems saw some offsetting gains from a short on the British pound as BREXIT concerns drove the currency to new multi-year lows.
The Trust declined in March due to losses driven by commodity positioning, while foreign exchange, interest rate and stock index holdings had only a slightly negative impact during the month. Commodity positions from both the trend and non-trend systems provided some of the biggest losses during March. Short positioning across the petroleum complex suffered when those markets moved higher in response to an Organization of the Petroleum Exporting Countries (“OPEC”) announcement that the organization had scheduled a mid-April meeting to discuss output levels. Natural gas shorts hurt the Trust as well as that product rallied amid larger than expected inventory draws. Short holdings on the grain markets also led to losses with soybeans being one of the worst performers. Strong exports, political tensions in Brazil, and lower inventory projections were all behind the move higher. Coffee shorts also suffered as the political tensions in Brazil drove prices up. Foreign exchange positions added small additional losses. Long positioning on the Australian dollar produced profits aslevels, some rising geopolitical risks, and a dovish U.S. Federal Reserve and ultra-loose policies in Japan and Europe collectively boosted the appeal of higher yielding currencies. A short on the British pound produced some offsetting losses as that currency experienced an oversold bounce fueled in part by a more dovish US Fed. Interest rate holdings had a slightly negative impact on the monthly P&L. Price action during March was very choppy making it difficult for some systems to find and hold profitable trades. The first half of the month saw fixed income prices chop lower as stock prices moved higher. The second half of the month saw a sharp reversal higher as the US Fed took a more dovish than expected stance on interest rate policy. Stock index holdings also had only a slightly negative monthly P&L impact. Global equity indices generally moved higher during March as commodity prices bounced and global central banks continued to provide an accommodative backdrop for stocks. The Trust held a mix of long and short holdings leading to offsetting gains and losses that left the sector nearly flat at month-end.
The Trust showed a decline in April as losses came from interest rate, commodity, stock index, and foreign exchange holdings. Interest rate holdings had the largest negative impact on the monthly P&L with both trend following and non-trend systems suffering. Fixed income prices saw a sharp reversal lower during the month which hurt long positioning within the Trust. Increasing inflation expectations amid a sharp bounce in crude oil prices, which have rallied over 60% from the decade-plus low seen in February, pushed interest rate yields higher and prices lower. Tentative signs that Chinese economic activity was beginning to stabilize only added to the downward pressure as money rotated to riskier assets, such as stocks and commodities. Commodity positions from both the trend and non-trend systems also provided losses to the Trust during April. Short positioning on the energies, industrial metals, soft commodities, and grain markets all contributed to the losses. Many markets in each of these sub-sectors saw sharp intra-month reversals to the upside fueled by short covering amid a revived "risk-on" environment. A weaker US dollar also contributed upward momentum to many of the dollar-denominated commodity markets. Some offsetting gains came from long positioning on silver which benefitted from the weaker US dollar and low inventory levels and short holdings on the cattle complex as those markets retreated on the back of slow seasonal demand and oversupply concerns. Stock index holdings showed a negative monthly P&L impact, especially from the trend models. Global equity indices generally moved higher during April as commodity prices bounced and global central banks continued to provide an accommodative backdrop for stocks. Foreign exchange positions added additional losses. Short positioning on the British pound versus the US dollar showed losses when the pound strengthened as fears began to subside that the United Kingdom might vote to exit the European Union at a planned referendum in June (the so-called BREXIT).
Losses in commodities and foreign exchange left the Trust with a decline in May, while interest rate and stock index holdings produced gains. Commodity positions from both the trend and non-trend models provided losses to the Trust. Long holdings on gold and silver both suffered as the US dollar strengthened during the month. Short positioning within the energy complex generated losses as the price of crude rallied on back of the supply and demand equilibrium showing tentative signs of rebalancing. In the meats, short cattle positions suffered as those markets rose amid signs of increased demand. Small offsetting profits were found within the grains sub-sector as a long soybean position profited due to strong US export sales and South American crop concerns. Foreign exchange positions from both the trend and non-trend systems also showed losses during May. After weakening for several months in a row, the US dollar steadily strengthened throughout most of the month hurting the Trust's short dollar positions against a variety of currencies. Front-end US yields repriced higher as the Fed reminded markets through multiple channels that all FOMC meetings going forward are "live" with respect to potential policy change, fueling US dollar strength. Interest rate holdings had one of the largest positive impacts on the monthly P&L with both trend following and non-trend systems showing gains. Long positioning on long-dated markets in Europe, Australia, and the UK produced some of the best gains. A mix of weaker economic data, dovish central bank actions, and concern over the late June UK referendum to leave the Euro-zone (i.e. "BREXIT") all helped to push prices higher in those regions during May. Stock index holdings showed a positive monthly P&L impact, especially from the non-trend models. The faster-reacting non-trend systems were able to successfully navigate the choppy price action seen in many of the global stock indices. A short position on the S&P 500 volatility index benefitted from the general risk-on environment in the second half of the month which pushed that index sharply lower.
The Trust showed a profit in June as gains came from interest rate and commodity markets, while stock index and foreign exchange holdings produced some losses. Interest rate holdings had the largest positive impact on the monthly P&L with both trend following and non-trend systems showing gains. Long positions across global interest rate markets showed strong profits, especially within Europe. United Kingdom voters surprised and shocked markets worldwide with their decision to leave the European Union. The so-called BREXIT sparked a risk-off reaction globally, with government bond futures among the largest beneficiaries, as investors accepted record low bond yields in multiple markets in exchange for the safety of government paper. Commodity positions from the trend models provided some additional gains. Long positioning on the precious metals was one of the best performing sub-sectors. The flight to safety triggered by the UK BREXIT vote along with dampened expectations of additional US FOMC interest rate hikes this year pushed gold and silver prices sharply higher. The grains sub-sector contributed additional profits led by a long soybean holding which rose amid a bullish June crop report. Short positioning on natural gas produced some offsetting losses as lower average inventories, as calculated by the US EIA, helped contribute to a short squeeze in that market. Stock index holdings produced some of the largest monthly losses with both the trend following and non-trend systems contributing. Long global stock index exposure suffered from risk-off selling caused by the uncertainty that the UK BREXIT vote created. In addition, a short position on the CBOE volatility index future produced losses amid the sharp spike in volatility due to the UK referendum. Foreign exchange positions showed some small losses during June. Mixed FX positioning against the US dollar led to mostly offsetting gains and losses. Profits were seen on a long Japanese yen position which strengthened in a flight-to safety trade. Losses were produced by positioning on the Euro which saw choppy price action leading up to and after the surprising BREXIT decision.
The Trust showed a profit in July with gains from stock index, commodity, and interest rate markets, while foreign exchange holdings produced some small losses. Stock index holdings produced some of the largest monthly gains with both the trend following and non-trend systems contributing. Global equity markets shook off the fear and uncertainty created by the UK's decision to leave the European Union and produced strong gains during July. Long positioning within the Trust across global stock indices benefitted from the higher prices with holdings in Australia, the UK, Canada, Germany, and Taiwan producing some of the best performance. Generally better than expected Q2 earnings results, attractive dividend yields, and the expectation that global central banks will keep rates lower for longer all offset terror attacks, a coup attempt in Turkey, and uncertainty over the US presidential election. Commodity positions from both the trend and non-trend models provided some additional gains to the Trust. Short positioning across the energy complex was profitable with both gasoline and WTI crude producing some of the best returns. Inventory reports during the month showed that supply was plentiful leading to lower prices. Precious metals added to gains within the sector as long positioning benefitted from a slightly weaker US dollar and ongoing accommodation from the US Federal Reserve. Some offsetting losses were produced within the grain sub-sector. A long position on soybeans suffered from weaker demand amid robust crop expectations. Interest rate holdings had a positive impact on the monthly P&L with trend following systems showing gains. Long positioning on long-dated interest rate markets produced some of the best profits. Holdings in Australia benefitted from an accommodative central bank that is grappling with persistently low inflation readings and uncertainty around the newly elected Prime Minister's effectiveness given his very narrow victory. Foreign exchange positioning produced small losses driven by non-trend following strategies. Choppy price action and a mix of long and short positioning versus the US dollar led to the muted P&L within the FX sector overall.
Decline in August came from losses primarily in commodity, foreign exchange, and interest rate positions, while stock index positions closed the month flat. Commodity holdings from the trend models provided some of the largest losses to the Trust. Positioning within the energy and precious metal sub-sectors caused a bulk of the damage. Short positioning within the energy complex suffered from concerns that OPEC might try to rein in production at an informal meeting scheduled for September which helped fuel a short squeeze. Long holdings on precious metals also caused losses as growing expectations for higher interest rates in the US led to a sell-off in both gold and silver. The Trust did receive some offsetting gains from a short position on wheat which saw its price decline to a 10-year low on abundant supply. Foreign exchange positions from both trend following and non-trend following strategies also showed losses during August. Some of the largest monthly losses were seen in the euro, Mexican peso, and Australian dollar (all versus the US dollar). Choppy price action in the euro and peso created a difficult environment for our systems to trade profitably. A multi-month uptrend in the Aussie dollar produced losses when that currency experienced a price reversal beginning in the middle of the month. Interest rate holdings had a negative impact on the monthly P&L with trend following and non-trend systems both showing losses. Long positioning, especially within the US, suffered from a better than expected July US employment report released early in the month. A growing stream of comments from US Federal Reserve members signaling their willingness to potentially raise interest rates at one of three remaining 2016 FOMC meetings also pressured interest rate markets lower, sending yields higher. Stock index P&L was relatively flat as a long position within Australia was hurt by a sell-off in the financial, mining, and telecommunication sectors. Some offsetting gains were found in a long position within Hong Kong which rose in value on better than expected earnings and amid the news that the long-planned stock-trading link between Hong Kong and China was officially approved.
Losses across all asset classes left the Trust lower in September as interest rate holdings had a negative impact on the monthly P&L with trend following and non-trend systems both showing losses. Uncertainty and nervousness over central bank interest rate decisions drove global fixed income prices lower in the first half of September as the US Federal Reserve, the Bank of Japan, and the European Central Bank all made intra-month policy announcements. On balance, all three major central banks leaned more hawkish than expected, with the US FOMC indicating that one interest rate hike was likely before year-end. The Trust was hurt by long positioning on long-dated markets, especially within Australia, the US, and the UK. Commodity holdings from both non-trend and trend models provided additional losses. A surprise announcement from OPEC that the cartel had agreed to some production cuts sent the crude complex sharply higher, hurting short positioning. Oversold price bounces in corn and wheat hurt short positioning within the grains. Some offsetting gains were seen in the softs and meats. A continued trend higher in the price of sugar benefitted long positioning, while a drop in both hog and cattle prices was profitable for short holdings, as prices fell about 23% and 7%, respectively. Stock index holdings added to the monthly losses as the non-trend systems struggled to successfully trade choppy global equity index markets. Global stocks sold off in the first half of the month following bond prices lower as yields rose. Stocks then bounced once markets digested major central bank announcements, only to see prices fall on financial health concerns surrounding Deutsche Bank (DB). Prices then rebounded when headlines turned more positive on the outlook for DB near month-end. Foreign exchange positions from the non-trend following strategies showed small losses. The non-trend systems failed to successfully navigate a very choppy environment for many major currencies. Among the biggest P&L contributors, the Mexican peso produced gains, while the Canadian dollar and euro produced losses.
The Trust showed a decline in October as losses from commodity and interest rate holdings were only partially offset by gains within foreign exchange positions. Stock index positioning had little impact on the Trust during the month. Commodity holdings from both trend and non-trend models produced losses. Short positions on corn and wheat suffered as prices rose due to stronger than expected export sales. The trading systems experienced losses in natural gas amid choppy price action as the market weighed warmer-than-normal weather and a structural tightening of the supply-and-demand balance. Long positioning on sugar saw losses as prices fell late in the month on improving growing conditions in Brazil. Long holdings on precious metals were hurt by the stronger US dollar. Interest rate holdings had a negative impact on the monthly P&L with trend following and non-trend systems both showing losses. Long positioning on long-dated interest rate markets within Europe experienced losses as prices fell during the month. The European Central Bank (ECB) failed to announce an extension to their existing quantitative easing (QE) program which pushed prices lower across continental Europe. Additional losses came from a long holding on the Australian 10-year note as that country's central bank indicated that a rate cut was further away than the market had been expecting which caused futures to decline. Foreign exchange positions, especially from the non-trend following strategies, produced some partially offsetting gains during October. The US dollar was stronger across our universe of currencies. Some of the best gains came from short positioning on the British pound, Swedish krona, and the euro (all versus the US dollar). Expectations grew during the month that the US Federal Reserve was on-track to hike interest rates by the end of 2016 which helped lead to overall dollar strength. Stock index holdings had little impact on the Trust during the month. A mix of gains and losses across the global stock index market set produced mostly offsetting P&L which led to relatively flat performance from the asset class.
The Trust continued to showed a decline in November as losses came primarily from commodity holdings while interest rate, foreign exchange, and stock index positions had a muted impact on the Trust during the month. Commodity holdings produced some of the largest losses to the Trust. Short positioning within the energy sub-sector was hurt in the second half of the month when OPEC confounded skeptics by securing its first production cut since 2008. This action sent prices sharply higher across the complex. Trend following strategies suffered in both coffee and sugar as long positions produced losses after prices for both commodities dropped due to higher supply expectations. A short live cattle position produced losses as that market rallied amid firmer wholesale prices and supportive inventory data. Some offsetting gains were found within the industrial metals sub-sector. A long zinc position profited as the metal's price rose sharply, helped by tight supply and a pledge from US President-elect Trump to invest in infrastructure projects. Additional gains came from a short wheat holding which profited as prices dropped over 5% amid ample supply expectations. Foreign exchange positions produced some small losses during November. A long position on the Mexican peso (versus the US dollar) negatively impacted the Trust when Donald Trump's unexpected presidential election victory sent that currency sharply lower amid fears over possible new protectionist policies. Interest rate holdings also produced small losses during the month. Trend following systems with long look-backs were most negatively impacted as the Trump presidential election victory pushed long-end prices sharply lower as yields rose. Bond markets began pricing in an expected Trump administration fiscal stimulus package, including increased infrastructure spending and tax cuts, which are viewed as inflationary. Stock index holdings produced flat results for the month. Long positioning in North American Indices benefitted from the Trump victory as potential new infrastructure spending and a stronger US dollar helped shares rise in value. Offsetting losses were realized from long positioning in European indices.
The Trust advanced in December as gains came from stock index holdings while commodity positions produced partially offsetting losses, with five of the six sub-sectors traded showing declines. Foreign exchange and interest rate positions had little overall impact on the Trust during the month. Global stock index holdings contributed the best gains to the Trust during December. Long positioning on European indices produced some of the largest gains for the sector. During the month, the European Central Bank (ECB) gave a boost to equities when they extended their quantitative easing program. A calming of events within Italy around their political leadership and their ongoing banking crisis also helped markets. Additional gains came from the US, Canada, and Australia as those markets continued to benefit from expectations of reflationary policies from President-elect Trump and his incoming administration. Commodity holdingstrading produced the largest offsetting losses to the Trust. Long positioning on copper and zinc incurred losses amid profit-taking after the recent run-up in prices driven by better Chinese economic growth and the Trump effect. A short lean hog holding suffered as that market rallied amid solid export activity and a lowered US production projection from the USDA. A short on natural gas produced losses when prices moved higher amid colder temperatures and below normal inventory stockpiles. Some small offsettingonly gains were found in a short cocoa position which fell amid higher production in Ivory Coast, driving prices to over 3-1/2 year lows. Interest rate holdings produced small profits for the Trust during December. Long positioning on the German 10-year note was one of the best performing markets, helped by the extension of stimulus from the ECB. Foreign exchange holdings had little impact on the Trust P&Lacross most global stock indexes proved profitable as equities generally moved higher during the month. Mixed positioning acrossDiminished trade tensions, supportive central bank policies, and dampened risk related to Brexit all provided a tailwind for stocks to close out the currencies traded led to mostly offsetting gains and losses leading to the muted impact overall.decade.