UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
(
X
) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number
000-52602
CERES TACTICAL COMMODITY L.P.
(Exact name of registrant as specified in its charter)
New York | 20-2718952 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
c/o Ceres Managed Futures LLC
522 Fifth Avenue
New York, New York 10036
(Address of principal executive offices) (Zip Code)
(855)
672-4468
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
N/A | N/A | N/A |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
X
NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes
X
NoIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2
of the Exchange Act.Large accelerated filer | Accelerated filer | Non-accelerated filerX | ||
Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
_
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).Yes No
X
A
s of July 31, 2022,
54,487.3787
Limited Partnership Class A Redeemable Units were outstanding,600.058
Limited Partnership Class D Redeemable Units were outstanding and916.493
Limited Partnership Class Z Redeemable Units were outstanding.PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
.Ceres Tactical Commodity L.P.
Statements of Financial Condition
June 30, 2022 (Unaudited) | December 31, 2021 | |||||||
Assets: | ||||||||
Investment in the Funds (1) , at fair value | $ | 24,705,236 | $ | 31,910,757 | ||||
Redemptions receivable from the Funds | 23,867,182 | 9,530,301 | ||||||
Equity in trading account: | ||||||||
Unrestricted cash | 27,006,140 | 83,266,107 | ||||||
Restricted cash | 9,365,484 | 7,622,510 | ||||||
Net unrealized appreciation on open futures contracts | 61,528,997 | 2,520,777 | ||||||
Net unrealized appreciation on open forward contracts | - | 32,498 | ||||||
Options purchased, at fair value (premiums paid $3,726,544 and $6,171,271 at June 30, 2022 and December 31, 2021, respectively) | 15,857,964 | 11,866,605 | ||||||
Total equity in trading account | 113,758,585 | 105,308,497 | ||||||
Interest receivable | 82,359 | 2,728 | ||||||
Total assets | $ | 162,413,362 | $ | 146,752,283 | ||||
Liabilities and Partners’ Capital: | ||||||||
Liabilities: | ||||||||
Net unrealized depreciation on open forward contracts | $ | 461,013 | $ | - | ||||
Options written, at fair value (premiums received $5,245,854 and $6,265,420 at June 30, 2022 and December 31, 2021, respectively) | 8,143,576 | 7,039,257 | ||||||
Accrued expenses: | ||||||||
Ongoing selling agent fees | 93,821 | 85,818 | ||||||
Management fees | 146,134 | 125,544 | ||||||
General Partner fees | 95,916 | 87,151 | ||||||
Incentive fees | 4,053,328 | 10,012,065 | ||||||
Professional fees | 249,275 | 186,105 | ||||||
Redemptions payable to General Partner | - | 50,000 | ||||||
Redemptions payable to Limited Partners | 2,589,712 | 1,255,919 | ||||||
Total liabilities | 15,832,775 | 18,841,859 | ||||||
Partners’ Capital: | ||||||||
General Partner, Class Z, 748.1180 Redeemable Units outstanding at June 30, 2022 and December 31, 2021 | 1,596,715 | 1,394,753 | ||||||
Limited Partners, Class A, 54,273.4647 at June 30, 2022 and December 31, 2021, respectively | 141,751,370 | 124,645,209 | ||||||
Limited Partners, Class D, 600.0580 Redeemable Units outstanding at June 30, 2022 and December 31, 2021 | 1,242,788 | 1,089,766 | ||||||
Limited Partners, Class Z, 932.2510 and 418.7500 Redeemable Units outstanding at June 30, 2022 and December 31, 2021, respectively | 1,989,714 | 780,696 | ||||||
Total partners’ capital (net asset value) | 146,580,587 | 127,910,424 | ||||||
Total liabilities and partners’ capital | $ | 162,413,362 | $ | 146,752,283 | ||||
Net asset value per Redeemable Unit: | ||||||||
Class A | $ | 2,611.80 | $ | 2,290.21 | ||||
Class D | $ | 2,071.11 | $ | 1,816.10 | ||||
Class Z | $ | 2,134.31 | $ | 1,864.35 | ||||
(1) | Defined in Note 1. |
See accompanying notes to financial statements.
1
Ceres Tactical Commodity L.P.
Condensed Schedule of Investments
June 30, 2022
(Unaudited)
Number of Contracts | Fair Value | % of Partners’ Capital | ||||||||||||
Futures Contracts Purchased | ||||||||||||||
Currencies | 71 | $ | (124,647 | ) | (0.10) | % | ||||||||
Energy | ||||||||||||||
NAT GAS LAST DAY Nov22 | 97 | 2,812,100 | 1.92 | |||||||||||
NAT GAS LAST DAY Dec22 | 230 | 6,777,860 | 4.62 | |||||||||||
GLOBEX NAT GAS LD DEC23 | 235 | 5,192,150 | 3.54 | |||||||||||
NATURAL GAS FUTR Oct22 | 765 | (1,975,751 | ) | (1.35) | ||||||||||
NATURAL GAS FUTR Nov22 | 2,351 | 16,076,203 | 10.97 | |||||||||||
NATURAL GAS FUTR Nov23 | 3,190 | 10,952,867 | 7.47 | |||||||||||
NATURAL GAS FUTR DEC22 | 2,398 | 16,515,058 | 11.27 | |||||||||||
NATURAL GAS FUTR DEC23 | 1,156 | 3,438,420 | 2.35 | |||||||||||
NATURAL GAS FUTR Dec24 | 703 | 2,547,295 | 1.74 | |||||||||||
NATURAL GAS FUTR JAN23 | 267 | (3,535,150 | ) | (2.41) | ||||||||||
NATURAL GAS FUTR APR23 | 438 | (1,536,490 | ) | (1.05) | ||||||||||
NATURAL GAS FUTR DEC23 | 284 | 3,352,610 | 2.29 | |||||||||||
Other | 3,605 | 2,089,417 | 1.43 | |||||||||||
Grains | 151 | (160,254 | ) | (0.11) | ||||||||||
Indices | 214 | (42,122 | ) | (0.03) | ||||||||||
Livestock | 71 | (20,400 | ) | (0.01) | ||||||||||
Metals | 8 | (4,880 | ) | (0.00) | * | |||||||||
Softs | 306 | (151,288 | ) | (0.10) | ||||||||||
Total futures contracts purchased | 62,202,998 | 42.44 | ||||||||||||
Futures Contracts Sold | ||||||||||||||
Energy | ||||||||||||||
GLOBEX NAT GAS LD MAR23 | 65 | (1,516,080 | ) | (1.03) | ||||||||||
GLOBEX NAT GAS LD MAR24 | 235 | (4,663,040 | ) | (3.18) | ||||||||||
NATURAL GAS FUTR APR23 | 2,221 | (5,813,360 | ) | (3.97) | ||||||||||
NATURAL GAS FUTR SEP22 | 1,916 | (2,743,742 | ) | (1.87) | ||||||||||
NATURAL GAS FUTR Sep24 | 663 | (1,643,758 | ) | (1.12) | ||||||||||
NATURAL GAS FUTR SEP22 | 418 | 10,304,560 | 7.03 | |||||||||||
NATURAL GAS FUTR OCT22 | 463 | 9,611,590 | 6.56 | |||||||||||
NATURAL GAS FUTR DEC22 | 145 | 2,487,240 | 1.70 | |||||||||||
Other | 9,722 | (7,327,697 | ) | (5.00) | ||||||||||
Grains | 292 | 335,073 | 0.23 | |||||||||||
Indices | 225 | 123,816 | 0.08 | |||||||||||
Livestock | 62 | 34,010 | 0.02 | |||||||||||
Metals | 62 | 160,810 | 0.11 | |||||||||||
Softs | 99 | (23,423 | ) | (0.02) | ||||||||||
Total futures contracts sold | (674,001 | ) | (0.46) | |||||||||||
Net unrealized appreciation on open futures contracts | $ | 61,528,997 | 41.98 | % | ||||||||||
Unrealized Appreciation on Open Forward Contracts | ||||||||||||||
Metals | 285 | $ | 4,045,068 | 2.76 | % | |||||||||
Total unrealized appreciation on open forward contracts | 4,045,068 | 2.76 | ||||||||||||
Unrealized Depreciation on Open Forward Contracts | ||||||||||||||
Metals | 275 | (4,506,081 | ) | (3.07) | ||||||||||
Total unrealized depreciation on open forward contracts | (4,506,081 | ) | (3.07) | |||||||||||
Net unrealized depreciation on open forward contracts | $ | (461,013 | ) | (0.31) | % | |||||||||
Options Purchased | ||||||||||||||
Calls | ||||||||||||||
Energy | 953 | $ | 14,995,957 | 10.24 | % | |||||||||
Metals | 96 | 93,200 | 0.06 | |||||||||||
Softs | 33 | 11,700 | 0.01 | |||||||||||
Puts | ||||||||||||||
Energy | 505 | 35,303 | 0.02 | |||||||||||
Metals | 44 | 659,779 | 0.45 | |||||||||||
Softs | 20 | 62,025 | 0.04 | |||||||||||
Total options purchased (premiums paid $3,726,544) | $ | 15,857,964 | 10.82 | % | ||||||||||
Options Written | ||||||||||||||
Calls | ||||||||||||||
Energy | 684 | $ | (5,837,250 | ) | (3.99) | % | ||||||||
Metals | 85 | (93,200 | ) | (0.06) | ||||||||||
Softs | 16 | (107,580 | ) | (0.07) | ||||||||||
Puts | ||||||||||||||
Energy | 1,328 | (1,004,715 | ) | (0.69) | ||||||||||
Grains | 17 | (59,925 | ) | (0.04) | ||||||||||
Metals | 64 | (875,896 | ) | (0.60) | ||||||||||
Softs | 106 | (165,010 | ) | (0.11) | ||||||||||
Total options written (premiums received $5,245,854) | $ | (8,143,576 | ) | (5.56) | % | |||||||||
Fair Value | % of Partners’ Capital | |||||||||||||
Investment in the Funds | ||||||||||||||
CMF NL Master Fund LLC | $ | 13,859,227 | 9.45 | % | ||||||||||
CMF Drakewood Master Fund LLC | 10,846,009 | 7.40 | ||||||||||||
Total investment in the Funds | $ | 24,705,236 | 16.85 | % | ||||||||||
* | Due to rounding. |
See accompanying notes to financial statements.
2
Ceres Tactical Commodity L.P.
Condensed Schedule of Investments
December 31, 2021
Number of Contracts | Fair Value | % of Partners’ Capital | ||||||||||||
Futures Contracts Purchased | ||||||||||||||
Currencies | 40 | $ | 9,055 | 0.01 | % | |||||||||
Energy | ||||||||||||||
NATURAL GAS FUTR Feb 22 - Dec 24 | 12,525 | 15,688,463 | 12.26 | |||||||||||
NAT GAS LAST DAY Dec 22 | 230 | 2,925,360 | 2.29 | |||||||||||
GLOBEX NAT GAS LD Dec 23 | 235 | 1,984,400 | 1.55 | |||||||||||
Other | 2,294 | 1,051,178 | 0.82 | |||||||||||
Grains | 285 | 37,245 | 0.03 | |||||||||||
Indices | 476 | (1,154,113 | ) | (0.90 | ) | |||||||||
Livestock | 31 | 990 | 0.00 | * | ||||||||||
Metals | 110 | 134,848 | 0.11 | |||||||||||
Softs | 322 | 1,057 | 0.00 | * | ||||||||||
Total futures contracts purchased | 20,678,483 | 16.17 | ||||||||||||
Futures Contracts Sold | ||||||||||||||
Energy | ||||||||||||||
NATURAL GAS FUTR Mar 22 - Mar 25 | 13,228 | (7,865,625 | ) | (6.15 | ) | |||||||||
NAT GAS LAST DAY Mar 22 - Oct 22 | 699 | (6,817,820 | ) | (5.33 | ) | |||||||||
GLOBEX NAT GAS LD Mar 24 | 235 | (1,558,690 | ) | (1.22 | ) | |||||||||
Other | 3,371 | (2,197,193 | ) | (1.72 | ) | |||||||||
Grains | 211 | 115,235 | 0.09 | |||||||||||
Indices | 320 | 233,958 | 0.18 | |||||||||||
Livestock | 42 | (12,440 | ) | (0.01 | ) | |||||||||
Metals | 34 | (17,100 | ) | (0.01 | ) | |||||||||
Softs | 249 | (38,031 | ) | (0.03 | ) | |||||||||
Total futures contracts sold | (18,157,706 | ) | (14.20 | ) | ||||||||||
Net unrealized appreciation on open futures contracts | $ | 2,520,777 | 1.97 | % | ||||||||||
Unrealized Appreciation on Open Forward Contracts | ||||||||||||||
Metals | 493 | $ | 2,333,825 | 1.83 | % | |||||||||
Total unrealized appreciation on open forward contracts | 2,333,825 | 1.83 | ||||||||||||
Unrealized Depreciation on Open Forward Contracts | ||||||||||||||
Metals | 507 | (2,301,327 | ) | (1.80 | ) | |||||||||
Total unrealized depreciation on open forward contracts | (2,301,327 | ) | (1.80 | ) | ||||||||||
Net unrealized appreciation on open forward contracts | $ | 32,498 | 0.03 | % | ||||||||||
Options Purchased | ||||||||||||||
Calls | ||||||||||||||
Energy | ||||||||||||||
NAT GAS EUR OPT C, 3% - 4.25%, Feb 22 - Dec 25 | 1,695 | $ | 10,523,414 | 8.23 | % | |||||||||
Metals | 97 | 551,393 | 0.43 | |||||||||||
Puts | ||||||||||||||
Energy | 920 | 661,421 | 0.52 | |||||||||||
Metals | 83 | 130,377 | 0.10 | |||||||||||
Total options purchased (premiums paid $6,171,271 ) | $ | 11,866,605 | 9.28 | % | ||||||||||
Options Written | ||||||||||||||
Calls | ||||||||||||||
Energy | 1,377 | $ | (3,786,346 | ) | (2.96 | ) | % | |||||||
Metals | 97 | (551,393 | ) | (0.43 | ) | |||||||||
Puts | ||||||||||||||
Energy | 2,179 | (2,553,333 | ) | (2.00 | ) | |||||||||
Metals | 83 | (130,377 | ) | (0.10 | ) | |||||||||
Softs | 25 | (17,808 | ) | (0.01 | ) | |||||||||
Total options written (premiums received $6,265,420 ) | $ | (7,039,257 | ) | (5.50 | ) | % | ||||||||
Fair Value | % of Partners’ Capital | |||||||||||||
Investment in the Funds | ||||||||||||||
CMF NL Master Fund LLC | $ | 10,984,329 | 8.59 | % | ||||||||||
CMF GSL Master Fund LLC | 20,926,428 | 16.36 | ||||||||||||
Total investment in the Funds | $ | 31,910,757 | 24.95 | % | ||||||||||
* | Due to rounding. |
See accompanying notes to financial statements.
3
Ceres Tactical Commodity L.P.
Statements of Income and Expenses
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Investment Income: | ||||||||||||||||
Interest income | $ | 118,960 | $ | 2,037 | $ | 136,389 | $ | 8,660 | ||||||||
Interest income allocated from the Funds | 53,446 | 868 | 59,440 | 3,377 | ||||||||||||
Total investment income | 172,406 | 2,905 | 195,829 | 12,037 | ||||||||||||
Expenses: | ||||||||||||||||
Expenses allocated from the Funds | 70,651 | 68,337 | 116,314 | 133,650 | ||||||||||||
Clearing fees related to direct investments | 220,109 | 269,968 | 446,624 | 572,510 | ||||||||||||
Ongoing selling agent fees | 278,190 | 220,752 | 533,159 | 417,292 | ||||||||||||
Management fees | 424,088 | 315,012 | 790,273 | 607,356 | ||||||||||||
General Partner fees | 283,758 | 223,914 | 542,653 | 422,998 | ||||||||||||
Incentive fees | 2,318,477 | 1,545,559 | 5,223,871 | 8,347,805 | ||||||||||||
Professional fees | 121,688 | 110,478 | 237,766 | 208,774 | ||||||||||||
Total expenses | 3,716,961 | 2,754,020 | 7,890,660 | 10,710,385 | ||||||||||||
Net investment loss | (3,544,555 | ) | (2,751,115 | ) | (7,694,831 | ) | (10,698,348 | ) | ||||||||
Trading Results: | ||||||||||||||||
Net gains (losses) on trading of commodity investments in the Funds: | ||||||||||||||||
Net realized gains (losses) on closed contracts | (27,958,221 | ) | 2,668,985 | (43,397,614 | ) | 10,189,669 | ||||||||||
Net realized gains (losses) on closed contracts allocated from the Funds | (85,608 | ) | 407,084 | 4,977,819 | 31,414,330 | |||||||||||
Net change in unrealized gains (losses) on open contracts | 37,377,237 | 4,814,235 | 62,815,328 | 3,071,556 | ||||||||||||
Net change in unrealized gains (losses) on open contracts allocated from the Funds | 1,400,486 | 963,657 | 1,397,589 | 1,195,289 | ||||||||||||
Total trading results | 10,733,894 | 8,853,961 | 25,793,122 | 45,870,844 | ||||||||||||
Net income (loss) | $ | 7,189,339 | $ | 6,102,846 | $ | 18,098,291 | $ | 35,172,496 | ||||||||
Net income (loss) per Redeemable Unit: * | ||||||||||||||||
Class A | $ | 127.50 | $ | 111.21 | $ | 321.59 | $ | 620.08 | ||||||||
Class D | $ | 101.10 | $ | 88.18 | $ | 255.01 | $ | 491.71 | ||||||||
Class Z | $ | 108.10 | $ | 93.35 | $ | 269.96 | $ | 507.40 | ||||||||
Weighted average Redeemable Units outstanding: | ||||||||||||||||
Class A | 55,039.4694 | 53,459.2600 | 54,880.9785 | 54,401.5475 | ||||||||||||
Class D | 600.0580 | 600.0580 | 600.0580 | 600.0580 | ||||||||||||
Class Z | 1,518.1417 | 1,099.0937 | 1,355.9143 | 1,078.6033 | ||||||||||||
* | Represents the change in net asset value per Redeemable Unit during the period. |
See accompanying notes to financial statements.
4
Ceres Tactical Commodity L.P.
Statements of Changes in Partners’ Capital
For the Three and Six Months Ended June 30, 2022 and 2021
(Unaudited)
Class A | Class D | Class Z | Total | |||||||||||||||||||||||||||||
Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | |||||||||||||||||||||||||
Partners’ Capital, December 31, 2020 | $ | 81,673,675 | 56,256.1017 | $ | 690,828 | 600.0580 | $ | 1,274,933 | 1,087.4260 | $ | 83,639,436 | 57,943.5857 | ||||||||||||||||||||
Subscriptions - Limited Partners | 3,517,560 | 1,874.1270 | - | - | 175,000 | 109.7220 | 3,692,560 | 1,983.8490 | ||||||||||||||||||||||||
Redemptions - General Partner | - | - | - | - | (140,000 | ) | (87.9390 | ) | (140,000 | ) | (87.9390 | ) | ||||||||||||||||||||
Redemptions - Limited Partners | (8,783,964 | ) | (4,685.7600 | ) | - | - | - | - | (8,783,964 | ) | (4,685.7600 | ) | ||||||||||||||||||||
Net income (loss) | 34,324,088 | - | 295,055 | - | 553,353 | - | 35,172,496 | - | ||||||||||||||||||||||||
Partners’ Capital, June 30, 2021 | $ | 110,731,359 | 53,444.4687 | $ | 985,883 | 600.0580 | $ | 1,863,286 | 1,109.2090 | $ | 113,580,528 | 55,153.7357 | ||||||||||||||||||||
Partners’ Capital, March 31, 2021 | $ | 104,219,432 | 53,154.4397 | $ | 932,968 | 600.0580 | $ | 1,585,670 | 999.4870 | $ | 106,738,070 | 54,753.9847 | ||||||||||||||||||||
Subscriptions - Limited Partners | 2,190,000 | 1,090.6670 | - | - | 175,000 | 109.7220 | 2,365,000 | 1,200.3890 | ||||||||||||||||||||||||
Redemptions - Limited Partners | (1,625,388 | ) | (800.6380 | ) | - | - | - | - | (1,625,388 | ) | (800.6380 | ) | ||||||||||||||||||||
Net income (loss) | 5,947,315 | - | 52,915 | - | 102,616 | - | 6,102,846 | - | ||||||||||||||||||||||||
Partners’ Capital, June 30, 2021 | $ | 110,731,359 | 53,444.4687 | $ | 985,883 | 600.0580 | $ | 1,863,286 | 1,109.2090 | $ | 113,580,528 | 55,153.7357 | ||||||||||||||||||||
Class A | Class D | Class Z | Total | |||||||||||||||||||||||||||||
Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | Amount | Redeemable Units | |||||||||||||||||||||||||
Partners’ Capital, December 31, 2021 | $ | 124,645,209 | 54,425.1587 | $ | 1,089,766 | 600.0580 | $ | 2,175,449 | 1,166.8680 | $ | 127,910,424 | 56,192.0847 | ||||||||||||||||||||
Subscriptions - Limited Partners | 4,380,000 | 1,768.7600 | - | - | 1,075,000 | 513.5010 | 5,455,000 | 2,282.2610 | ||||||||||||||||||||||||
Redemptions - Limited Partners | (4,883,128 | ) | (1,920.4540 | ) | - | - | - | - | (4,883,128 | ) | (1,920.4540 | ) | ||||||||||||||||||||
Net income (loss) | 17,609,289 | - | 153,022 | - | 335,980 | - | 18,098,291 | - | ||||||||||||||||||||||||
Partners’ Capital, June 30, 2022 | $ | 141,751,370 | 54,273.4647 | $ | 1,242,788 | 600.0580 | $ | 3,586,429 | 1,680.3690 | $ | 146,580,587 | 56,553.8917 | ||||||||||||||||||||
Partners’ Capital, March 31, 2022 | $ | 135,360,469 | 54,486.3317 | $ | 1,182,120 | 600.0580 | $ | 2,418,661 | 1,193.6870 | $ | 138,961,250 | 56,280.0767 | ||||||||||||||||||||
Subscriptions - Limited Partners | 2,622,000 | 1,019.9500 | - | - | 1,025,000 | 486.6820 | 3,647,000 | 1,506.6320 | ||||||||||||||||||||||||
Redemptions - Limited Partners | (3,217,002 | ) | (1,232.8170 | ) | - | - | - | - | (3,217,002 | ) | (1,232.8170 | ) | ||||||||||||||||||||
Net income (loss) | 6,985,903 | - | 60,668 | - | 142,768 | - | 7,189,339 | - | ||||||||||||||||||||||||
Partners’ Capital, June 30, 2022 | $ | 141,751,370 | 54,273.4647 | $ | 1,242,788 | 600.0580 | $ | 3,586,429 | 1,680.3690 | $ | 146,580,587 | 56,553.8917 | ||||||||||||||||||||
See accompanying notes to financial statements.
5
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
1. | Organization: |
Ceres Tactical Commodity L.P. (the “Partnership”) is a limited partnership organized on April 20, 2005 under the partnership laws of the State of New York to engage, directly and indirectly, in the speculative trading of commodity interests on United States (“U.S.”) and international futures, options on futures and forward markets. The Partnership may also engage, directly or indirectly, in swap transactions and other derivative transactions with the approval of the General Partner (as defined below). Initially, the Partnership’s investment strategy focused on energy and energy-related investments. While the Partnership is expected to continue to have significant exposure to energy and energy-related markets, such trading will no longer be the Partnership’s primary focus. Therefore, the Partnership’s past trading performance will not necessarily be indicative of future results. The sectors traded include energy, grains, livestock, metals and softs. The commodity interests that are traded by the Partnership, directly or indirectly through its investment in the Funds (as defined below) are volatile and involve a high degree of market risk. The General Partner may also determine to invest up to all of the Partnership’s assets (directly or indirectly through its investment in the Funds) in U.S. Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates. During the initial offering period, the Partnership sol
d
11,925redeemable units of limited partnership interest (“Redeemable Units”). The Partnership commenced trading on September 6, 2005. The Partnership privately and continuously offers Redeemable Units to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership, is the trading manager (the “Trading Manager”) of NL Master (as defined below) and Drakewood Master (as defined below), and was the trading manager of GSL Master (as defined below). The General Partner is a wholly-owned subsidiary of Morgan Stanley Domestic Holdings, Inc. (“MSD Holdings”). MSD Holdings is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses.
As of June 30, 2022, all trading decisions are made for the Partnership by Millburn Ridgefield Corporation (“Millburn”), Ospraie Management, LLC (“Ospraie”), Pan Capital Management L.P. (“Pan”), Northlander Commodity Advisors LLP (“Northlander”) and Drakewood Capital Management Limited (“Drakewood”) (each, an “Advisor” and, collectively, the “Advisors”), each, a registered commodity trading advisor. On June 30, 2022, the Partnership fully redeemed its investment from CMF GSL Master Fund LLC (“GSL Master”). Also effective June 30, 2022, Geosol Capital, LLC (“Geosol”) ceased to act as a commodity trading advisor to the Partnership. References herein to the “Advisors” may include, as relevant, Geosol. Each Advisor is allocated a portion of the Partnership’s assets to manage. The Partnership invests the portion of its assets allocated to each of the Advisors either directly, through individually managed accounts, or indirectly through its investment in the Funds. The Advisors are not affiliated with one another, are not affiliated with the General Partner and MS&Co. and are not responsible for the organization or operation of the Partnership.
As of June 13, 2018, the Partnership began offering three classes of limited partnership interests, Class A Redeemable Units, Class D Redeemable Units and Class Z Redeemable Units. All Redeemable Units issued prior to October 31, 2016 were deemed “Class A Redeemable Units.” Class Z Redeemable Units were first issued on January 1, 2017. The rights, liabilities, risks and fees associated with investment in the Class A Redeemable Units were not changed. Class D Redeemable Units were first issued on July 1, 2018. The rights, liabilities, risks and fees associated with investment in the Class A Redeemable Units and Class Z Redeemable Units were not changed. Class A Redeemable Units, Class D Redeemable Units and Class Z Redeemable Units will each be referred to as a “Class” and collectively referred to as the “Classes.” Class A Redeemable Units are and Class D Redeemable Units were available to taxable U.S. individuals and institutions, U.S. tax exempt individuals and institutions and
f 0.75%non-U.S.
investors. Class Z Redeemable Units are offered to limited partners who receive advisory services from Morgan Stanley Smith Barney LLC (doing business as Morgan Stanley Wealth Management) (“Morgan Stanley Wealth Management”) and may also be offered to certain employees of Morgan Stanley and/or its subsidiaries (and their family members). Class A Redeemable Units, Class D Redeemable Units and Class Z Redeemable Units are identical, except that Class A Redeemable Units and Class D Redeemable Units are subject to a monthly ongoing selling agent fee equal to 1/12 o(a 0.75% annual rate) of the adjusted net assets of Class A Redeemable Units and Class D Redeemable Units, respectively, as of the end of each month, whereas Class Z Redeemable Units are not subject to a monthly ongoing selling agent fee. Effective January 1, 2021, the Partnership ceased offering Class D Redeemable Units.
6
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
During the reporting periods ended June 30, 2022 and 2021, the Partnership’s/Funds’ commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant.
Millburn, Ospraie and Pan directly trade the Partnership’s assets allocated to each Advisor through managed accounts in the name of the Partnership pursuant to Millburn’s Commodity Program, Ospraie’s Commodity Program and Pan’s Energy Trading Program, respectively.
The Partnership, CMF NL Master Fund LLC (“NL Master”) and CMF Drakewood Master Fund LLC (“Drakewood Master”) have, and GSL Master had, entered into futures brokerage account agreements with MS&Co. NL Master and Drakewood Master are collectively referred to as the “Funds.” References herein to “Funds” may also include, as relevant, GSL Master. The Partnership, directly and through its investment in the Funds, pays MS&Co. (or will reimburse MS&Co. if previously paid) its allocable share of all trading fees for the clearing and, where applicable, the execution of transactions as well as exchange, user,
give-up,
floor brokerage and National Futures Association fees (collectively, the “clearing fees”).The Partnership has also entered into a selling agreement (as amended, the “Selling Agreement”) with Morgan Stanley Wealth Management. Pursuant to the Selling Agreement, the Partnership pays Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal t
per year of the adjusted
month-end
net assets of Class A Redeemable Units and Class D Redeemable Units, respectively. Morgan Stanley Wealth Management pays a portion of its ongoing selling agent fees to properly registered or exempted financial advisors who have sold Class A and Class D Redeemable Units in the Partnership. Class Z Redeemable Units are not subject to a monthly ongoing selling agent fee.Effective January 1, 2021, the management fee paid to Millburn was reduced to 1/12 of 1.0% (1.0% per year) of the adjusted
month-end
Net Assets (as defined in its management agreement with the Partnership and the General Partner) allocated to Millburn and the incentive fee paid to Millburn was increased to 27.5% of New Trading Profits (as defined in its management agreement with the Partnership and the General Partner) earned by Millburn for the Partnership during the calendar year.The General Partner fees, management fees, incentive fees and professional fees of the Partnership are allocated proportionally to each Class based on the net asset value of each Class.
The General Partner has delegated certain administrative functions to SS&C Technologies, Inc., a Delaware corporation, currently doing business as SS&C GlobeOp (the “Administrator”). Pursuant to a master services agreement, the Administrator furnishes certain administrative, accounting, regulatory reporting, tax and other services as agreed from time to time. In addition, the Administrator maintains certain books and records of the Partnership. The cost of retaining the Administrator is allocated among the pools operated by the General Partner, including the Partnership.
2. | Basis of Presentation and Summary of Significant Accounting Policies: |
The accompanying financial statements and accompanying notes are unaudited but, in the opinion of the General Partner, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Partnership’s financial condition at June 30, 2022 and the results of its operations and changes in partners’ capital for the three and six months ended June 30, 2022 and 2021. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. These financial statements should be read together with the financial statements and notes included in the Partnership’s Annual Report on Form
10-K
(the “Form10-K”)
filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2021. The December 31, 2021 information has been derived from the audited financial statements as of and for the year ended December 31, 2021.Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.
7
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
Use of Estimates.
Profit Allocation.
Statement of Cash Flows.
“Statement of Cash Flows.”
Partnership’s Investment in the Funds.
Partnership’s/Funds’ Derivative Investments.
first-in,
first-out
method. Net unrealized gains or losses on open contracts are included as a component of equity in trading account in the Partnership’s/Funds’ Statements of Financial Condition. Net realized gains or losses and net change in unrealized gains or losses are included in the Partnership’s/Funds’ Statements of Income and Expenses.The Partnership/Funds do not isolate the portion of the results of operations arising from the effect of changes in foreign exchange rates on investments due to fluctuations from changes in market prices of investments held. Such fluctuations are included in total trading results in the Partnership’s/Funds’ Statements of Income and Expenses.
Partnership’s Cash
Income Taxes.
“Income Taxes,”
“more-likely-than-not”
of being sustained “when challenged” or “when examined” by the applicable tax authority. Tax positions determined not to meet themore-likely-than-not
threshold would be recorded as a tax benefit or liability in the Partnership’s Statements of Financial Condition for the current year. If a tax position does not meet the minimum statutory threshold to avoid the incurring of penalties, an expense for the amount of the statutory penalty and interest, if applicable, shall be recognized in the Statements of Income and Expenses in the period in which the position is claimed or expected to be claimed. The General Partner has concluded that there are 0significant uncertain tax positions that would require recognition in the financial statements. The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2018 through 2021 tax years remain subject to examination by U.S. federal and most state tax authorities.8
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
Investment Company Status
2013-08
“Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements”
Net Income (Loss) per Redeemable Unit.
“Financial Services – Investment Companies.”
There have been no material changes with respect to the Partnership’s critical accounting policies as reported in the Partnership’s Annual Report on Form
10-K
for the year ended December 31, 2021.3. | Financial Highlights: |
Financial highlights for the limited partner Classes as a whole for the three and six months ended June 30, 2022 and 2021 were as follows.
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | Class D | Class Z | Class A | Class D | Class Z | Class A | Class D | Class Z | Class A | Class D | Class Z | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per Redeemable Unit Performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(for a unit outstanding throughout the period): * | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized gains (losses) | $ | 190.16 | $ | 150.90 | $ | 151.68 | $ | 161.46 | $ | 128.02 | $ | 130.75 | $ | 458.18 | $ | 363.46 | $ | 368.48 | $ | 812.13 | $ | 642.00 | $ | 641.37 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss | (62.66 | ) | (49.80 | ) | (43.58 | ) | (50.25 | ) | (39.84 | ) | (37.40 | ) | (136.59 | ) | (108.45 | ) | (98.52 | ) | (192.05 | ) | (150.29 | ) | (133.97 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase (decrease) for the period | 127.50 | 101.10 | 108.10 | 111.21 | 88.18 | 93.35 | 321.59 | 255.01 | 269.96 | 620.08 | 491.71 | 507.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value per Redeemable Unit, beginning of period | 2,484.30 | 1,970.01 | 2,026.21 | 1,960.69 | 1,554.80 | 1,586.48 | 2,290.21 | 1,816.10 | 1,864.35 | 1,451.82 | 1,151.27 | 1,172.43 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value per Redeemable Unit, end of period | $ | 2,611.80 | $ | 2,071.11 | $ | 2,134.31 | $ | 2,071.90 | $ | 1,642.98 | $ | 1,679.83 | $ | 2,611.80 | $ | 2,071.11 | $ | 2,134.31 | $ | 2,071.90 | $ | 1,642.98 | $ | 1,679.83 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | Class D | Class Z | Class A | Class D | Class Z | Class A | Class D | Class Z | Class A | Class D | Class Z | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios to Average Limited Partners’ Capital: ** | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment loss *** | (5.0 | ) % | (5.0 | ) % | (4.3 | ) % | (5.8 | ) % | (5.8 | ) % | (5.4 | ) % | (7.4 | ) % | (7.4 | ) % | (6.2 | ) % | (12.9 | ) % | (12.6 | ) % | (10.9 | ) % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | 3.9 | % | 3.9 | % | 3.5 | % | 4.4 | % | 4.4 | % | 3.9 | % | 3.9 | % | 3.9 | % | 3.2 | % | 4.7 | % | 4.6 | % | 3.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Incentive fees | 1.6 | % | 1.6 | % | 1.4 | % | 1.4 | % | 1.4 | % | 1.5 | % | 3.8 | % | 3.8 | % | 3.3 | % | 8.2 | % | 8.0 | % | 7.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 5.5 | % | 5.5 | % | 4.9 | % | 5.8 | % | 5.8 | % | 5.4 | % | 7.7 | % | 7.7 | % | 6.5 | % | 12.9 | % | 12.6 | % | 11.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return before incentive fees | 6.8 | % | 6.8 | % | 6.6 | % | 7.1 | % | 7.1 | % | 7.3 | % | 18.1 | % | 18.1 | % | 17.9 | % | 53.0 | % | 52.8 | % | 52.3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Incentive fees | (1.7 | ) % | (1.7 | ) % | (1.3 | ) % | (1.4 | ) % | (1.4 | ) % | (1.4 | ) % | (4.1 | ) % | (4.1 | ) % | (3.4 | ) % | (10.3 | ) % | (10.1 | ) % | (9.0 | ) % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return after incentive fees | 5.1 | % | 5.1 | % | 5.3 | % | 5.7 | % | 5.7 | % | 5.9 | % | 14.0 | % | 14.0 | % | 14.5 | % | 42.7 | % | 42.7 | % | 43.3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
* | Net investment loss per Redeemable Unit is calculated by dividing the interest income less total expenses by the average number of Redeemable Units outstanding during the period. The net realized and unrealized gains (losses) per Redeemable Unit is a balancing amount necessary to reconcile the change in net asset value per Redeemable Unit with the other per unit information. |
** | Annualized (except for incentive fees). |
*** | Interest income less total expenses. |
The above ratios and total return may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner Classes using the limited partners’ share of income, expenses and average partners’ capital of the Partnership and include the income and expenses allocated from the Funds.
4. | Trading Activities: |
The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity interests. The results of the Partnership’s trading activities are shown in the Statements of Income and Expenses. The Partnership also invests certain of its assets through a “master/feeder” structure. The Partnership’s
pro-rata
share of the results of the Funds’ trading activities is shown in the Partnership’s Statements of Income and Expenses.9
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited
)
The futures brokerage account agreements with MS&Co. give the Partnership and the Funds, respectively, the legal right to net unrealized gains and losses on open futures and forward contracts in their respective Statements of Financial Condition. The Partnership and the Funds net, for financial reporting purposes, the unrealized gains and losses on open futures and open forward contracts in their respective Statements of Financial Condition, as the criteria under ASC 210-20,have been met.
“Balance Sheet,”
All of the commodity interests owned directly by the Partnership are held for trading purposes. All of the commodity interests owned by the Funds are held for trading purposes. The monthly average number of futures contracts traded directly by the Partnership during the three months ended June 30, 2022 and 2021 were 33,662 and 33,170, respectively. The monthly average number of futures contracts traded directly by the Partnership during the six months ended June 30, 2022 and 2021 were 34,689 and 29,632, respectively. The monthly average number of metals forward contracts traded directly by the Partnership during the three months ended June 30, 2022 and 2021 were 775 and 1,477, respectively. The monthly average number of metals forward contracts traded directly by the Partnership during the six months ended June 30, 2022 and 2021 were 919 and 1,584, respectively. The monthly average number of option contracts traded directly by the Partnership during the three months ended June 30, 2022 and 2021 were 6,095 and 4,138, respectively. The monthly average number of option contracts traded directly by the Partnership during the six months ended June 30, 2022 and 2021 were 6,565 and 4,339, respectively.
Trading and transaction fees are based on the number of trades executed by the Advisors and the Partnership’s respective percentage ownership of each Fund.
All clearing fees paid to MS&Co. are borne directly by the Partnership for its direct trading. In addition, clearing fees are borne by the Funds for indirect trading and allocated to the Funds’ members, including the Partnership.
The following tables summarize the gross and net amounts recognized relating to assets and liabilities of the Partnership’s derivatives and their offsetting subject to master netting arrangements or similar agreements as of June 30, 2022 and December 31, 2021,
respectively.
Gross Amounts | Amounts | Gross Amounts Not Offset in the | ||||||||||||||||||||||
Offset in the | Presented in the | Statements of Financial Condition | ||||||||||||||||||||||
Gross | Statements of | Statements of | Cash Collateral | |||||||||||||||||||||
Amounts | Financial | Financial | Financial | Received/ | ||||||||||||||||||||
June 30, 2022 | Recognized | Condition | Condition | Instruments | Pledged* | Net Amount | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Futures | $ | 114,880,972 | $ | (53,351,975) | $ | 61,528,997 | $ | - | $ | - | $ | 61,528,997 | ||||||||||||
Forwards | 4,045,068 | (4,045,068) | - | - | - | - | ||||||||||||||||||
Total assets | $ | 118,926,040 | $ | (57,397,043) | $ | 61,528,997 | $ | - | $ | - | $ | 61,528,997 | ||||||||||||
Liabilities | ||||||||||||||||||||||||
Futures | $ | (53,351,975) | $ | 53,351,975 | $ | - | $ | - | $ | - | $ | - | ||||||||||||
Forwards | (4,506,081) | 4,045,068 | (461,013) | - | 461,013 | - | ||||||||||||||||||
Total liabilities | $ | (57,858,056) | $ | 57,397,043 | $ | (461,013) | $ | - | $ | 461,013 | $ | - | ||||||||||||
Net fair value | $ | 61,528,997 | * | |||||||||||||||||||||
10
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
Gross Amounts | Amounts | Gross Amounts Not Offset in the | ||||||||||||||||||||||
Offset in the | Presented in the | Statements of Financial Condition | ||||||||||||||||||||||
Gross | Statements of | Statements of | Cash Collateral | |||||||||||||||||||||
Amounts | Financial | Financial | Financial | Received/ | ||||||||||||||||||||
December 31, 2021 | Recognized | Condition | Condition | Instruments | Pledged* | Net Amount | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Futures | $ | 33,395,257 | $ | (30,874,480) | $ | 2,520,777 | $ | - | $ | - | $ | 2,520,777 | ||||||||||||
Forwards | 2,333,825 | (2,301,327) | 32,498 | - | - | 32,498 | ||||||||||||||||||
Total assets | $ | 35,729,082 | $ | (33,175,807) | $ | 2,553,275 | $ | - | $ | - | $ | 2,553,275 | ||||||||||||
Liabilities | ||||||||||||||||||||||||
Futures | $ | (30,874,480) | $ | 30,874,480 | $ | - | $ | - | $ | - | $ | - | ||||||||||||
Forwards | (2,301,327) | 2,301,327 | - | - | - | - | ||||||||||||||||||
Total liabilities | $ | (33,175,807) | $ | 33,175,807 | $ | - | $ | - | $ | - | $ | - | ||||||||||||
Net fair value | $ | 2,553,275 | * | |||||||||||||||||||||
* | In the event of default by the Partnership, MS&Co., the Partnership’s commodity futures broker and the sole counterparty to the Partnership’s non-exchange-traded contracts, as applicable, has the right to offset the Partnership’s obligation with the Partnership’s cash and/or U.S. Treasury bills held by MS&Co., thereby minimizing MS&Co.’s risk of loss. In certain instances, MS&Co. may not post collateral and as such, in the event of default by MS&Co., the Partnership is exposed to the amount shown in the Statements of Financial Condition. In the case of exchange-traded contracts, the Partnership’s exposure to counterparty risk may be reduced since the exchange’s clearinghouse interposes its credit between buyer and seller and the clearinghouse’s guarantee funds may be available in the event of a default. In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
11
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
The following tables indicate the gross fair values of derivative instruments of futures, forward and option contracts held directly by the Partnership as separate assets and liabilities as of June 30, 2022 and December 31, 2021, respectively.
June 30, 2022 | ||||||
Assets | ||||||
Futures Contracts | ||||||
Currencies | $ | 6,110 | ||||
Energy | 114,081,829 | |||||
Grains | 418,166 | |||||
Indices | 136,841 | |||||
Livestock | 37,910 | |||||
Metals | 173,795 | |||||
Softs | 26,321 | |||||
Total unrealized appreciation on open futures contracts | ||||||
Liabilities | ||||||
Futures Contracts | ||||||
Currencies | (130,757 | ) | ||||
Energy | (52,679,527 | ) | ||||
Grains | (243,347 | ) | ||||
Indices | (55,147 | ) | ||||
Livestock | (24,300 | ) | ||||
Metals | (17,865 | ) | ||||
Softs | (201,032 | ) | ||||
Total unrealized depreciation on open futures contracts | (53,351,975 | ) | ||||
Net unrealized appreciation on open futures contracts | $ | 61,528,997 | * | |||
Assets | ||||||
Forward Contracts | ||||||
Metals | $ | 4,045,068 | ||||
Total unrealized appreciation on open forward contracts | 4,045,068 | |||||
Liabilities | ||||||
Forward Contracts | ||||||
Metals | (4,506,081 | ) | ||||
Total unrealized depreciation on open forward contracts | (4,506,081 | ) | ||||
Net unrealized depreciation on open forward contracts | $ | (461,013 | ) | ** | ||
Assets | ||||||
Options Purchased | ||||||
Energy | $ | 15,031,260 | ||||
Metals | 752,979 | |||||
Softs | 73,725 | |||||
Total options purchased | $ | 15,857,964 | *** | |||
Liabilities | ||||||
Options Written | ||||||
Energy | $ | (6,841,965 | ) | |||
Grains | (59,925 | ) | ||||
Metals | (969,096 | ) | ||||
Softs | (272,590 | ) | ||||
Total options written | $ | (8,143,576 | ) | **** | ||
* | This amount is in “Net unrealized appreciation on open futures contracts” in the Statements of Financial Condition. |
** | This amount is in “Net unrealized depreciation on open forward contracts” in the Statements of Financial Condition. |
*** | This amount is in “Options purchased, at fair value” in the Statements of Financial Condition. |
**** | This amount is in “Options written, at fair value” in the Statements of Financial Condition. |
12
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
December 31, 2021 | ||||||
Assets | ||||||
Futures Contracts | ||||||
Currencies | $ | 19,552 | ||||
Energy | 32,506,206 | |||||
Grains | 269,015 | |||||
Indices | 240,961 | |||||
Livestock | 14,300 | |||||
Metals | 164,478 | |||||
Softs | 180,745 | |||||
Total unrealized appreciation on open futures contracts | ||||||
Liabilities | ||||||
Futures Contracts | ||||||
Currencies | (10,497 | ) | ||||
Energy | (29,296,133 | ) | ||||
Grains | (116,535 | ) | ||||
Indices | (1,161,116 | ) | ||||
Livestock | (25,750 | ) | ||||
Metals | (46,730 | ) | ||||
Softs | (217,719 | ) | ||||
Total unrealized depreciation on open futures contracts | (30,874,480 | ) | ||||
Net unrealized appreciation on open futures contracts | $ | 2,520,777 | * | |||
Assets | ||||||
Forward Contracts | ||||||
Metals | $ | 2,333,825 | ||||
Total unrealized appreciation on open forward contracts | 2,333,825 | |||||
Liabilities | ||||||
Forward Contracts | ||||||
Metals | (2,301,327 | ) | ||||
Total unrealized depreciation on open forward contracts | (2,301,327 | ) | ||||
Net unrealized appreciation on open forward contracts | $ | 32,498 | ** | |||
Assets | ||||||
Options Purchased | ||||||
Energy | $ | 11,184,835 | ||||
Metals | 681,770 | |||||
Total options purchased | $ | 11,866,605 | *** | |||
Liabilities | ||||||
Options Written | ||||||
Energy | $ | (6,339,679 | ) | |||
Metals | (681,770 | ) | ||||
Softs | (17,808 | ) | ||||
Total options written | $ | (7,039,257 | ) | **** | ||
* | This amount is in “Net unrealized appreciation on open futures contracts” in the Statements of Financial Condition. |
** | This amount is in “Net unrealized appreciation on open forward contracts” in the Statements of Financial Condition. |
*** | This amount is in “Options purchased, at fair value” in the Statements of Financial Condition. |
**** | This amount is in “Options written, at fair value” in the Statements of Financial Condition. |
13
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
The following table indicates the trading gains and losses, by market sector, on derivative instruments traded directly by the Partnership for the three and six months ended June 30, 2022 and 2021.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||
Sector | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||
Currencies | $ | (241,649) | $ | (13,519) | $ | (269,161) | $ | (28,512) | ||||||||||||||||||||||||||||||||
Energy | 8,271,301 | 5,775,961 | 18,182,213 | 9,116,369 | ||||||||||||||||||||||||||||||||||||
Grains | 1,212,094 | (217,059) | 1,336,981 | 717,855 | ||||||||||||||||||||||||||||||||||||
Indices | 194,862 | 22,468 | 421,650 | 1,629,395 | ||||||||||||||||||||||||||||||||||||
Livestock | 149,908 | (240,073) | 29,686 | (910,994) | ||||||||||||||||||||||||||||||||||||
Metals | (123,938) | 1,361,913 | (1,216,553) | 1,819,444 | ||||||||||||||||||||||||||||||||||||
Softs | (43,562) | 793,529 | 932,898 | 917,668 | ||||||||||||||||||||||||||||||||||||
Total | $ 9,419,016 | ***** | $ 7,483,220 | ***** | $ 19,417,714 | ***** | $ 13,261,225 | ***** | ||||||||||||||||||||||||||||||||
***** | This amount is included in “Total trading results” in the Statements of Income and Expenses. |
5. | Fair Value Measurements: |
Partnership’s and the Funds’ Fair Value Measurements.
The fair value of exchange-traded futures, option and forward contracts is determined by the various exchanges, and reflects the settlement price for each contract as of the close of business on the last business day of the reporting period. The fair value of foreign currency forward contracts is extrapolated on a forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period from various exchanges. The fair value of
non-exchange-traded
foreign currency option contracts is calculated by applying an industry standard model application for options valuation of foreign currency options, using as inputs the spot prices, interest rates, and option implied volatilities quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period. U.S. Treasury bills are valued at the last available bid price received from independent pricing services as of the close of the last business day of the reporting period.The Partnership and the Funds consider prices for commodity futures, swap and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) . The values of U.S. Treasury bills, non-exchange-traded futures, forward, swap and certain option contracts for which market quotations are not readily available are priced by pricing services that derive fair values for those assets and liabilities from observable inputs (Level 2) . As of June 30, 2022 and December 31, 2021 and for the periods ended June 30, 2022 and 2021, the Partnership and the Funds did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3) .
14
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
June 30, 2022 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | ||||||||||||||||
Futures | $ | 114,880,972 | $ | 53,426,996 | $ | 61,453,976 | $ | - | ||||||||
Forwards | 4,045,068 | - | 4,045,068 | - | ||||||||||||
Options purchased | 15,857,964 | 15,857,964 | - | - | ||||||||||||
Total assets | $ | 134,784,004 | $ | 69,284,960 | $ | 65,499,044 | $ | - | ||||||||
Liabilities | ||||||||||||||||
Futures | $ | 53,351,975 | $ | 21,730,399 | $ | 31,621,576 | $ | - | ||||||||
Forwards | 4,506,081 | - | 4,506,081 | - | ||||||||||||
Options written | 8,143,576 | 8,143,576 | - | - | ||||||||||||
Total liabilities | $ | 66,001,632 | $ | 29,873,975 | $ | 36,127,657 | $ | - | ||||||||
December 31, 2021 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | ||||||||||||||||
Futures | $ | 33,395,257 | $ | 33,395,257 | $ | - | $ | - | ||||||||
Forwards | 2,333,825 | - | 2,333,825 | - | ||||||||||||
Options purchased | 11,866,605 | 11,866,605 | - | - | ||||||||||||
Total assets | $ | 47,595,687 | $ | 45,261,862 | $ | 2,333,825 | $ | - | ||||||||
Liabilities | ||||||||||||||||
Futures | $ | 30,874,480 | $ | 30,874,480 | $ | - | $ | - | ||||||||
Forwards | 2,301,327 | - | 2,301,327 | - | ||||||||||||
Options written | 7,039,257 | 7,039,257 | - | - | ||||||||||||
Total liabilities | $ | 40,215,064 | $ | 37,913,737 | $ | 2,301,327 | $ | - | ||||||||
The Investment in the Funds measured using the net asset value per share practical expedient is not required to be included in the fair value hierarchy. Please refer to the Condensed Schedules of Investments as of June 30, 2022 and December 31, 2021, respectively.
6. | Investment in the Funds: |
On April 1, 2019, the Partnership allocated a portion of its assets to NL Master, a limited liability company organized under the limited liability company laws of the State of Delaware. NL Master permits accounts managed by Northlander using Northlander’s Commodity Program, a proprietary, discretionary trading system, to invest together in one trading vehicle. The General Partner is also the trading manager of NL Master. Individual and pooled accounts currently managed by Northlander, including the Partnership, are permitted to be members of NL Master. The Trading Manager and Northlander believe that trading through this master/feeder structure should promote efficiency and economy in the trading process.
On May 1, 2022, the Partnership allocated a portion of its assets to Drakewood Master, a limited liability company organized under the limited liability company laws of the State of Delaware. Drakewood Master permits accounts managed by Drakewood using Drakewood’s Drakewood Prospect Fund Strategy, a proprietary, discretionary trading system, to invest together in one trading vehicle. The General Partner is also the trading manager of Drakewood Master. Individual and pooled accounts currently managed by Drakewood, including the Partnership, are permitted to be members of Drakewood Master. The Trading Manager and Drakewood believe that trading through the master/feeder structure should promote efficiency and economy in the trading process.
15
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
On November 1, 2020, the Partnership allocated a portion of its assets to GSL Master, a limited liability company organized under the limited liability company laws of the State of Delaware. GSL Master permitted accounts managed by Geosol using Geosol’s U.S. Power and Natural Gas Program, a proprietary, discretionary trading system, to invest together in one trading vehicle. On June 30, 2022, the Partnership fully redeemed its investment from GSL Master.
The General Partner is not aware of any material changes to the trading programs discussed above or in Note 1, “Organization” during the fiscal quarter ended June 30, 2022.
The Partnership’s/Funds’ trading of futures, forward, swap and option contracts, if applicable, on commodities is done primarily on U.S. commodity exchanges and foreign commodity exchanges. The Partnership/Funds engage in such trading through commodity brokerage accounts maintained with MS&Co.
Generally, a member in the Funds withdraws all or part of its capital contribution and undistributed profits, if any, from the Funds as of the end of any month (the “Redemption Date”) after a request has been made to the Trading Manager at least three days in advance of the Redemption Date. Such withdrawals are classified as a liability when the member elects to redeem and informs the Funds. However, a member may request a withdrawal as of the end of any day if such request is received by the Trading Manager at least three days in advance of the proposed withdrawal date.
Management fees, General Partner fees, ongoing selling agent fees and incentive fees are charged at the Partnership level. All clearing fees paid to MS&Co. are borne directly by the Partnership for its direct trading. In addition, clearing fees are borne by the Funds and allocated to the Funds’ members, including the Partnership. Professional fees are borne by the Funds and allocated to the Partnership, and
are
also charged directly at the Partnership level.At June 30, 2022, the Partners
hip owned approximately 28.9% of NL Master and 27.7% of Drakewood Master. At December 31, 2021, the Partnership owned approximately 26.0% of NL Master and 100% of GSL Master. It is the Partnership’s intention to continue
to
invest in the Funds. The performance of the Partnership is directly affected by the performance of the Funds. Expenses to investors as a result of the investment in the Funds are approximately the same as they would be if the Partnership traded directly and redemption rights are not affected.Summarized information reflecting the total assets, liabilities and members’ capital of the Funds is shown in the following tables:
June 30, 2022 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
NL Master | $ | 48,143,486 | $ | 149,486 | $ | 47,994,000 | ||||||
Drakewood Master | 39,995,976 | 877,976 | 39,118,000 | |||||||||
December 31, 2021 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
GSL Master | $ | 27,210,336 | $ | 6,284,765 | $ | 20,925,571 | ||||||
NL Master | 50,260,292 | 8,006,342 | 42,253,950 |
16
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
Summarized information reflecting the net investment income (loss), total trading results and
net
income (loss) of the Funds is shown in the following tables:For the three months ended June 30, 2022 | ||||||||||||
Net Investment Income (Loss) | Total Trading Results | Net Income (Loss) | ||||||||||
GSL Master | $ | (20,485 | ) | $ | (71,232 | ) | $ | (91,717 | ) | |||
NL Master | 17,036 | 7,158,232 | 7,175,268 | |||||||||
Drakewood Master (a) | (6,189 | ) | (2,129,915 | ) | (2,136,104 | ) |
For the six months ended June 30, 2022 | ||||||||||||
Net Investment Income (Loss) | Total Trading Results | Net Income (Loss) | ||||||||||
GSL Master | $ | (49,612 | ) | $ | 3,221,886 | $ | 3,172,274 | |||||
NL Master | (22,788 | ) | 13,766,600 | 13,743,812 | ||||||||
Drakewood Master (a) | (6,189 | ) | (2,129,915 | ) | (2,136,104 | ) |
For the three months ended June 30, 2021 | ||||||||||||
Net Investment Income (Loss) | Total Trading Results | Net Income (Loss) | ||||||||||
GSL Master | $ | (51,530 | ) | $ | (478,377 | ) | $ | (529,907 | ) | |||
NL Master | (59,284 | ) | 6,877,987 | 6,818,703 |
For the six months ended June 30, 2021 | ||||||||||||
Net Investment Income (Loss) | Total Trading Results | Net Income (Loss) | ||||||||||
GSL Master | $ | (106,558 | ) | $ | 30,148,220 | $ | 30,041,662 | |||||
NL Master | (96,930 | ) | 9,720,845 | 9,623,915 |
(a) | From May 1, 2022, commencement of operations for Drakewood Master, through June 30, 2022. |
17
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
Summarized information reflecting the Partnership’s investments in and the Partnership’s
pro-rata
share of the results of operations of the Funds is shown in the following tables:June 30, 2022 | For the three months ended June 30, 2022 | |||||||||||||||||||||||||||||||
% of | Expenses | Net | ||||||||||||||||||||||||||||||
Partners’ | Fair | Income | Clearing | Professional | Income | Investment | Redemptions | |||||||||||||||||||||||||
Funds | Capital | Value | (Loss) | Fees | Fees | (Loss) | Objective | Permitted | ||||||||||||||||||||||||
GSL Master | - % | $ | - | $ | (42,714 | ) | $ | 12,450 | $ | 36,554 | $ | (91,718 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
NL Master | 9.45 % | 13,859,227 | 1,989,873 | 4,338 | 4,240 | 1,981,295 | Commodity Portfolio | Monthly | ||||||||||||||||||||||||
Drakewood Master (a) | 7.40 % | 10,846,009 | (578,835 | ) | 8,358 | 4,711 | (591,904 | ) | Commodity Portfolio | Monthly | ||||||||||||||||||||||
$ | 24,705,236 | $ | 1,368,324 | $ | 25,146 | $ | 45,505 | $ | 1,297,673 | |||||||||||||||||||||||
June 30, 2022 | For the six months ended June 30, 2022 | |||||||||||||||||||||||||||||||
% of | Expenses | Net | ||||||||||||||||||||||||||||||
Partners’ | Fair | Income | Clearing | Professional | Income | Investment | Redemptions | |||||||||||||||||||||||||
Funds | Capital | Value | (Loss) | Fees | Fees | (Loss) | Objective | Permitted | ||||||||||||||||||||||||
GSL Master | - % | $ | - | $ | 3,254,806 | $ | 29,730 | $ | 52,803 | $ | 3,172,273 | Commodity Portfolio | Monthly | |||||||||||||||||||
NL Master | 9.45 % | 13,859,227 | 3,758,877 | 12,441 | 8,271 | 3,738,165 | Commodity Portfolio | Monthly | ||||||||||||||||||||||||
Drakewood Master (a) | 7.40 % | 10,846,009 | (578,835 | ) | 8,358 | 4,711 | (591,904 | ) | Commodity Portfolio | Monthly | ||||||||||||||||||||||
$ | 24,705,236 | $ | 6,434,848 | $ | 50,529 | $ | 65,785 | $ | 6,318,534 | |||||||||||||||||||||||
December 31, 2021 | For the three months ended June 30, 2021 | |||||||||||||||||||||||||||||||
% of | Expenses | Net | ||||||||||||||||||||||||||||||
Partners’ | Fair | Income | Clearing | Professional | Income | Investment | Redemptions | |||||||||||||||||||||||||
Funds | Capital | Value | (Loss) | Fees | Fees | (Loss) | Objective | Permitted | ||||||||||||||||||||||||
GSL Master | 16.36 % | $ | 20,926,428 | $ | (477,686 | ) | $ | 34,971 | $ | 17,250 | $ | (529,907 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
NL Master | 8.59 % | 10,984,329 | 1,849,295 | 12,352 | 3,764 | 1,833,179 | Commodity Portfolio | Monthly | ||||||||||||||||||||||||
$ | 31,910,757 | $ | 1,371,609 | $ | 47,323 | $ | 21,014 | $ | 1,303,272 | |||||||||||||||||||||||
December 31, 2021 | For the six months ended June 30, 2021 | |||||||||||||||||||||||||||||||
% of | Expenses | Net | ||||||||||||||||||||||||||||||
Partners’ | Fair | Income | Clearing | Professional | Income | Investment | Redemptions | |||||||||||||||||||||||||
Funds | Capital | Value | (Loss) | Fees | Fees | (Loss) | Objective | Permitted | ||||||||||||||||||||||||
GSL Master | 16.36 % | $ | 20,926,428 | $ | 30,151,146 | $ | 74,983 | $ | 34,501 | $ | 30,041,662 | Commodity Portfolio | Monthly | |||||||||||||||||||
NL Master | 8.59 % | 10,984,329 | 2,461,850 | 17,408 | 6,758 | 2,437,684 | Commodity Portfolio | Monthly | ||||||||||||||||||||||||
$ | 31,910,757 | $ | 32,612,996 | $ | 92,391 | $ | 41,259 | $ | 32,479,346 | |||||||||||||||||||||||
(a) | The Partnership first invested into Drakewood Master on May 1, 2022. |
18
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
7. Financial Instrument Risks:
In the normal course of business, the Partnership and the Funds are parties to financial instruments with(“OTC”). Exchange-traded instruments include futures and certain standardized forward, swap and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer or seller of an option has unlimited risk. Certain swap contracts may also be traded on a swap execution facility or OTC. OTC contracts are negotiated between contracting parties and also include certain forward and option contracts. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. None of the Partnership’s/Funds’ contracts are traded OTC, although contracts may be traded OTC in the future.
off-balance-sheet
risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures, options and swaps, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange, a swap execution facility orover-the-counter
Futures Contracts.
London Metal Exchange Forward Contracts.
Options.
marked-to-market
marked-to-market
As both a buyer and seller of options, the Partnership/Funds pay or receive a premium at the outset and then bear the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership/Funds to potentially unlimited liability; for purchased options, the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset. The Partnership/Funds do not consider these contracts to be guarantees.
19
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
Futur
es-Style Options
Market
risk is the potential for changes in the value of the financial instruments traded by the Partnership/Funds due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Partnership and the Funds are exposed to market risk equal to the value of the futures and forward contracts held and unlimited liability on such contracts sold short.
Credit
exchange-traded
instruments is reduced to the extent that, through MS&Co. or an MS&Co. affiliate, the Partnership’s/Funds’ counterparty is an exchange or clearing organization.The
risk-adjusted
performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, forward and option contracts by sector, margin requirements, gain and loss transactions and collateral positions.The
majority of these financial instruments mature within one year of the inception date. However, due to the nature of the Partnership’s/Funds’ business, these instruments may not be held to maturity.
The
risk to the limited partners that have purchased Redeemable Units is limited to the amount of their share of the Partnership’s net assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
In
the ordinary course of business, the Partnership/Funds enter into contracts and agreements that contain various representations and warranties and which provide general indemnifications. The Partnership’s/Funds’ maximum exposure under these arrangements cannot be determined, as this could include future claims that have not yet been made against the Partnership/Funds. The General Partner/Trading Manager considers the risk of any future obligation relating to these indemnifications to be remote.
Since
COVID-19,
has spread from China to many other countries, including the United States. The outbreak has been declared a pandemic by the World Health Organization, and the U.S. Health and Human Services Secretary has declared a public health emergency in the United States in response to the outbreak.20
Ceres Tactical Commodity L.P.
Notes to Financial Statements
(Unaudited)
Thedirectives and increased remote work protocols. If the pandemic continues to be prolonged or the actions of governments and central banks are unsuccessful, including actions to facilitate the comprehensive distribution of effective vaccines, the adverse impact on the global economy will deepen.
COVID-19
pandemic and related voluntary and government-imposed social and business restrictions has impacted global economic conditions and adversely affected various industries (including, but not limited to, transportation, hospitality and entertainment), resulting in volatility in the global financial markets, disruption in global supply chains, increased unemployment, and operational challenges such as the temporary and permanent closures of businesses,sheltering-in-place
Given
COVID-19
will further impact the U.S and other world economies or the value of the Partnership’s/Funds’ investments, or for how long the effects of such events will continue. Nevertheless, the novel coronavirus continues to present material uncertainty and risk with respect to the Partnership’s/Funds’ investments and operations.On
pre-positioned
forces into the Ukraine. The conflict has created volatility in the price of various commodities and may have a negative impact on business activity globally, and therefore could adversely affect the performance of the Partnership’s/Funds’ investments. Furthermore, uncertainties regarding the conflict between the two nations and the varying involvement of the United States and other NATO countries preclude prediction as to the ultimate impact on global economic and market conditions, and, as a result, presents material uncertainty and risk with respect to the Partnership/Funds and the performance of their investments or operations, and the ability of the Partnership to achieve its investment objectives. Additionally, to the extent that investors, service providers and/or other third parties have material operations or assets in Russia or Ukraine, they may have their operations disrupted and/or suffer adverse consequences related to the ongoing conflict.8. Subsequent Events:
The
General Partner evaluates events that occur after the balance sheet date but before and up until financial statements are available to be issued. The General Partner has assessed the subsequent events through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment to or disclosure in the financial statements.
21
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership does not have, nor does it expect to have, any capital assets. The Partnership does not engage in sales of goods or services. Its assets are its (i) investment in the Funds, (ii) redemptions receivable from the Funds, (iii) equity in trading account, consisting of unrestricted cash, restricted cash, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts and options purchased at fair value, if applicable, and (iv) interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership, through its direct investments and investment in the Funds. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred in the second quarter of 2022.
The Partnership’s/Funds’ investment in futures, forwards and options may, from time to time, be illiquid. Most U.S. futures exchanges limit fluctuations in prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” Trades may not be executed at prices beyond the daily limit. If the price for a particular futures or option contract has increased or decreased by an amount equal to the daily limit, positions in that futures or option contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. These market conditions could prevent the Partnership/Funds from promptly liquidating their futures or option contracts and result in restrictions on redemptions.
Other than the risks inherent in commodity futures, forwards, options and swaps trading, and U.S. Treasury bills and money market mutual fund securities, the General Partner/Trading Manager knows of no trends, demands, commitments, events or uncertainties which will result in or which are reasonably likely to result in the Partnership’s/Funds’ liquidity increasing or decreasing in any material way.
The Partnership’s capital consists of the capital contributions of the partners, as increased or decreased by realized and/or unrealized gains and losses on trading and by expenses, interest income, subscriptions and redemptions of Redeemable Units and distributions of profits, if any.
For the six months ended June 30, 2022, Partnership capital increased 14.6% from $127,910,424 to $146,580,587. This increase was attributable to subscriptions of 1,768.7600 Class A limited partner Redeemable Units totaling $4,380,000, subscriptions of 513.5010 Class Z limited partner Redeemable Units totaling $1,075,000 and net income of $18,098,291 which was partially offset by redemptions of 1,920.4540 Class A limited partner Redeemable Units totaling $4,883,128. Future redemptions can impact the amount of funds available for direct investments and investment in the Funds in subsequent periods.
Other than as discussed above, there are no known material trends, favorable or unfavorable, that would affect, nor any expected material changes to, the Partnership’s capital resource arrangements at the present time.
Off-Balance
Sheet Arrangements and Contractual ObligationsThe Partnership does not have any
off-balance
sheet arrangements, nor does it have contractual obligations or commercial commitments to make future payments, that would affect its liquidity or capital resources.Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting periods. The General Partner believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. As a result, actual results could differ from those estimates. A summary of the Partnership’s significant accounting policies is described in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Financial Statements.
The Partnership/Funds record all investments at fair value in their respective financial statements, with changes in fair value reported as a component of net realized gains (losses) and net change in unrealized gains (losses) in the respective Statements of Income and Expenses.
22
Results of Operations
During the Partnership’s second quarter of 2022, the net asset value per Redeemable Unit for Class A increased 5.1% from $2,484.30 to $2,611.80 as compared to an increase of 5.7% in the second quarter of 2021. During the Partnership’s second quarter of 2022, the net asset value per Redeemable Unit for Class D increased 5.1% from $1,970.01 to $2,071.11 as compared to an increase of 5.7% in the second quarter of 2021. During the Partnership’s second quarter of 2022, the net asset value per Redeemable Unit for Class Z increased 5.3% from $2,026.21 to $2,134.31 as compared to an increase of 5.9% in the second quarter of 2021. The Partnership experienced a net trading gain before fees and expenses during the second quarter of 2022 of $10,733,894. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in energy, grains and livestock and were partially offset by losses in currencies, metals and softs. The Partnership experienced a net trading gain before fees and expenses during the second quarter of 2021 of $8,853,961. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in energy, metals and softs and were partially offset by losses in currencies, grains and livestock.
During the 2nd quarter of 2022, the most notable gains were achieved during all three months of the quarter from long positions in natural gas futures as prices rallied on increasing global demand. Additional energy gains were recorded during April, May and June from long positions in global crude oil and its refined products. Within the grains sector, gains were recorded during April from long futures positions in wheat, soybeans, and corn as the continued conflict between Russia and Ukraine threatened to curtail European grain exports, pushing prices higher. Further gains were achieved within the livestock markets during April, May and June from short positions in lean hog futures as prices declined amid concern the reimplementation of COVID lockdown measures in China would limit export demand for U.S. pork. The Partnership’s gains for the quarter were partially offset by losses within the metals markets throughout the quarter from long positions in aluminum futures as prices fell on concerns a global recession would slow industrial demand growth. Small losses were experienced during April and June from hedge positions in the British pound.
During the Partnership’s six months ended June 30, 2022, the net asset value per Redeemable Unit for Class A increased 14.0% from $2,290.21 to $2,611.80 as compared to an increase of 42.7% during the six months ended June 30, 2021. During the Partnership’s six months ended June 30, 2022, the net asset value per Redeemable Unit for Class D increased 14.0% from $1,816.10 to $2,071.11 as compared to an increase of 42.7% during the six months ended June 30, 2021. During the Partnership’s six months ended June 30, 2022, the net asset value per Redeemable Unit for Class Z increased 14.5% from $1,864.35 to $2,134.31 as compared to an increase of 43.3% during the six months ended June 30, 2021. The Partnership experienced a net trading gain before fees and expenses for the six months ended June 30, 2022 of $25,793,122. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in energy, grains, livestock and softs and were partially offset by losses in currencies and metals. The Partnership experienced a net trading gain before fees and expenses for the six months ended June 30, 2021 of $45,870,844. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in energy, grains, metals and softs and were partially offset by losses in currencies and livestock.
During the first six months of the year, the most notable gains were experienced in each month from long positions in a wide variety of energy markets as a combination of growing global demand, lack of long-term capital expenditures into energy infrastructure and the war between Russia and Ukraine pushed prices higher. Within the grains, gains were recorded during April from long futures positions in wheat, soybeans, and corn as the continued conflict between Russia and Ukraine threatened to curtail European grain exports, pushing prices higher. Further gains were recorded during March from long positions in sugar, cotton, and cocoa futures as inflationary pressures pushed commodity prices higher. The Partnership’s overall trading gains for the first six months of the year were partially offset by losses recorded in the metals sector throughout the year from positions in both industrial and precious metals as currency fluctuations, concerns for global industrial growth, and the uncertain impact of sanctions on Russian metal exports caused short-term price volatility and choppiness for a majority of the first two quarters of the year.
Commodity markets are highly volatile. Broad price fluctuations and rapid inflation increase not only the risks involved in commodity trading, but also the possibility of profit. The profitability of the Partnership/Funds depends on the existence of major price trends and the ability of the Advisors to correctly identify those price trends. Price trends are influenced by, among other factors, changing supply and demand relationships, weather, pandemics, epidemics and other health crises, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisors are able to identify them, the Partnership/Funds expect to increase capital through operations.
23
Interest income on 100% of the average daily equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of the Funds’) brokerage account during each month is earned at a rate equal to the monthly average of the
4-week
U.S. Treasury bill discount rate. For the avoidance of doubt, the Partnership/Funds will not receive interest on amounts in the futures brokerage account that are committed to margin. Any interest earned on the Partnership’s and/or the Funds’ account in excess of the amounts described above, if any, will be retained by MS&Co. and/or shared with the General Partner. All interest income earned on U.S. Treasury bills and money market mutual fund securities will be retained by the Partnership and/or the Funds, as applicable. Interest income earned for the three and six months ended June 30, 2022 increased by $169,501 and $183,792, respectively, as compared to the corresponding periods in 2021. The increase in interest income was primarily due to higher interest rates and average daily equity during the three and six months ended June 30, 2022 as compared to the corresponding periods in 2021. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on (1) the average daily equity maintained in cash in the Partnership’s and/or the applicable Funds’ accounts, (2) the amount of U.S. Treasury bills and/or money market mutual fund securities held by the Partnership and/or the Funds and (3) interest rates over which none of the Partnership, the Funds or MS&Co. has control.Certain clearing fees are based on the number of trades executed by the Advisors for the Partnership/Funds. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees related to direct investments for the three and six months ended June 30, 2022 decreased by $49,859 and $125,886, respectively, as compared to the corresponding periods in 2021. The decrease in these clearing fees was primarily due to a decrease in the number of direct trades made by the Partnership during the three and six months ended June 30, 2022 as compared to the corresponding periods in 2021.
Ongoing selling agent fees are calculated as a percentage of the Partnership’s adjusted Net Assets of Class A Redeemable Units and Class D Redeemable Units as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Ongoing selling agent fees for the three and six months ended June 30, 2022 increased by $57,438 and $115,867, respectively, as compared to the corresponding periods in 2021. The increase was due to higher average adjusted net assets during the three and six months ended June 30, 2022 as compared to the corresponding periods in 2021.
Management fees are calculated as a percentage of the Partnership’s adjusted Net Assets as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Management fees for the three and six months ended June 30, 2022 increased by $109,076 and $182,917, respectively, as compared to the corresponding periods in 2021. The increase was due to higher average net assets during the three and six months ended June 30, 2022 as compared to the corresponding periods in 2021.
General Partner fees are paid to the General Partner for administering the business and affairs of the Partnership including, among other things, (i) selecting, appointing and terminating the Partnership’s commodity trading advisors, (ii) allocating and reallocating the Partnership’s assets among the commodity trading advisors and (iii) monitoring the activities of the commodity trading advisors. These fees are calculated as a percentage of the Partnership’s adjusted net assets as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. General Partner fees for the three and six months ended June 30, 2022 increased by $59,844 and $119,655, respectively, as compared to the corresponding periods in 2021. This increase was due to higher average net assets during the three and six months ended June 30, 2022 as compared to the corresponding periods in 2021.
Incentive fees are based on the Net Trading Profits (as defined in the respective management agreements between the Partnership, the General Partner and each Advisor) generated by each Advisor at the end of each quarter, half year or year, as applicable. Trading performance for the three and six months ended June 30, 2022 resulted in incentive fees of $2,318,477 and $5,223,871, respectively. Trading performance for the three and six months ended June 30, 2021 resulted in incentive fees of $1,545,559 and $8,347,805, respectively. To the extent an Advisor incurs a loss for the Partnership, the Advisor will not be paid incentive fees until such Advisor recovers any net loss incurred and earns additional new trading profits for the Partnership.
In allocating substantially all of the assets of the Partnership among the Advisors, the General Partner considers, among other factors, the Advisors’ past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisors and allocate assets to additional advisors at any time.
24
As of June 30, 2022 and March 31, 2022, the Partnership’s assets were allocated among the Advisors in the following approximate percentages:
Advisor | June 30, 2022 * | June 30, 2022 (percentage of Partners’ Capital) * | March 31, 2022 | March 31, 2022 (percentage of Partners’ Capital) | ||||||||||||
Millburn | $ | 32,933,398 | 22% | $ | 29,899,133 | 22% | ||||||||||
Ospraie | 30,280,454 | 21% | 31,285,170 | 23% | ||||||||||||
Pan | 28,993,520 | 20% | 28,039,577 | 20% | ||||||||||||
Northlander | 13,151,519 | 9% | 10,389,640 | 7% | ||||||||||||
Geosol | 20,612,288 | 14% | 23,406,029 | 17% | ||||||||||||
Drakewood | 10,846,009 | 7% | - | 0% | ||||||||||||
Unallocated | 9,763,399 | 7% | 15,941,701 | 11% |
* | Allocation presented is prior to Geosol’s termination effective the close of business on June 30, 2022. |
For additional disclosures about operational and financial risk related to the
COVID-19
outbreak, refer to Part II, Item 5. “Other Information.” in this Form10-Q.
25
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
.The Partnership/Funds are speculative commodity pools. The market sensitive instruments held by the Partnership/Funds are acquired for speculative trading purposes, and all or substantially all of the Partnership’s/Funds’ assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s/Funds’ main line of business.
The limited partners will not be liable for losses exceeding the current net asset value of their investment.
Market movements result in frequent changes in the fair value of the Partnership’s/Funds’ open positions and, consequently, in their earnings and cash balances. The Partnership’s/Funds’ market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Partnership’s/Funds’ open positions and the liquidity of the markets in which they trade.
The Partnership/Funds rapidly acquire and liquidate both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s/Funds’ past performance is not necessarily indicative of their future results.
Quantifying the Partnership’s and the Funds’ Trading Value at Risk
The following quantitative disclosures regarding the Partnership’s/Funds’ market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.
The Partnership/Funds account for open positions on the basis of fair value accounting principles. Any loss in the market value of the Partnership’s/Funds’ open positions is directly reflected in the Partnership’s/Funds’ earnings and cash flow.
The Partnership’s/Funds’ risk exposure in the market sectors traded by the Advisors is estimated below in terms of Value at Risk. Please note that the Value at Risk model is used to numerically quantify market risk for historic reporting purposes only and is not utilized by either the General Partner or the Advisors in their daily risk management activities.
“Value at Risk” is a measure of the maximum amount which the Partnership/Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s/Funds’ speculative trading and the recurrence in the markets traded by the Partnership/Funds of market movements far exceeding expectations could result in actual trading or
non-trading
losses far beyond the indicated Value at Risk or the Partnership’s/Funds’ experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Partnership’s/Funds’ losses in any market sector will be limited to Value at Risk or by the Partnership’s/Funds’ attempts to manage their market risk.Exchange margin requirements have been used by the Partnership/Funds as the measure of their Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in
95%-99%
of anyone-day
interval. The margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-termone-day
price fluctuation.Value at Risk tables represent a probabilistic assessment of the risk of loss in market sensitive instruments. Northlander and Drakewood trade, and Geosol traded, the Partnership’s assets indirectly in master fund managed accounts established in the name of the master funds over which they have or had been granted limited authority to make trading decisions. Millburn, Ospraie and Pan directly trade managed accounts in the name of the Partnership. The first two trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly and through its investments in the Funds. The remaining trading Value at Risk tables reflect the market sensitive instruments held by the Partnership directly (i.e in the managed accounts in the Partnership’s name traded by certain Advisors) and indirectly by each Fund separately. There have been no material changes in the trading Value at Risk information previously disclosed in the Partnership’s Annual Report on Form
10-K
for the year ended December 31, 2021.26
The following table indicates the trading Value at Risk associated with the Partnership’s open positions by market category as of June 30, 2022. As of June 30, 2022, the Partnership’s total capitalization was $146,580,587.
June 30, 2022 | ||||||||
Market Sector | Value at Risk | % of Total Capitalization | ||||||
Currencies | $ | 217,739 | 0.15 | % | ||||
Energy | 6,404,983 | 4.36 | ||||||
Grains | 1,020,750 | 0.70 | ||||||
Livestock | 95,370 | 0.07 | ||||||
Metals | 3,102,198 | 2.12 | ||||||
Softs | 958,831 | 0.65 | ||||||
Total | $ | 11,799,871 | 8.05 | % | ||||
The following table indicates the trading Value at Risk associated with the Partnership’s open positions by market category as of December 31, 2021. As of December 31, 2021, the Partnership’s total capitalization was $127,910,424.
December 31, 2021 | ||||||||
Market Sector | Value at Risk | % of Total Capitalization | ||||||
Currencies | $ | 94,600 | 0.08 | % | ||||
Energy | 6,985,797 | 5.46 | ||||||
Grains | 470,493 | 0.37 | ||||||
Livestock | 81,180 | 0.06 | ||||||
Metals | 910,596 | 0.71 | ||||||
Softs | 844,031 | 0.66 | ||||||
Total | $ | 9,386,697 | 7.34 | % | ||||
The following tables indicate the trading Value at Risk associated with the Partnership’s direct investments and indirect investment in the Funds as of June 30, 2022 and December 31, 2021, and the highest, lowest and average values during the three months ended June 30, 2022 and the twelve months ended December 31, 2021. All open contracts trading risk exposures have been included in calculating the figures set forth below.
As of June 30, 2022 and December 31, 2021, the Partnership’s Value at Risk for the portion of its assets that are traded directly was as follows:
June 30, 2022 | ||||||||||||||||||||
Three Months Ended June 30, 2022 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk * | |||||||||||||||
Currencies | $ | 143,880 | 0.10 | % | $ | 144,045 | $ | 54,395 | $ | 99,147 | ||||||||||
Energy | 4,631,769 | 3.16 | 6,854,092 | 551,318 | 4,705,063 | |||||||||||||||
Grains | 1,020,750 | 0.70 | 1,670,932 | 407,260 | 1,020,401 | |||||||||||||||
Livestock | 95,370 | 0.07 | 141,254 | 28,270 | 65,717 | |||||||||||||||
Metals | 1,916,279 | 1.31 | 2,270,613 | 142,413 | 1,460,644 | |||||||||||||||
Softs | 958,831 | 0.65 | 1,168,019 | 439,965 | 877,252 | |||||||||||||||
Total | $ | 8,766,879 | 5.99 | % | ||||||||||||||||
* | Average of daily Values at Risk. |
27
December 31, 2021 | ||||||||||||||||||||
Twelve Months Ended December 31, 2021 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk * | |||||||||||||||
Currencies | $ | 94,600 | 0.07 | % | $ | 122,815 | $ | - | $ | 34,894 | ||||||||||
Energy | 5,371,868 | 4.20 | 7,462,084 | 1,836,386 | 3,525,980 | |||||||||||||||
Grains | 470,493 | 0.37 | 1,842,907 | 301,478 | 946,454 | |||||||||||||||
Livestock | 81,180 | 0.06 | 748,599 | 32,615 | 234,921 | |||||||||||||||
Metals | 910,596 | 0.71 | 2,702,004 | 357,295 | 1,494,999 | |||||||||||||||
Softs | 844,031 | 0.66 | 1,213,593 | 266,446 | 770,096 | |||||||||||||||
Total | $ | 7,772,768 | 6.07 | % | ||||||||||||||||
* | Annual average of daily Values at Risk. |
As of June 30, 2022, NL Master’s total capitalization was $47,994,000, and the Partnership owned approximately 28.9% of NL Master. As of June 30, 2022, NL Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to NL Master for trading) was as follows:
June 30, 2022 | ||||||||||||||||||||
Three Months Ended June 30, 2022 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk * | |||||||||||||||
Energy | $ | 6,135,687 | 12.78 | % | $ | 11,543,208 | $ | 5,984,337 | $ | 7,525,924 | ||||||||||
Total | $ | 6,135,687 | 12.78 | % | ||||||||||||||||
* | Average of daily Values at Risk. |
As of December 31, 2021, NL Master’s total capitalization was $42,253,950, and the Partnership owned approximately 26.0% of NL Master. As of December 31, 2021, NL Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to NL Master for trading) was as follows:
December 31, 2021 | ||||||||||||||||||||
�� | Twelve Months Ended December 31, 2021 | |||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk * | |||||||||||||||
Energy | $ | 5,235,369 | 12.39 | % | $ | 12,881,816 | $ | 670,621 | $ | 3,221,401 | ||||||||||
Total | $ | 5,235,369 | 12.39 | % | ||||||||||||||||
* | Annual average of daily Values at Risk. |
As of June 30, 2022, Drakewood Master’s total capitalization was $39,118,000, and the Partnership owned approximately 27.7% of Drakewood Master. As of June 30, 2022, Drakewood Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Drakewood Master for trading) was as follows:
June 30, 2022 | ||||||||||||||||||||
Three Months Ended June 30, 2022 * | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk ** | |||||||||||||||
Currencies | $ | 266,640 | 0.68 | % | $ | 282,436 | $ | - | $ | 174,298 | ||||||||||
Metals | 4,281,295 | 10.94 | 4,555,817 | 36,300 | 3,287,087 | |||||||||||||||
Total | $ | 4,547,935 | 11.62 | % | ||||||||||||||||
* | From May 1, 2022, commencement of operations for Drakewood Master, through June 30, 2022. |
** | Average of daily Values at Risk. |
28
As of June 30, 2022, the Partnership fully redeemed its investment from GSL Master.
As of December 31, 2021, GSL Master’s total capitalization was $20,925,571, and the Partnership owned 100% of GSL Master. As of December 31, 2021, GSL Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to GSL Master for trading) was as follows:
December 31, 2021 | ||||||||||||||||||||
Twelve Months Ended December 31, 2021 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk * | |||||||||||||||
Energy | $ | 252,733 | 1.21 | % | $ | 4,098,617 | $ | - | $ | 564,146 | ||||||||||
Total | $ | 252,733 | 1.21 | % | ||||||||||||||||
* | Annual average of daily Values at Risk. |
29
Item 4.
Controls and Procedures
.The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to management, including the President and Chief Financial Officer (“CFO”) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.
The General Partner is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.
The General Partner’s President and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules
13a-15(e)
and15d-15(e)
under the Exchange Act) as of June 30, 2022, and, based on that evaluation, the General Partner’s President and CFO have concluded that at that date the Partnership’s disclosure controls and procedures were effective.The Partnership’sis a process under the supervision of the General Partner’s President and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. These controls include policies and procedures that:
internal control over financial reporting
• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; |
• | provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and (ii) the Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and |
• | provide reasonable assurance regarding prevention or timely detection and correction of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements. |
There were no changes in the Partnership’sprocess during the fiscal quarter ended June 30, 2022 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
internal control over financial reporting
30
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
.This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which MS&Co. or its subsidiaries is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.
On June 1, 2011, Morgan Stanley & Co. Incorporated converted from a Delaware corporation to a Delaware limited liability company. As a result of that conversion, Morgan Stanley & Co. Incorporated is now named Morgan Stanley & Co. LLC (“MS&Co.” or “the Company”).
MS&Co. is a wholly-owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley files periodic reports with the SEC as required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) which include current descriptions of material litigation and material proceedings and investigations, if any, by governmental and/or regulatory agencies or self-regulatory organizations concerning Morgan Stanley and its subsidiaries, including MS&Co. As a consolidated subsidiary of Morgan Stanley, MS&Co. does not file its own periodic reports with the SEC that contain descriptions of material litigation, proceedings and investigations. As a result, we refer you to the “Legal Proceedings” section of Morgan Stanley’s SEC 10-K filings for 2021, 2020, 2019, 2018, and 2017. In addition, MS&Co. annually prepares an Audited, Consolidated Statement of Financial Condition (“Audited Financial Statement”) that is publicly available on Morgan Stanley’s website at
www.morganstanley.com
. We refer you to the Commitments, Guarantees and Contingencies – Legal section of MS&Co.’s 2021 Audited Financial Statement.
In addition to the matters described in those filings, in the normal course of business, each of Morgan Stanley and MS&Co. has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions, and other litigation, as well as being subject to regulatory investigations arising in connection with its activities as a global diversified financial services institution. Certain of the legal actions or regulatory investigations include claims for substantial penalties, compensatory and/or punitive damages or claims for indeterminate amounts of penalties or damages.
MS&Co. is a Delaware limited liability company with its main business office located at 1585 Broadway, New York, New York 10036. Among other registrations and memberships, MS&Co. is registered as a futures commission merchant and is a member of the National Futures Association.
During the preceding five years, the following administrative, civil, or criminal actions pending, on appeal or concluded against MS&Co. or any of its principals are material within the meaning of CFTC Rule 4.24(l)(2) or 4.34(k)(2):
Regulatory and Governmental Matters.
On September 28, 2017, the CFTC issued an order filing and simultaneously settling charges against MS&Co. regarding violations of CFTC Rule 166.3 by failing to diligently supervise the reconciliation of exchange and clearing fees with the amounts it ultimately charged customers for certain transactions on multiple exchanges. The order and settlement required MS&Co. to pay a $500,000 penalty and cease and desist from violating CFTC Rule 166.3.
31
On November 2, 2017, the CFTC issued an order filing and simultaneously settling charges against MS&Co. for non-compliance with applicable rules governing Part 17 Large Trader reports to the CFTC. The order requires MS&Co. to pay a $350,000 penalty and cease and desist from further violations of the Commodity Exchange Act.
On September 30, 2020, the SEC entered into a settlement order with MS&Co. settling an administrative action which relates to MS&Co.’s violations of the order marking requirements of Regulation SHO of the Exchange Act resulting from its improper use of aggregation units in structuring the Firm’s equity swaps business. The order found that MS&Co. improperly operated its equity swaps business without netting certain “long” and “short” positions as required by Rule 200(c) of Regulation SHO. The order found that the long exposure to an equity security (the “Long Unit”) and the short exposure to an equity security (the “Short Unit”) were not independent from one another and did not have separate trading strategies or objectives without regard to each other, and that the Long and Short Units were not eligible for the exception in Rule 200(f) of Regulation SHO. The order found that MS&Co. willfully violated Section 200(g) of Regulation SHO. MS&Co. consented, without admitting or denying the findings and without adjudication of any issue of law or fact, to a censure; to cease and desist from committing or causing future violations; to pay a civil penalty of $5 million; and to comply with the undertaking enumerated in the order.
Civil Litigation
On August 18, 2009, Relators Roger Hayes and C. Talbot Heppenstall, Jr., filed a qui tam action in New Jersey state court styled. The complaint, filed under seal pursuant to the New Jersey False Claims Act, alleged that the Company and several other underwriters of municipal bonds had defrauded New Jersey issuers by misrepresenting that they would achieve the best price or lowest cost of capital in connection with certain municipal bond issuances. On March 17, 2016, the court entered an order unsealing the complaint. On November 17, 2017, Relators filed an amended complaint to allege the Company mispriced certain bonds issued in twenty-three bond offerings between 2008 and 2017, having a total par amount of $6,946 million. The complaint seeks, among other relief, treble damages. On February 22, 2018, the Company moved to dismiss the amended complaint, and on July 17, 2018, the court denied the Company’s motion. On October 13, 2021, following a series of voluntary and involuntary dismissals, Relators limited their claims to certain bonds issued in five offerings the Company underwrote between 2008 and 2011, having a total par amount of $3,856 million.
State of New Jersey ex. rel. Hayes v. Bank of America Corp., et al
On May 17, 2013, plaintiff infiled a complaint against MS&Co. and certain affiliates in the Supreme Court of the State of New York County (“Supreme Court of NY”). The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $133 million. The complaint alleges causes of action against MS&Co. for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part MS&Co.’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $116 million. On August 11, 2016, the Appellate Division, First Department (“First Department”) affirmed the trial court’s decision denying in part MS&Co.’s motion to dismiss the complaint. On July 15, 2022, MS&Co. filed a motion for summary judgment. At December 25, 2019, the current unpaid balance of the
IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al.
32
mortgage pass-through certificates at issue in this action was approximately $22 million, and the certificates had incurred actual losses of $58 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $22 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.
In August of 2017, MS&Co. was named as a defendant in a purported antitrust class action in the United States District Court for the Southern District of New York (“SDNY”) styledPlaintiffs allege, inter alia, that MS&Co., together with a number of other financial institution defendants, violated U.S. antitrust laws and New York state law in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for securities lending. The class action complaint was filed on behalf of a purported class of borrowers and lenders who entered into stock loan transactions with the defendants. The class action complaint seeks, among other relief, certification of the class of plaintiffs and treble damages. On September 27, 2018, the court denied the defendants’ motion to dismiss the class action complaint. A decision on plaintiffs’ motion for class certification is pending. On June 30, 2022, a magistrate judge issued recommendations that the court certify a class.
Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al.
Settled Civil Litigation
On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against MS&Co., styled, in the Supreme Court of NY. The complaint related to a $275 million credit default swap (“CDS”) referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserted claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that MS&Co. misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that MS&Co knew that the assets backing the CDO were of poor quality when it entered into the CDS with CDIB. On March 22, 2021, the parties entered into a settlement agreement. On April 16, 2021, the court entered a stipulation of voluntary discontinuance, with prejudice.
China
Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al.
On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against MS&Co. and other defendants in the Circuit Court of the State of Illinois, styledA corrected amended complaint was filed on April 8, 2011, which alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by MS&Co. at issue in the action was approximately $203 million. The complaint seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On November 4, 2021, the Firm entered into an agreement to settle the litigation.
Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al.
On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against MS&Co. and other defendants in the Superior Court of the Commonwealth of Massachusetts styledAn amended complaint was filed on June 29, 2012 and alleged that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates
Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al.
33
allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $385 million. The amended complaint raised claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and sought, among other things, to rescind the plaintiff’s purchase of such certificates. On November 25, 2013, July 16, 2014, and May 19, 2015, respectively, the plaintiff voluntarily dismissed its claims against MS&Co. with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $332 million. On July 13, 2018, the parties reached an agreement in principle to settle the litigation.
On May 3, 2013, plaintiffs infiled a complaint against MS&Co., certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleged that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $634 million. The complaint alleged causes of action against MS&Co. for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and sought, among other things, compensatory and punitive damages. On June 26, 2018, the parties entered into an agreement to settle the litigation.
Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al.
On April 1, 2016, the California Attorney General’s Office filed an action against MS&Co. in California state court styled, on behalf of California investors, including the California Public Employees’ Retirement System and the California Teachers’ Retirement System. The complaint alleged that MS&Co. made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV, and asserted violations of the California False Claims Act and other state laws and sought treble damages, civil penalties, disgorgement, and injunctive relief. On April 24, 2019, the parties reached an agreement to settle the litigation.
California v. Morgan Stanley, et al.
Beginning on March 25, 2019, MS&Co. was named as a defendant in a series of putative class action complaints filed in the United States District Court for the SDNY, the first of which is styled. Each complaint alleged a conspiracy to fix prices and restrain competition in the market for unsecured bonds issued by the following Government-Sponsored Enterprises: the Federal National Mortgage Association; the Federal Home Loan Mortgage Corporation; the Federal Farm Credit Banks Funding Corporation; and the Federal Home Loan Banks. The purported class period for each suit is from January 1, 2012 to June 1, 2018. Each complaint raised a claim under Section 1 of the Sherman Act and sought, among other things, injunctive relief and treble compensatory damages. On May 23, 2019, plaintiffs filed a consolidated amended class action complaint styled, with a purported class period from January 1, 2009 to January 1, 2016. On June 13, 2019, the defendants filed a joint motion to dismiss the consolidated amended complaint. On August 29, 2019, the court denied MS&Co.’s motion to dismiss. On December 15, 2019, MS&Co. and certain other defendants entered into a stipulation of settlement to resolve the action as against each of them in its entirety. On June 16, 2020, the court granted final approval of the settlement.
Alaska Electrical Pension Fund v. BofA Secs., Inc., et al
In re GSE Bonds Antitrust Litigation
Additional lawsuits containing claims similar to those described above may be filed in the future. In the course of its business, MS&Co., as a major futures commission merchant, is party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of MS&Co. MS&Co. may establish reserves from time to time in connections with such actions.
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Item 1A.
Risk Factors
.There have been no material changes to the risk factors set forth under Part I, Item 1A. “
Risk Factors
.” in the Partnership’s Annual Report on Form10-K
for the fiscal year ended December 31, 2021 other than as disclosed in Note 7, “Financial Instrument Risks
.” of the Financial Statements and under Part II, Item 1A. “Risk Factors
.” in the Partnership’s Quarterly Report on Form10-Q
for the quarter ended March 31, 2022.Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
.For the three months ended June 30, 2022, there were subscriptions of 1,019.9500 Class A Redeemable Units totaling $2,622,000 and 486.6820 Class Z Redeemable Units totaling $1,025,000. Redeemable Units are issued in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act and Section 506 of Regulation D promulgated thereunder. The Redeemable Units are purchased by accredited investors, as described in Regulation D. In determining the applicability of the exemption, the General Partner relies on the fact that the Redeemable Units are purchased by accredited investors in a private offering.
Proceeds from the sale of Redeemable Units are used in the trading of commodity interests including futures, option and forward contracts and any other interests pertaining thereto, including interest in commodity pools.
The following chart sets forth the purchases of limited partner Redeemable Units for each Class by the Partnership.
Period | Class A (a) Total Number of Redeemable Units Purchased * | Class A (b) Average Price Paid per Redeemable Unit ** | (c) Total Number of Redeemable Units Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Redeemable Units that May Yet by Purchased Under the Plans or Programs | ||||
April 1, 2022 - April 30, 2022 | 17.1860 | $ 2,580.59 | N/A | N/A | ||||
May 1, 2022 - May 31, 2022 | 224.0880 | $ 2,601.39 | N/A | N/A | ||||
June 1, 2022 - June 30, 2022 | 991.5430 | $ 2,611.80 | N/A | N/A | ||||
1,232.8170 | $ 2,609.47 |
* | Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date, the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for limited partners. |
** | Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions. |
Item 3.
Defaults Upon Senior Securities
.
Item 4.
Mine Safety Disclosures
.
Item 5.
Other Information
.Certain impacts to public health conditions particular to the coronavirus
(COVID-19)
outbreak that occurred after December 31, 2021 could impact the operations and financial performance of the Partnership’s investments subsequent to June 30, 2022. The extent of the impact to the financial performance of the Partnership’s investments will depend on future developments, including (i) the duration and spread of the outbreak, (ii) the restrictions and advisories, (iii) the effects on the financial markets, and (iv) the effects on the economy overall, all of which are highly uncertain and cannot be predicted. If the financial performance of the Partnership’s investments is impacted because of these factors for an extended period, the Partnership’s performance may be adversely affected.35
Item 6.
Exhibits
.31.1 Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director) (filed herewith).
31.2 Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer) (filed herewith).
101.INS | Inline XBRL Instance Document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CERES TACTICAL COMMODITY L.P.
By: | Ceres Managed Futures LLC | |
(General Partner) | ||
By: | /s/ Patrick T. Egan | |
Patrick T. Egan | ||
President and Director | ||
Date: | August 11, 2022 | |
By: | /s/ Brooke Lambert | |
Brooke Lambert | ||
Chief Financial Officer (Principal Accounting Officer) | ||
Date: | August 11, 2022 |
The General Partner which signed the above is the only party authorized to act for the registrant. The registrant has no principal executive officer, principal financial officer, controller, or principal accounting officer and has no Board of Directors.
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