March 28, 2016 - 7:40 AM EDT
Print Email Article Font Down Font Up
GLOBAL DIVERSIFIED FUTURES FUND L.P. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The Partnership, through its investment in the Funds, aims to achieve
substantial capital appreciation through speculative trading, directly or
indirectly in 
U.S.
 and international markets for currencies, interest rates,
stock indices, agricultural and energy products and precious and base metals.
The Partnership/Funds may employ futures, options on futures, and forward
contracts in those markets.

The General Partner manages all business of the Partnership/Funds. The General
Partner has delegated its responsibility for the investment of the Partnership's
assets to the Advisors. The General Partner engages a team of approximately 30
professionals whose primary emphasis is attempting to maintain quality control
among the advisors to the funds operated or managed by the General Partner. A
full-time staff of due diligence professionals use proprietary technology and
on-site evaluations to monitor new and existing futures money managers. The
accounting and operations staff provides processing of subscriptions and
redemptions and reporting to limited partners and regulatory authorities. The
General Partner also includes staff involved in marketing and sales support. In
selecting Advisors for the Partnership, the General Partner considered, among
other things, the Advisors' past performance trading style, volatility of
markets traded and fee requirements. The General Partner may modify or terminate
the allocation of assets among the Advisors at any time and may allocate assets
to additional advisors at any time.

Responsibilities of the General Partner include:


  •   due diligence examinations of the Advisors;




  •   selection, appointment and termination of the Advisors;




  •   negotiation of the Management Agreements; and




  •   monitoring the activity of the Advisors.


In addition, the General Partner prepares, or assists the Administrator in
preparing, the books and records and provides, or assists the Administrator in
providing, the administrative and compliance services that are required by law
or regulation, from time to time, in connection with the operation of the
Partnership.



                                       16
--------------------------------------------------------------------------------
While the Partnership and the Funds have the right to seek lower commission
rates and fees from other commodity brokers at any time, the General Partner
believes that the customer agreements and other arrangements with the commodity
broker are fair, reasonable, and competitive.

As of December 31, 2015, the programs traded by each Advisor on behalf of the
Partnership are: Aspect - Diversified Program and Altis - The Global Futures
Portfolio Program. The General Partner may modify or terminate the allocation of
assets among the Advisors at any time and may allocate assets to additional
advisors at any time. As of September 30, 2015 the Partnership redeemed its
interest in Blackwater Master. As of December 31, 2015 and September 30, 2015,
the Partnership's assets were allocated among the Advisors in the following
approximate percentages:



Advisor                                      December 31, 2015                       September 30, 2015
Aspect Capital Limited.              $       6,895,536              51%      $       5,565,443                40%
Altis Partners (Jersey) Limited.     $       6,616,424              49%      $       4,025,963                29%
Blackwater Capital Management LLC    $             -                 0%      $       4,291,558 *              31%


* Prior to the Partnership's redemption of its interest in Blackwater Master.



                                       17

--------------------------------------------------------------------------------

Aspect Capital Limited

Aspect trades the Aspect Diversified Program (the "Diversified Program") on
behalf of the Partnership. The Diversified Program is a proprietary systematic
global futures trading program. Its goal is the generation of significant
medium-term capital growth independent of stock and bond market returns within a
rigorous risk management framework.

The Diversified Program applies a systematic and broadly diversified global
investment system, which deploys multiple investment strategies that, primarily
through the use of derivatives, seek to identify and exploit directional moves
in the market behavior of a broad range of financial instruments and other
assets including (but not limited to) currencies, interest rates, indices, debt
securities (including bonds) and commodities (including energy, metal and
agricultural commodities). By maintaining comparatively small exposure to any
individual market and maintaining positions in a variety of contracts, Aspect
aims to achieve long-term diversification. Generally, the Diversified Program
maintains positions in the majority of traded markets. Market concentration
varies according to the strength of signals, volatility and liquidity, amongst
other factors. The emphasis is upon structuring a genuinely diversified set of
market risk allocations that is designed to maximize the probability of returns
wherever profit opportunities appear. Market exposures are monitored daily and
the level of exposure of the Diversified Program in each market is quantifiable
at all times and changes in accordance with market volatility and liquidity.

The Diversified Program employs an automated system to collect, process and
analyze market data (including current and historical price data) and identify
and exploit directional moves in market behavior. The Diversified Program trades
across a variety of frequencies to exploit trends over a range of timescales.
Positions are taken according to the aggregate signal and are adjusted to
attempt to control risk.

Altis Partners (Jersey) Limited

Altis trades its Global Futures Portfolio Program on behalf of the Partnership.
It is a proprietary, systematic, automated trading system. The Global Futures
Portfolio Program currently trades in over 100 futures markets on recognized
futures exchanges globally. Altis may add or remove markets from the trading
system in response to changes in market liquidity. Under the fully automated
system, changes in market prices are forecast over a number of future periods
and the portfolio is optimized to take best advantage of these forecasts.
Forecasts are derived from a number of quantitative market phenomena; for
instance, directional movement components look for persistent upward or downward
price movements over a number of time-scales, and anti-trending components are
invoked when such movements may have gone too far too fast. Other inputs are
derived from changes in perceived instrument volatility and the effect of one
market against another closely correlated one.

Under the trading system, the relevant return forecasts, together with their
corresponding measures of risk, and market correlation are re-estimated daily.
Portfolio resources are then allocated to where the approach expects significant
changes in prices, bearing in mind the need to diversify exposure to risk. As a
result, portfolio composition is not fixed; there are no pre-assigned weightings
to markets or sectors. Moreover, no one market is treated differently to its
peers in terms of parameter inputs. Due to the number of inputs or indicators
used, and their application across a broad range of markets, portfolio changes
are generally small, except perhaps during periods of extreme volatility.

No assurance can be given that the Advisors' strategies will be successful or that they will generate profits for the Partnership.

Specific Fund level performance information is included in Note 6 to the Partnership's financial statements included in "Item 8. Financial Statements and Supplementary Data."



                                       18

--------------------------------------------------------------------------------

For the period January 1, 2015 through December 31, 2015 the average allocation by commodity market sector for each of the Funds was as follows:

                          CMF Aspect Master Fund L.P.



                        Currencies                  37.8%
                        Energy                      10.9%
                        Grains                       3.8%
                        Indices                     13.4%
                        Interest Rates 
U.S.
          3.5%
                        Interest Rates Non-
U.S.
     13.3%
                        Livestock                    0.9%
                        Metals                      12.7%
                        Softs                        3.7%


                      CMF Altis Partners Master Fund L.P.



                        Currencies                  23.7%
                        Energy                       8.9%
                        Grains                       7.5%
                        Indices                     17.3%
                        Interest Rates 
U.S.
          3.1%
                        Interest Rates Non-
U.S.
      9.0%
                        Livestock                    3.6%
                        Metals                      17.4%
                        Softs                        9.5%


(a) Liquidity.

The Partnership does not engage in sales of goods or services. Its only assets
are its investments in Funds and cash. The Funds' only assets are their equity
in trading accounts, consisting of cash and cash margin, net unrealized
appreciation on open futures and forward contracts and 
U.S.
 Treasury bills, at
fair value. Because of the low margin deposits normally required in commodity
futures trading, relatively small price movements may result in substantial
losses to the Partnership. While substantial losses could lead to a material
decrease in liquidity, no such illiquidity occurred during the year ended
December 31, 2015.

To minimize the risk relating to low margin deposits, the Partnership/Funds follow certain trading policies, including:

(i) The Partnership/Funds invest their assets only in commodity interests that

the Advisors believe are traded in sufficient volume to permit ease of

taking and liquidating positions. Sufficient volume, in this context,

refers to a level of liquidity that the Advisors believe will permit it to

        enter and exit trades without noticeably moving the market.




                                       19

--------------------------------------------------------------------------------

(ii) An Advisor will not initiate additional positions in any commodity if

these positions would result in aggregate positions requiring a margin of

        more than 66 2/3% of the Partnership's net assets allocated to that
        Advisor.



(iii) The Partnership/Funds may occasionally accept delivery of a commodity.

Unless such delivery is disposed of promptly by retendering the warehouse

receipt representing the delivery to the appropriate clearing house, the

         physical commodity position is fully hedged.



(iv) The Partnership/Funds do not employ the trading technique commonly known

        as "pyramiding," in which the speculator uses unrealized profits on
        existing positions as margin for the purchase or sale of additional
        positions in the same or related commodities.



(v) The Partnership/Funds do not utilize borrowings other than short-term

borrowings if the Partnership/Funds take delivery of any cash commodities.

(vi) The Advisors may, from time to time, employ trading strategies such as

spreads or straddles on behalf of the Partnership/Funds. The terms

"spread" and "straddle" describe a commodity futures trading strategies

        involving the simultaneous buying and selling of futures contracts on the
        same commodity but involving different delivery dates or markets.



(vii) The Partnership/Funds will not permit the churning of their commodity

trading accounts. The term "churning" refers to the practice of entering

and exiting trades with a frequency unwarranted by legitimate efforts to

profit from the trades, driven by the desire to generate commission

income.


From January 1, 2015 through December 31, 2015, the Partnership's average margin
to equity ratio (i.e., the percentage of assets on deposit required for margin)
was approximately 15.8%. The foregoing margin to equity ratio takes into account
cash held in the Partnership's name, as well as the allocable value of the
positions and cash held on behalf of the Partnership in the name of the Funds.

In the normal course of business, the Partnership, through its investments in
the Funds, is party to financial instruments with off-balance sheet risk,
including derivative financial instruments and derivative commodity instruments.
These financial instruments may include futures, forwards, 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 specified 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 or over-the-counter ("OTC"). Exchange traded instruments
include futures and certain standardized forward, swap and option contracts.
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 relating 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.
The General Partner estimates that at any given time approximately 2.9% to 28.0%
of the Funds' contracts are traded OTC.

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.

Market risk is the potential for changes in the value of the financial
instruments traded by the 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 Funds are exposed
to a market risk equal to the value of the futures and forward contracts
purchased and unlimited liability on such contracts sold short.

Credit risk is the possibility that a loss may occur due to the failure of a
counterparty to perform according to the terms of a contract. The
Partnership's/Funds' risk of loss in the event of a counterparty default is
typically limited to the amounts recognized in the Statements of Financial
Condition and is not represented by the contract or notional amounts of the
instruments. The Partnership's/Funds' risk of loss is reduced through the use of
legally enforceable master netting agreements with counterparties that permit
the Partnership Funds to offset unrealized gains and losses and other assets and
liabilities with such counterparties upon the occurrence of certain events. The
Partnerships/Funds had credit risk and concentration risk during the reporting
period and during prior periods, as MS&Co., CGM or their affiliates were the
sole counterparties or brokers with respect to the Partnership's/Funds' assets.
Credit risk with respect to exchange-traded instruments is reduced to the extent
that, through MS&Co. and/or CGM, the Partnership's/Funds' counterparty is an
exchange or clearing organization. The Partnership/Funds continue to be subject
to such risks with respect to MS&Co.



                                       20

--------------------------------------------------------------------------------
The General Partner monitors and attempts to control the Partnership's/Funds'
risk exposure on a daily basis through financial, credit and risk management
monitoring systems, and accordingly, believes that it has effective procedures
for evaluating and limiting the credit and market risks to which the
Partnership/Funds may be subject. These monitoring systems generally allow the
General Partner to statistically analyze actual trading results with
risk-adjusted performance indicators and correlation statistics. In addition,
online monitoring systems provide account analysis of futures, forwards and
options positions by sector, margin requirements, gain and loss transactions and
collateral positions. (See "Item 8. Financial Statements and Supplementary Data"
for further information on financial instrument risk included in the notes to
financial statements.)

Other than the risks inherent in 
U.S.
 Treasury bills, money market mutual funds
securities, commodity futures and forwards, options and swaps trading, the
Partnership knows of no trends, demands, commitments, events or uncertainties
which will result in, or which are reasonably likely to result in, the
Partnership's liquidity increasing or decreasing in any material way. The
Limited Partnership Agreement provides that the Partnership shall cease trading
operations and liquidate all open positions under certain circumstances
including a decrease in net asset value per Redeemable Unit to less than $400 as
of the close of business on any business day.

(b) Capital Resources.

(i) The Partnership has made no material commitments for capital expenditures.

(ii) The Partnership's capital consists of the capital contributions of the

partners, as increased or decreased by net income or losses on trading and

by expenses, interest income, redemptions of Redeemable Units and

distributions of profits, if any. Gains or losses on trading cannot be

predicted. Market movements in commodities are dependent upon fundamental

and technical factors which the Advisors may or may not be able to

identify, such as changing supply and demand relationships, weather,

government, agricultural, commercial and trade programs and policies,

national and international political and economic events and changes in

interest rates. Partnership expenses consist of, among other things,

ongoing selling agent fees, clearing fees, General Partner fees and

advisory fees. The level of these expenses is dependent upon trading

performance and the ability of the Advisors to identify and take advantage

of price movements in the commodity markets, in addition to the level of

Net Assets maintained. In addition, the amount of interest income payable

        by the Partnership's commodity broker is dependent upon interest rates
        over which neither the Partnership/Funds nor the commodity broker has
        control.


No forecast can be made as to the level of redemptions in any given period. A
limited partner may cause all or some of its Redeemable Units to be redeemed by
the Partnership at the redemption value per Redeemable Unit thereof as of the
end of each month on three business days' notice to the General Partner. There
is no fee charged to limited partners in connection with redemptions.
Redemptions generally are funded out of the Partnership's cash holdings and/or
redemption from the Funds. For the year ended December 31, 2015, 791.0720
Redeemable Units were redeemed totaling $1,267,804. For the year ended
December 31, 2014, 1,111.3570 Redeemable Units were redeemed totaling $1,556,036
and 10.3600 General Partner Redeemable Units were redeemed totaling $15,184. For
the year ended December 31, 2013, 792.0620 Redeemable Units were redeemed
totaling $1,205,622 and 47.0000 General Partner Redeemable Units were redeemed
totaling $75,122.



                                       21

--------------------------------------------------------------------------------

(c) Results of Operations.

For the year ended December 31, 2015, the net asset value per Redeemable Unit
decreased 0.9% from $1,605.10 to $1,590.58. For the year ended December 31,
2014, the net asset value per Redeemable Unit increased 11.7% from $1,436.62 to
$1,605.10. For the year ended December 31, 2013, the net asset value per
Redeemable Unit decreased 10.3% from $1,602.18 to $1,436.62.

The Partnership experienced a net trading gain, through investments in the
Funds, before fees and expenses in 2015 of $841,906. Gains were primarily
attributable to the Funds' trading in energy, currencies, livestock, metals and
U.S.
 and non-
U.S.
 interest rates and were partially offset by losses in grains,
softs and indices. The net trading gains or losses for the Partnership/Funds are
discussed on page 42 under "Item 8. Financial Statements and Supplementary
Data."

The most significant losses were incurred within the agricultural markets during
June from short positions in wheat, soybeans, and corn futures as prices rallied
after heavy rainfall in the 
U.S.
 Midwest raised the potential for crop damage.
During October, losses in this sector were experienced during the first half of
the month from short coffee and sugar futures positions as prices increased amid
crop concerns after reports of dry conditions in 
Brazil's
 growing regions.
Additional losses were experienced during January from long positions in cocoa
futures as prices fell after industry reports indicated crop harvests from the
Ivory Coast
 would exceed analysts' expectations. Within the global stock index
sector, losses were experienced during August from long positions in 
U.S.
,
Asian, and European equity index futures as prices declined sharply amid
investor concern over the economic slowdown in 
China
. Losses were also recorded
during December from long positions in European, 
U.S.
, and Asian equity index
futures as prices fell after weakness in Chinese economic data revived concern
about the stability of the global economy. Additional losses in this sector were
incurred during June from long positions in Asian and 
U.S.
 equity index futures
as prices weakened as concerns over 
Greece's
 efforts to avoid a default weighed
on global financial markets. The Partnership's losses the year were offset by
trading gains achieved within the energy markets during November and December
from short positions in crude oil and its related products as prices weakened as
the failure of the OPEC nations to cut production highlighted a growing global
supply glut. Gains within the energy markets were also recorded during July,
August, September and October as prices plunged as 
U.S.
 oil production reached
record levels. Within the currency markets, gains were recorded during January
from short positions in the euro versus the 
U.S.
 dollar as the relative value of
the euro declined amid a deteriorating economic outlook in 
Europe
. Currency
gains were also recorded during November from short positions in the euro, Swiss
franc, and British pound versus the 
U.S.
 dollar after the relative value of the
dollar advanced as positive economic indicators increased speculation the 
U.S.
Federal Reserve (the "Fed") would increase interest rates. Additional gains in
the currency sector were recorded during July from short positions in the
Canadian dollar versus the 
U.S.
 dollar. Within the metals sector, gains were
recorded during July from short position in aluminum and copper futures as
prices moved lower amid increased concern a slowdown in the Chinese economy
would diminish demand for industrial metals. Gains were also experienced within
this sector during January from short positions in copper futures as prices fell
over growing concern a slowdown in Chinese manufacturing would limit demand for
the industrial metal. Within the global interest rate sector, gains were
achieved during January from long positions in European, 
U.S.
, and Australian
fixed income futures as prices moved higher as investor concern about the
economic recovery in 
Europe
 spurred demand for the relative "safety" of
government assets. Further gains were recorded in this sector during the third
quarter.

The Partnership experienced a net trading gain, through investments in the
Funds, before fees and expenses in 2014 of $2,513,437. Gains were primarily
attributable to the Funds' trading in energy, currencies, grains and 
U.S.
 and
non-
U.S.
 interest rates and were partially offset by gains in livestock, metals,
softs and indices.



                                       22
--------------------------------------------------------------------------------
The most significant gains were achieved within the fixed income sector during
October, November, and December in from long positions in European fixed income
futures as prices advanced on increased speculation the European Central Bank
would increase its quantitative easing measures to stimulate the Eurozone's
stagnant economy. Additional gains within the sector were experienced during May
and August from long positions in European fixed income futures as prices moved
higher as investors speculated central banking authorities in 
Europe
 and 
Asia
would increase stimulus measures to raise inflation. Within the energy markets,
gains were experienced primarily during October, November and December from
short positions in crude oil and its related contracts as prices moved lower
amid rising 
U.S.
 oil production and after the OPEC nations failed to cut output
in response to the global supply glut. Within the currency sector, gains were
experienced primarily during September from short positions in the Japanese yen
versus the 
U.S.
 dollar as the relative value of the yen declined after economic
indicators showed 
Japan's
 economy was growing at a slower pace than previously
forecast. Additional gains during August were recorded from short positions in
the euro versus the 
U.S.
 dollar as the relative value of the dollar advanced
after the U.S. Federal Reserve Bank indicated it was committed to keeping
inflation in check. During December, gains were achieved from short positions in
the euro versus the 
U.S.
 dollar as the relative value of the dollar strengthened
after economic indicators showed the growth of the 
U.S.
 economy was outpacing
its European counterparts. Within the agricultural markets, gains were
experienced during September from short positions in corn and wheat futures as
favorable growing conditions in the 
U.S.
 Midwest reinforced analysts'
predictions that 
U.S.
 farms are heading for record crop levels in 2014.
Additional gains in this sector were recorded during June from long positions in
cattle futures as increased beef demand combined with 
U.S.
 farm herds being at
reduced levels due to droughts in 
Texas
 and 
California
 boosted prices. A portion
of the Partnership's gains for the year was offset by losses incurred within the
global stock index sector during January from long positions in 
U.S.
, European,
and Asian equity index futures as prices declined as economic growth momentum in
China
 weakened and the 
U.S.
 Federal Reserve announced measures to further taper
its quantitative easing program. Additional losses were recorded during October
from long positions in 
U.S.
, European, and Asian equity index futures as prices
fell early in the month amid investor concern of stagnant economic growth rates
in 
Europe
 and 
Asia
 and expectations of higher interest rates in the 
U.S.
 Within
the metals markets, losses were incurred during February from short positions in
aluminum futures as prices advanced after a report showed 
China's
 new credit
increased to a record during January, boosting demand prospects for industrial
metals.

Interest income on 80% of the average daily equity maintained in cash in each of
the Fund's brokerage accounts was earned at a rate equal to the monthly average
of the 4-week 
U.S.
 Treasury bill discount rate. All interest income earned on
U.S.
 Treasury bills and money market mutual fund securities will be retained by
the Partnership. Interest income for the three and twelve months ended
December 31, 2015 decreased by $279 and $1,168, respectively, as compared to the
corresponding periods in 2014. This decrease in interest income was due to lower
U.S.
 Treasury bill rates during the three and twelve months ended December 31,
2015, as compared to the corresponding periods in 2014. Interest earned by the
Partnership will increase the net asset value of the Partnership. The amount of
interest income earned by the Partnership during the reporting period depends on
the average daily equity maintained in the Partnership's and the Funds' accounts
and upon interest rates over which neither the Partnership/Funds nor the
commodity broker had control.

Ongoing selling agent fees are calculated as a percentage of the Partnership's
adjusted net asset value on the last day of each month and are affected by
trading performance and redemptions. Ongoing selling agent fees for the three
and twelve months ended December 31, 2015 decreased by $1,426 and $168,178,
respectively, as compared to the corresponding periods in 2014. The decrease in
ongoing selling agent fees was due to lower average net assets during the three
and twelve months ended December 31, 2015, as compared to the corresponding
periods in 2014.

Management fees are calculated as a percentage of the Partnership's net asset
value on the last day of each month and are affected by trading performance and
redemptions. Accordingly, they must be compared in relation to the fluctuations
in the monthly net asset values. Management fees for the three and twelve months
ended December 31, 2015 increased by $1,542 and $8,517, respectively, as
compared to the corresponding periods in 2014. The increase in management fees
was due to a higher average net assets during the three and twelve months ended
December 31, 2015, as compared to the corresponding periods in 2014.

General Partner fees are paid to the General Partner for administering the
business and affairs of the Partnership. These fees are calculated as a
percentage of the Partnership's adjusted net asset value on the last day of each
month and are affected by trading performance and redemptions. Accordingly, they
must be compared in relation to the fluctuations in monthly net asset values.
General Partner fees for the three months ended December 31, 2015 decreased by
$839, as compared to the corresponding period in 2014. The decrease in General
Partner fees for the three months ending December 31, 2015 is primarily due to
lower average net assets during the three months ended December 31, 2015, as
compared to the corresponding period in 2014. General Partner fees for the
twelve months ended December 31, 2015 was $130,200. This is a new fee
implemented by the Partnership effective October 1, 2014.

Incentive fees are based on the new trading profits generated by each Advisor as
defined in the respective management agreements between the Partnership, the
General Partner and each Advisor and are payable annually. Incentives fees for
the years ended December 31, 2015 and 2014 were $78,282 and $13,643,
respectively.



                                       23
--------------------------------------------------------------------------------
The Partnership pays professional fees, which generally include legal,
accounting expenses, administrative, filing, reporting and data processing fees.
Professional fees for the years ended December 31, 2015 and 2014 were $218,073
and $253,511, respectively.

The Partnership experienced a net trading loss, through investments in the
Funds, before fees and expenses in 2013 of $386,776. Losses were primarily
attributable to the Funds' trading in energy, currencies, grains and 
U.S.
 and
non-
U.S.
 interest rates and were partially offset by gains in livestock, metals,
softs and indices.

The most significant losses during the year ended December 31, 2013 were
incurred within the energy sector, primarily during September, from long
positions in gasoil, gasoline and crude oil futures as prices fell in reaction
to the debate within the U.S. Congress over funding the government and its
potential impact on energy demand. Additional losses were recorded in February
from long futures positions in crude oil and its related products as prices fell
on concern fuel demand will decline. Within the global interest rate markets,
losses were incurred during May from long positions in 
U.S.
 and European fixed
income futures as prices declined on reports signaling the global economic
recovery was strengthening. Additional losses in this sector were recorded in
September from short positions in Australian fixed income futures as prices
advanced on news the nation's industrial exports benefitted from a recovery of
the Chinese manufacturing base. Within the currency markets, losses were
recorded in May from long positions in the Indian rupee versus the 
U.S.
 dollar
as the value of the Indian currency weakened on concerns of a possible pullback
in global fund flows and the country's external deficit. Currency losses were
also recorded in June from long positions in the British pound, euro, and Swiss
franc as the value of these European currencies moved lower relative to the 
U.S.
dollar during the latter half of the month on concern of weakness in European
economies. A portion of the Partnership's losses for the year was offset by
trading gains achieved within the global stock index sector, primarily during
January, from long positions in Asian, 
U.S.
, and European equity index futures
as prices advanced amid positive global economic sentiment. Additional gains
were achieved during October from long positions in 
U.S.
 and European equity
index futures as prices advanced as the 
U.S
 Federal Reserve delayed curtailing
its stimulus plan and corporate earnings beat analysts' estimates, increasing
optimism that 
Europe
 is recovering from a recession. Long positions in European
and 
U.S.
 equity index futures were also profitable. Within the agricultural
complex, gains were recorded during December from short positions in wheat
futures as priced declined on speculation crops totals in the 
U.S.
, 
South America
 and parts of 
Europe
, could reach record levels in 2014.

In the General Partner's opinion, the Advisors continue to employ trading
methods and produce results consistent with the objectives of the Partnership
and expectations for the Advisors' programs. The General Partner continues to
monitor the Advisors' performance on a daily, weekly, monthly and annual basis
to assure these objectives are met.

Commodity futures markets are highly volatile. Broad price fluctuations and
rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisors to
identify those price trends correctly. Price trends are influenced by, among
other things, changing supply and demand relationships, weather, 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 expects to increase capital through operations.

In allocating the assets of the Partnership among the Advisors, the General
Partner considers, among other factors, each Advisor's past performance, trading
style, volatility of markets traded and fee requirements. The General Partner
may modify or terminate the allocation of assets to the Advisors and allocate
assets to additional advisors at any time. Each Advisors' percentage allocation
and trading program is described in the "Overview" section of this Item 7.

(d) Off-balance Sheet Arrangements. None

(e) Contractual Obligations. None

(f) Operational Risk.



                                       24
--------------------------------------------------------------------------------
The Partnership, through its investment in the Funds, is directly exposed to
market risk and credit risk, which arise in the normal course of its business
activities. Slightly less direct, but of critical importance, are risks
pertaining to operational and back office support. This is particularly the case
in a rapidly changing and increasingly global environment with increasing
transaction volumes and an expansion in the number and complexity of products in
the marketplace.

Such risks include:

Operational/Settlement Risk - the risk of financial and opportunity loss and
legal liability attributable to operational problems, such as inaccurate pricing
of transactions, untimely trade execution, clearance and/or settlement, or the
inability to process large volumes of transactions. The Partnership/Funds are
subject to increased risks with respect to its trading activities in emerging
markets, where clearance, settlement, and custodial risks are often greater than
in more established markets.

Technological Risk - the risk of loss attributable to technological limitations
or hardware failure that constrain the Partnership's/Funds' ability to gather,
process, and communicate information efficiently and securely, without
interruption, to customers, and in the markets where the Partnership/Funds
participate. Additionally, the General Partner's computer systems may be
vulnerable to unauthorized access, mishandling or misuse, computer viruses or
malware, cyber attacks and other events that could have a security impact on
such systems. If one or more of such events occur, this potentially could
jeopardize a limited partner's personal, confidential, proprietary or other
information processed and stored in, and transmitted through, the General
Partner's computer systems, and adversely affect the Partnership's business,
financial condition or results of operations.

Legal/Documentation Risk - the risk of loss attributable to deficiencies in the documentation of transactions (such as trade confirmations) and customer relationships (such as master netting agreements) or errors that result in non-compliance with applicable legal and regulatory requirements.

Financial Control Risk - the risk of loss attributable to limitations in
financial systems and controls. Strong financial systems and controls ensure
that assets are safeguarded, that transactions are executed in accordance with
management's authorization, and that financial information utilized by
management and communicated to external parties, including the Partnership's
Redeemable Unit holders, creditors, and regulators, is free of material errors.

(g) Critical Accounting Policies.

Partnership's Investments.  The Partnership carries its investments in the Funds
at fair value based on the respective Fund's net asset value per Redeemable Unit
as calculated by the Fund.

Funds' Investments. All commodity interests including derivative financial
instruments and derivative commodity instruments, held by the Partnership and
the Funds are held for trading purposes. The commodity interests are recorded on
trade date and open contracts are recorded at fair value (as described below) at
the measurement date. Investments in commodity interests denominated in foreign
currencies are translated into 
U.S.
 dollars at the exchange rates prevailing at
the measurement date. Gains or losses are realized when contracts are liquidated
and are determined using the first-in, first-out method. Unrealized gains or
losses on open contracts are included as a component of equity in trading
account in the Funds' Statements of Financial Condition. Net realized gains or
losses and net change in unrealized gains or losses from the preceding period
are reported in the Funds' Statements of Income and Expenses.

Funds' Fair Value Measurements.  Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date under current
market conditions. The fair value hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to fair values derived from unobservable
inputs (Level 3). The level in the fair value hierarchy within which the fair
value measurement in its entirety falls shall be determined based on the lowest
level input that is significant to the fair value measurement in its entirety.

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 input 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.



                                       25

--------------------------------------------------------------------------------
The Funds consider prices for exchange-traded commodity futures, forward, 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 forwards, swap and certain option contracts for which
market quotations are not readily available, are priced by broker quotes or
pricing services that derive fair values for those assets and liabilities from
observable inputs (Level 2). The value of the Partnership's investments in the
Funds reflects its proportional interest in the Funds. As of and for the years
ended December 31, 2015 and 2014, 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). Transfers between levels are considered at the end of the
reporting period. During the years ended December 31, 2015 and 2014, there were
no transfers of assets or liabilities between Level 1 and Level 2.

Futures Contracts. The Funds trade futures contracts. A futures contract is a
firm commitment to buy or sell a specified quantity of investments, currency or
a standardized amount of a deliverable grade commodity, at a specified price on
a specified future date, unless the contract is closed before the delivery date
or the delivery quantity is something where physical delivery cannot occur (such
as the S&P 500 Index), whereby such contract is settled in cash. Payments
("variation margin") may be made or received by the Funds each business day,
depending on the daily fluctuations in the value of the underlying contracts,
and are recorded as unrealized gains or losses by the Funds. When the contract
is closed, the Funds record a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed. Transactions in futures contracts require participants to
make both initial margin deposits of cash or other assets and variation margin
deposits, through the futures broker, directly with the exchange on which the
contracts are traded. Net realized gains (losses) and net change in unrealized
gains (losses) on futures contracts are included in the Funds' Statements of
Income and Expenses.

Forward Foreign Currency Contracts. Forward foreign currency contracts are those
contracts where the Funds agree to receive or deliver a fixed quantity of
foreign currency for an agreed-upon price on an agreed upon future date. Forward
foreign currency contracts are valued daily, and the Funds' net equity therein,
representing unrealized gain or loss on the contracts as measured by the
difference between the forward foreign exchange rates at the dates of entry into
the contracts and the forward rates at the reporting date, is included in the
Funds' Statements of Financial Condition. Net realized gains (losses) and net
change in unrealized gains (losses) on forward foreign currency contracts are
recognized in the period in which the contract is closed or the changes occur,
respectively, and are included in the Funds' Statements of Income and Expenses.

The Funds do not isolate the portion of the results of operations arising from
the effect of changes in foreign exchange rates on investments from fluctuations
from changes in market prices of investments held. Such fluctuations are
included in total trading results in the Funds' Statements of Income and
Expenses.

London Metals Exchange Forward Contracts. Metals contracts traded on the 
London
Metals Exchange ("LME") represent a firm commitment to buy or sell a specified
quantity of aluminum, copper, lead, nickel, tin or zinc. LME contracts traded by
the Funds are cash settled based on prompt dates published by the LME. Payments
("variation margin") may be made or received by the Funds each business day,
depending on the daily fluctuations in the value of the underlying contracts,
and are recorded as unrealized gains or losses by the Funds. A contract is
considered offset when all long positions have been matched with a like number
of short positions settling on the same prompt date. When the contract is closed
at the prompt date, the Funds record a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Transactions in LME contracts require
participants to make both initial margin deposits of cash or other assets and
variation margin deposits, through the broker, directly with the LME. Net
realized gains (losses) and net change in unrealized gains (losses) on metals
contracts are included in the Funds' Statements of Income and Expenses.



                                       26

--------------------------------------------------------------------------------

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Source: Equities.com News (March 28, 2016 - 7:40 AM EDT)

News by QuoteMedia
www.quotemedia.com

Legal Notice