| TRADING ACTIVITIES AND RELATED RISKS | Note 11. TRADING ACTIVITIES AND RELATED RISKS The Fund engages in the speculative trading of U.S. and foreign futures contracts, forward currency contracts and centrally cleared
swap contracts (collectively, “derivatives”). Specifically, the Fund trades a portfolio focused on futures, forward, credit default index swap and interest rate swap contracts, which are instruments designed to hedge changes in interest rates,
currency exchange rates, stock index values, metals, energy, agriculture values, and credit risks. The Fund is exposed to both market risk, the risk arising from changes in the fair value of the contracts, and credit risk, the risk of failure by
another party to perform according to the terms of a contract. In February 2020, the Fund transferred all futures contracts held with UBS Securities LLC to Goldman, Sachs & Co., and all
forward currency contracts held with UBS to NatWest. Goldman, Sachs & Co. and NatWest serve as the sole futures broker and interbank market maker, respectively, for the Fund’s ongoing trading. Market Risk For derivatives, risks arise from changes in the fair value of the contracts. Market movements result in frequent changes in the
fair value of the Fund’s open positions and, consequently, in its earnings and cash flow. The Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels,
the fair value of financial instruments and contracts, the diversification effects among the Fund’s open positions and the liquidity of the markets in which it trades. Theoretically, the Fund is exposed to a market risk equal to the notional
contract value of futures and forward currency contracts purchased and unlimited liability on such contracts sold short. The value of an interest rate swap will change as market interest rates rise and fall in conjunction with whether the contract
is to receive or pay a fixed interest rate. As a purchaser of credit default index swaps, the Fund’s risk of loss is limited to any cash payments required under the swap contracts. Written credit default contracts (i.e., sell protection) expose the
Fund to a market risk equal to the notional value of such swap contracts and any cash payments required under the swap contracts. See Note 1.C. for an explanation of how the Fund determines its valuation for derivatives as well as the netting of
derivatives. The following tables summarize quantitative information required by ASC 815, Derivatives and Hedging, (“ASC 815”). ASC 815 provides
enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments are accounted for, and how derivative instruments affect an entity’s financial position, financial performance and cash flows. The fair value
of the Fund’s derivatives by instrument type, as well as the location of those instruments on the Statements of Financial Condition, as of September 30, 2022 and December 31, 2021 is as follows:
Type of Instrument *
Statements of Financial Condition Location
Asset Derivatives at September 30, 2022
Liability Derivatives at September 30, 2022 Fair Value
Net
Agriculture Contracts
Net unrealized gain (loss) on open futures contracts
$
298,254
$
(2,111,009
)
$
(1,812,755)
Energy Contracts
Net unrealized gain (loss) on open futures contracts
339,523
(164,814
)
174,709
Metal Contracts
Net unrealized gain (loss) on open futures contracts
3,878,410
(3,878,253
)
157
Stock Indices Contracts
Net unrealized gain (loss) on open futures contracts
1,950,933
(113,940
)
1,836,993
Short-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
1,490,387
(34,783
)
1,455,604
Long-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
657,440
(242,803
)
414,637
Forward Currency Contracts
Net unrealized gain (loss) on open forward currency contracts
24,369,684
(18,051,037
)
6,318,647
Credit Default Index Swap Contracts**
Credit default index swaps
0
(58,518
)
(58,518)
Interest Rate Swap Contracts**
Interest rate swaps
943,438
(979,814
)
(36,376
)
Total
$
33,928,069
$
(25,634,971
)
$
8,293,098
*
Derivatives not designated as hedging instruments under ASC 815
**
Amount of centrally cleared swap contracts is not reconciled with the
statements of financial condition due to variation margin amount included within cash at swaps broker in the statements of financial condition.
Type of Instrument *
Statements of Financial Condition Location
Asset Derivatives at December 31, 2021 Fair Value
Liability Derivatives at December 31, 2021 Fair Value
Net
Agriculture Contracts
Net unrealized gain (loss) on open futures contracts
$
670,890
$
(339,135
)
$
331,755
Energy Contracts
Net unrealized gain (loss) on open futures contracts
374,147
(351,855
)
22,292
Metal Contracts
Net unrealized gain (loss) on open futures contracts
2,649,310
(3,038,109
)
(388,799
)
Stock Indices Contracts
Net unrealized gain (loss) on open futures contracts
875,863
(168,666
)
707,197
Short-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
175,142
(190,112
)
(14,970
)
Long-Term Interest Rate Contracts
Net unrealized gain (loss) on open futures contracts
887,576
(1,351,050
)
(463,474
)
Forward Currency Contracts
Net unrealized gain (loss) on open forward currency contracts
6,779,979
(7,574,528
)
(794,549
)
Credit Default Index Swap Contracts**
Credit default index swaps
1,649,303
(216,558
)
1,432,745
Total
$
14,062,210
$
(13,230,013
)
$
832,197
*
Derivatives not designated as hedging instruments under ASC 815
**
Amount of centrally cleared swap contracts is not reconciled with the statements of financial condition due to variation margin amount included within cash at swaps broker in the
statements of financial condition. The trading gains and losses of the Fund’s derivatives by instrument type, as well as the location of those gains and losses on the
Statements of Operations, for the three months and nine months ended September 30, 2022 and 2021 are as follows:
Type of Instrument
Trading Gains (Losses) for the Three Months Ended
Trading Gains (Losses) for the Three Months Ended
Agriculture Contracts
$
(711,523)
$
(1,014,661)
Energy Contracts
(2,403,337)
1,433,207
Metal Contracts
1,152,211
178,310
Stock Indices Contracts
1,926,144
362,692
Short-Term Interest Rate Contracts
4,771,243
3,917
Long-Term Interest Rate Contracts
1,959,041
(917,301
)
Forward Currency Contracts
9,698,568
(521,917
)
Credit Default Index Swap Contracts
(190,696
)
849
Interest Rate Swap Contracts
1,098,608
512,987
Total
$
17,300,259
$
38,083
Type of Instrument
Trading Gains (Losses) for the Nine Months Ended
Trading Gains (Losses) for the Nine Months Ended
Agriculture Contracts
$
2,833,045
$
5,865,512
Energy Contracts
7,541,792
8,263,428
Metal Contracts
3,539,853
1,272,095
Stock Indices Contracts
3,597,137
9,582,779
Short-Term Interest Rate Contracts
6,671,292
(1,731,083
)
Long-Term Interest Rate Contracts
14,276,452
(6,669,990
)
Forward Currency Contracts
29,683,518
6,498,718
Credit Default Index Swap Contracts
(1,926,863
)
476,453
Interest Rate Swap Contracts
3,724,008
(2,216,285
)
Total
$
69,940,234
$
21,341,627
Line Item in the Statements of Operations
Trading Gains (Losses) for the Three Months Ended
Trading Gains (Losses) for the Three Months Ended
Futures trading gains (losses):
Realized**
$
4,779,742
$
2,163,490
Change in unrealized
1,914,037
(2,117,326
)
Forward currency trading gains (losses):
Realized**
7,975,523
(3,908,213)
Change in unrealized
1,723,045
3,386,296
Swap trading gains (losses):
Realized
706,189
345,151
Change in unrealized
201,723
168,685
Total
$
17,300,259
$
38,083
Line Item in the Statements of Operations
Trading Gains (Losses) for the Nine Months Ended
Trading Gains (Losses) for the Nine Months Ended
Futures trading gains (losses):
Realized***
$
36,584,227
$
23,052,906
Change in unrealized
1,875,344
(6,470,165
)
Forward currency trading gains (losses):
Realized***
22,570,322
5,664,738
Change in unrealized
7,113,196
833,980
Swap trading gains (losses):
Realized
1,392,044
(1,400,319
)
Change in unrealized
405,101
(339,513
)
Total
$
69,940,234
$
21,341,627
**
For the three months ended September 30, 2022 and 2021, the amounts above
include gains/(losses) on foreign currency cash balances at the futures brokers of $(73,875) and $56,965, respectively, and gains/(losses) on spot trades in connection with forward currency trading at the interbank market makers of $(1,388,963) and $314,802,
respectively.
***
For the nine months ended September 30, 2022
and 2021, the amounts above include gains/(losses) on foreign currency cash balances at the futures brokers of $3,343 and $65,469,
respectively, and gains/(losses) on spot trades in connection with forward currency trading at the interbank market makers of $(324,827)
and $(178,677), respectively. For the three months ended September 30, 2022 and 2021, the monthly average of futures contracts
bought and sold was approximately 13,200 and 27,900, respectively, the monthly average of notional value of centrally cleared swap contracts was approximately $1,298,500,000 and $3,727,700,000, respectively, and the monthly
average of notional value of forward currency contracts was $3,461,000,000 and $1,878,800,000, respectively. For the nine months ended
September 30, 2022 and 2021,
the monthly average of futures contracts bought and sold was approximately 13,000 and 27,500, respectively, the monthly average of notional value of centrally cleared swap contracts was approximately $857,400,000 and $2,936,200,000, respectively, and the monthly
average of notional value of forward currency contracts was $2,010,200,000 and $1,571,900,000, respectively. Open contracts generally mature within three months; as of September 30, 2022, the latest maturity date for open futures contracts is December 2023 December 2022 December 2027 Credit Risk The Fund trades futures contracts on exchanges that require margin deposits with the futures brokers and centrally cleared swap
contracts that require margin deposits with the swaps broker. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a futures broker or swaps broker to segregate all customer transactions and
assets from such future s broker’s or swaps broker’s proprietary activities. A customer’s cash and other property (for example, U.S. Treasury Bills) deposited with a futures broker or swaps broker are considered commingled with all other customer
funds subject to the futures broker’s or swaps broker’s segregation requirements. In the event of a futures broker’s or swaps broker’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the
recovered amount could be less than total cash and other property deposited. The Fund trades forward currency contracts in unregulated markets between principals and assumes the risk of loss from counterparty
nonperformance. Accordingly, the risks associated with forward currency contracts are generally greater than those associated with exchange traded contracts because of the greater risk of counterparty default. Additionally, the trading of forward
currency contracts typically involves delayed cash settlement. The Fund has a portion of its assets on deposit with PNC Bank. In the event of a financial institution’s insolvency, recovery of the
Fund’s assets on deposit may be limited to account insurance or other protection afforded such deposits. The Fund has entered into ISDA Agreements with UBS AG and NatWest. Under the terms of each ISDA Agreement, upon the designation of
an Event of Default, as defined in each ISDA Agreement, the non-defaulting party may set-off any sum or obligation owed by the defaulting party to the non-defaulting party against any sum or obligation owed by the non-defaulting party to the
defaulting party. If any sum or obligation is unascertained, the non-defaulting party may in good faith estimate that sum or obligation and set-off in respect to that estimate, accounting to the other party when such sum or obligation is
ascertained. Under the terms of each master netting agreement with UBS Securities LLC and Goldman, Sachs & Co., upon occurrence of a default
by the Fund, as defined in respective account documents, UBS Securities LLC and Goldman, Sachs & Co. have the right to close out any or all open contracts held in the Fund’s account; sell any or all of the securities held; and borrow or buy any
securities, contracts or other property for the Fund’s account. The Fund would be liable for any deficiency in its account resulting from such transactions. The amount of required margin and good faith deposits with the futures brokers and interbank market makers usually range from 10% to 30% of Net Asset Value. The fair
value of securities held to satisfy such requirements at September 30, 2022 and December 31, 2021 was $16,767,752 and $13,432,392, respectively,
which equals approximately 9% and 10%
of Net Asset Value, respectively. Included in cash deposits with the futures brokers, swaps broker and interbank market makers at September 30, 2022
and December 31, 2021 was restricted cash for margin requirements of $5,025,484 and $12,711,025, respectively, which equals approximately 3% and 10% of Net Asset Value, respectively. There were no
cash deposits held at UBS Securities LLC or UBS AG, a futures broker and interbank market maker, respectively, at September 30, 2022
and December 31, 2021. Set forth below are tables which disclose both gross information and net information about instruments and transactions eligible for
offset in the Statements of Financial Condition and instruments and transactions that are subject to a master netting agreement as well as amounts related to financial collateral (including U.S. Treasury Bills and cash collateral) held at clearing
brokers and counterparties. Margin reflected in the collateral tables is limited to the net amount of unrealized loss at each counterparty. Actual margin amounts required at each counterparty are based on the notional amounts or the number of
contracts outstanding and may exceed the margin presented in the collateral tables.
Offsetting of Derivative Assets by Counterparty
As of September 30, 2022
Type of Instrument
Counterparty
Gross Amounts of Recognized Assets
Gross Amounts Offset in the Statements of Financial Condition
Net Amounts of Unrealized Gain Statements of Financial Condition
Futures contracts
Goldman, Sachs & Co.
$
8,614,947
$
(6,545,602
)
$
2,069,345
Forward currency contracts
NatWest Markets Plc
24,369,684
(18,051,037
)
6,318,647
Centrally cleared swap contracts*
Centrally Cleared
943,438
(943,438
)
0
Total derivatives
$
33,928,069
$
(25,540,077
)
$
8,387,992
*
Amount of centrally cleared swap contracts is not reconciled with the statements of financial condition due to variation margin amount included within cash at swaps broker in the statements of financial condition.
Derivative Assets and Collateral Received by Counterparty
As of September 30, 2022
Net Amounts of Unrealized Gain Presented in the
Gross Amounts Not Offset in the Statements of Financial Condition
Counterparty
Statements of
Financial Instruments
Cash Collateral
Net Amount
Goldman, Sachs & Co.
$
2,069,345
$
0
$
0
$
2,069,345
NatWest Markets Plc
6,318,647
0
0
6,318,647
Centrally Cleared
0
0
0
0
Total
$
8,387,992
$
0
$
0
$
8,387,992
Offsetting of Derivative Liabilities by Counterparty
As of September 30, 2022
Type of Instrument
Counterparty
Gross Amounts of Recognized Liabilities
Gross Amounts Offset in the Statements of Financial Condition
Net Amounts of Unrealized Loss Presented in the Statements of Financial Condition
Futures contracts
Goldman, Sachs & Co.
$
6,545,602
$
(6,545,602
)
$
0
Forward currency contracts
NatWest Markets Plc
18,051,037
(18,051,037
)
0
Centrally cleared swap contracts
Centrally Cleared
1,038,332
(943,438
)
94,894
Total derivatives
$
25,634,971
$
(25,540,077
)
$
94,894
Derivative Liabilities and Collateral Pledged by Counterparty
As of September 30, 2022
Net Amounts of Presented in the
Gross Amounts Not Offset in the Statements of Financial Condition
Counterparty
Statements of
Financial Instruments
Cash Collateral
Net Amount
Goldman, Sachs & Co.
$
0
$
0
$
0
$
0
NatWest Markets Plc
0
0
0
0
Centrally Cleared
94,894
0
(94,894)
0
Total
$
94,894
$
0
$
(94,894
)
$
0
Offsetting of Derivative Assets by Counterparty
As of December 31, 2021
Type of Instrument
Counterparty
Gross Amounts of Recognized Assets
Gross Amounts Offset in the Statements of Financial Condition
Net Amounts of Unrealized Gain Presented in the Statements of Financial Condition
Futures contracts
Goldman, Sachs & Co.
$
5,632,928 $ (5,438,927 ) $ 194,001
Forward currency contracts
NatWest Markets Plc
6,779,979
(6,779,979
)
0
Centrally cleared swap contracts*
Centrally Cleared
1,649,303
(216,558
)
1,432,745
Total derivatives
$
14,062,210
$
(12,435,464
)
$
1,626,746
*
Amount of centrally cleared swap contracts is not reconciled with the statements of financial condition due to variation margin amount included within cash at swaps broker in the statements of financial condition.
Derivative Assets and Collateral Received by Counterparty
As of December 31, 2021
Net Amounts of Unrealized Gain Presented in the
Gross Amounts Not Offset in the Statements of Financial Condition
Counterparty
Statements of
Financial Instruments
Cash Collateral
Net Amount
Goldman, Sachs & Co.
$
194,001
$
0
$
0
$
194,001
NatWest Markets Plc
0
0
0
0
Centrally Cleared
1,432,745
0
0
1,432,745
Total
$
1,626,746
$
0
$
0
$
1,626,746
Offsetting of Derivative Liabilities by Counterparty
As of December 31, 2021
Type of Instrument
Counterparty
Gross Amounts of Recognized Liabilities
Gross Amounts Offset in the Financial Condition
Net Amounts of Unrealized Loss Presented in the Financial Condition
Futures contracts
Goldman, Sachs & Co.
$
5,438,927
$
(5,438,927
)
$
0
Forward currency contracts
NatWest Markets Plc
7,574,528
(6,779,979
)
794,549
Centrally cleared swap contracts
Centrally Cleared
216,558
(216,558
)
0
Total derivatives
$
13,230,013
$
(12,435,464
)
$
794,549
Derivative Liabilities and Collateral Pledged by Counterparty
As of December 31, 2021
Net Amounts of Unrealized Loss Presented in the
Gross Amounts Not Offset in the Statements of Financial Condition
Counterparty
Statements of Financial Condition
Financial
Cash Collateral
Net Amount
Goldman, Sachs & Co.
$
0
$
0
$
0
$
0
NatWest Markets Plc
794,549
0
(794,549)
0
Centrally Cleared
0
0
0
0
Total
$
794,549
$
0
$
(794,549)
$
0 Campbell & Company has established procedures to actively monitor market risk and minimize credit risk, although there can be no
assurance that it will, in fact, succeed in doing so. Campbell & Company’s basic market risk control procedures consist of continuously monitoring open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that
rarely exceeds 30%. Campbell & Company’s attempt to manage the risk of the Fund’s open positions is essentially the same in all
market categories traded. Campbell & Company applies risk management policies to its trading which generally limit the total exposure that may be taken per “risk unit” of assets under management. In addition, Campbell & Company follows
diversification guidelines (often formulated in terms of the balanced volatility between markets and correlated groups), as well as reducing position sizes dynamically in response to trading losses. Campbell & Company controls the risk of the
Fund’s non-trading fixed income instruments by limiting the duration of such instruments and requiring a minimum credit quality of the issuers of those instruments. Campbell & Company seeks to minimize credit risk primarily by depositing and maintaining the Fund’s assets at financial
institutions and brokers which Campbell & Company believes to be credit worthy. The limited partners bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances,
distributions and redemptions received. |
