EDGAR 10-K Filing

Company CIK: 1325676
Filing Year: 2023
Filename: 1325676_10-K_2023_0001193125-23-078792.json

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ITEM 1. BUSINESS
Item 1. Business.
(a) General Development of Business. 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 or 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 sold 11,925 redeemable 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.
Subscriptions and redemptions of Redeemable Units and General Partner contributions and redemptions for the years ended December 31, 2022, 2021 and 2020 are reported in the Statements of Changes in Partners’ Capital under “Item 8. Financial Statements and Supplementary Data.”
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership and is the trading manager (the “Trading Manager”) of NL Master (as defined below) and Drakewood Master (as defined below). The General Partner was also the Trading Manager of GSL Master (as defined below), Aquantum Master (as defined below) and Harbour Square Master (as defined below) prior to GSL Master’s, Aquantum Master’s and Harbour Square Master’s respective terminations. 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.
On February 1, 2013, the Partnership allocated substantially all of its capital to MB Master Fund L.P. (“MB Master”), a limited partnership organized under the partnership laws of the State of Delaware. Effective November 30, 2018, the Partnership fully redeemed its investment in MB Master. On January 1, 2018, the Partnership allocated a portion of its assets to CMF Harbour Square Master Fund LLC (“Harbour Square Master”), a limited liability company organized under the limited liability company laws of the State of Delaware. Effective March 31, 2019, the Partnership fully redeemed its investment in Harbour Square Master. Effective June 1, 2019, the assets allocated to Aquantum (defined below) were transferred into CMF Aquantum Master Fund LLC (“Aquantum Master”), a limited liability company organized under the limited liability company laws of the State of Delaware. Effective December 31, 2020, the Partnership fully redeemed its investment in Aquantum Master. On April 1, 2019, the Partnership allocated a portion of its assets to CMF NL Master Fund LLC (“NL Master”), a limited liability company organized under the limited liability company laws of the State of Delaware. On November 1, 2020, the Partnership allocated a portion of its assets to CMF GSL Master Fund LLC (“GSL Master”), a limited liability company organized under the limited liability company laws of the State of Delaware. Effective June 30, 2022, the Partnership fully redeemed its investment in GSL Master. On May 1, 2022, the Partnership allocated a portion of its assets to CMF Drakewood Master Fund LLC (“Drakewood Master”), a limited liability company organized under the limited liability company laws of the State of Delaware. NL Master and Drakewood Master are collectively referred to as the “Funds.” Reference herein to the “Funds” may also include, as relevant, GSL Master, Aquantum Master, MB Master and Harbour Square Master.
During the years ended December 31, 2022, 2021 and 2020, the Partnership’s/Funds’ commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant. During certain periods included in this report, the Partnership/Funds deposited a portion of their cash in non-trading bank accounts at JPMorgan Chase Bank, N.A.
As of December 31, 2022, all trading decisions are made for the Partnership by Millburn Ridgefield Corporation (“Millburn”), Ospraie Management, LLC (“Ospraie”), Northlander Commodity Advisors LLP (“Northlander”), Drakewood Capital Management Limited (“Drakewood”) and EMC Capital Advisors, LLC (“EMC”) (each an “Advisor” and, collectively, the “Advisors”), each, a registered commodity trading advisor. Effective on November 30, 2018, Aventis Asset Management, LLC (“Aventis”) ceased to act as a commodity trading advisor for the Partnership. Effective on March 31, 2019, Harbour Square Capital Management LLC (“Harbour Square”) ceased to act as a commodity trading advisor to the Partnership. Effective on December 31, 2020, Aquantum GmbH (“Aquantum”) ceased to act as a commodity trading advisor to the Partnership. Effective June 30, 2022, Geosol Capital, LLC (“Geosol”) ceased to act as a commodity trading advisor to the Partnership. Effective October 31, 2022, Pan Capital Management L.P. (“Pan”) ceased to act as a commodity trading advisor to the Partnership. References herein to the “Advisors” may also include, as relevant, Pan, Geosol, Aquantum, Harbour Square and Aventis. From February 1, 2013 until December 31, 2017, all trading decisions were made by Aventis. A description of the trading activities and focus of each Advisor is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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 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 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 of 0.75% (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. For the period from July 1, 2020 to December 31, 2020, Class A Redeemable Units were subject to a monthly ongoing selling agent fee equal to 1/12 of 1.00% (a 1.00% annual rate) of the adjusted net assets of Class A Redeemable Units as of the end of each month. Prior to July 1, 2020, Class A Redeemable Units were subject to a monthly ongoing selling agent fee equal to 1/12 of 2.00% (a 2.00% annual rate) of the adjusted net assets of Class A Redeemable Units as of the end of each month. Effective January 1, 2021, the Partnership ceased offering Class D Redeemable Units.
For the period January 1, 2022 through December 31, 2022, the approximate average market sector distribution for the Partnership was as follows:
At December 31, 2022, the Partnership owned approximately 28.6% of NL Master and 31.8% of Drakewood Master. At December 31, 2021, the Partnership owned approximately 26.0% of NL Master and 100.0% of GSL Master. The performance of the Partnership is directly affected by the performance of the Funds.
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.
The General Partner and each limited partner of the Partnership share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each, except that no limited partner is liable for obligations of the Partnership in excess of its capital contribution and profits, if any, net of distributions or redemptions and losses, if any.
The Partnership will be liquidated upon the first of the following to occur: December 31, 2055; the net asset value per Redeemable Unit decreases to less than $400 as of the close of any business day; or under certain circumstances as set forth in the limited partnership agreement of the Partnership, as may be amended or restated from time to time (the “Limited Partnership Agreement.”) In addition, the General Partner may, in its sole discretion, cause the Partnership to dissolve if the Partnership’s aggregate net assets decline to less than $1,000,000.
The General Partner administers the business and affairs of the Partnership, including selecting one or more advisors to make trading decisions for the Partnership. Effective January 1, 2019, the Partnership pays the General Partner a monthly General Partner fee in return for its services to the Partnership equal to 1/12 of 0.75% (0.75% per year) of month-end Net Assets. Prior to January 1, 2019, the Partnership paid the General Partner a monthly General Partner fee in return for its services to the Partnership equal to 1/12 of 1% (1% per year) of month-end Net Assets. Month-end Net Assets per Class, for the purpose of calculating the General Partner fee are Net Assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s management fee, incentive fee accrual, the General Partner fee and any redemptions or distributions as of the end of such month. The General Partner fee is allocated proportionately to each Class based on the net asset value of the respective Class. This fee may be increased or decreased at the discretion of the General Partner.
The General Partner, on behalf of the Partnership, entered into management agreements (each, a “Management Agreement”) with the Advisors. The Advisors are not affiliated with one another, are not affiliated with the General Partner or MS&Co. and are not responsible for the organization or operation of the Partnership. The Partnership pays Millburn a monthly management fee equal to 1/12 of 1.0% (1.0% per year) of month-end Net Assets allocated to Millburn. Prior to January 1, 2021, the Partnership paid Millburn a monthly management fee equal to 1/12 of 2.0% (2.0% per year) of month-end Net Assets allocated to Millburn. The Partnership pays Ospraie a monthly management fee equal to 1/12 of 1.5% (1.5% per year) of month-end Net Assets allocated to Ospraie. The Partnership pays Northlander a monthly management fee equal to 1/12 of 1.25% (1.25% per year) of month-end Net Assets allocated to Northlander. The Partnership pays Drakewood a monthly management fee equal to 1/12 of 1.5% (1.5% per year) of month-end Net Assets allocated to Drakewood. The Partnership pays EMC a monthly management fee equal to 1/12 of 0.60% (0.60 % per year) of month-end Net Assets allocated to EMC. Prior to its termination on November 30, 2018, Aventis was paid a monthly management fee equal to 1/12 of 1.25% (1.25% per year) of month-end Net Assets allocated to Aventis. Prior to its termination on March 31, 2019, Harbour Square was paid a monthly management fee equal to 1/12 of 1.15% (1.15% per year) of month-end Net Assets allocated to Harbour Square. Prior to its termination on December 31, 2020, Aquantum was paid a monthly management fee equal to 1/12 of 1.25% (1.25% per year) of month-end Net Assets allocated to Aquantum. Prior to its termination on June 30, 2022, Geosol was paid a monthly management fee equal to 1/12 of 1.0% (1.0% per year) of month-end Net Assets allocated to Geosol. Prior to its termination on October 31, 2022, Pan was paid a monthly management fee equal to 1/12 of 1.25% (1.25% per year) of month end Net Assets allocated to Pan. Month-end Net Assets, for the purpose of calculating management fees are Net Assets as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s management fee, incentive fee accrual, the General Partner fee and any redemptions or distributions as of the end of such month. An Advisor’s management fee is allocated proportionately to each Class based on the net asset value of the respective Class.
In addition, the Partnership is obligated to pay each Advisor an incentive fee. The Partnership pays Ospraie, Northlander, Drakewood and EMC each an incentive fee, payable annually, equal to 20% of New Trading Profits, as defined in each Management Agreement, earned by the relevant Advisor for the Partnership during each calendar year. The Partnership pays Millburn an incentive fee, payable annually, equal to 27.5% of New Trading Profits, as defined in the Management Agreement, earned by Millburn for the Partnership during the calendar year. Prior to January 1, 2021, Millburn was eligible to receive an incentive fee, payable annually, equal to 20% of New Trading Profits, as defined in the Management Agreement. Prior to its termination on November 30, 2018, Aventis was eligible to receive an incentive fee, payable quarterly, equal to 20% of New Trading Profits, as defined in the Management Agreement. Prior to its termination on March 31, 2019, Harbour Square was eligible to receive an incentive fee, payable quarterly, equal to 20% of New Trading Profits, as defined in the Management Agreement. Prior to its termination on December 31, 2020, Aquantum was eligible to receive a semi-annual incentive fee of 20% of New Trading Profits, as defined in the Management Agreement, earned by Aquantum for the Partnership each calendar half-year. Prior to its termination on June 30, 2022, Geosol was eligible to receive an incentive fee, payable annually, equal to 20% of New Trading Profits, as defined in the Management Agreement, earned by Geosol for the Partnership each calendar year. Prior to its termination on October 31, 2022, Pan was eligible to receive a quarterly incentive fee equal to 20% of New Trading Profits, as defined in the Management Agreement, earned by Pan for the Partnership each quarter. An Advisor’s incentive fee is allocated proportionally to each Class based on the net asset value of the respective Class. To the extent an Advisor incurs a loss for the Partnership, the Advisor will not be paid an incentive fee until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership. Each Management Agreement can be terminated upon notice by either party. 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 among the Advisors and may allocate assets to additional advisors at any time.
The Partnership and the Funds have entered into a customer agreement with MS&Co. (the “Customer Agreement”). Under the Customer Agreement, the Partnership pays 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 (“NFA”) fees (collectively, the “clearing fees”) directly and indirectly through its investment in the Funds. Clearing fees are allocated to the Partnership based on its proportionate share of each Fund. Clearing fees are also borne directly by the Partnership for its direct trading. Clearing fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed. All of the Partnership’s assets available for trading in commodity interests not held in the Funds’ accounts at MS&Co. are deposited in the Partnership’s accounts at MS&Co. The Partnership’s cash deposited by MS&Co. is held in segregated bank accounts to the extent required by Commodity Futures Trading Commission (“CFTC”) regulations. MS&Co. has agreed to pay the Partnership interest 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 at the rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate.
The Partnership has also entered into a selling agreement (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 to 0.75% per year of the adjusted month-end net assets of Class A Redeemable Units and Class D Redeemable Units, respectively. For the period from July 1, 2020 to December 31, 2020, the Partnership paid Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to 1.0% per year of the adjusted month-end net assets of Class A Redeemable Units. Prior to July 1, 2020, the Partnership paid Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to 2.0% per year of month-end net assets of Class A Redeemable Units. 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. Month-end net assets, for the purpose of calculating ongoing selling agent fees are net assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s ongoing selling agent fee, management fee, incentive fee accrual, the General Partner fee and other expenses and any redemptions or distributions as of the end of such month.
Generally, a limited partner/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 General Partner/Trading Manager at least three days in advance of the Redemption Date. Such withdrawals are classified as a liability when the limited partner/member elects to redeem and informs the Funds. However, a limited partner/member may request a withdrawal as of the end of any day if such request is received by the General Partner/Trading Manager at least three days in advance of the proposed withdrawal day.
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.
(b) Financial Information about Segments. The Partnership’s business consists of only one segment, speculative trading of commodity interests. The Partnership does not engage in sales of goods or services. The Partnership’s capital as of December 31, 2022 was $155,036,001.
(c) Narrative Description of Business. See Paragraphs (a) and (b) above.
(i) through (xii) - Not applicable.
(xiii) - The Partnership has no employees.
(d) Financial Information About Geographic Areas. The Partnership does not engage in the sale of goods or services or own any long-lived assets, and therefore this item is not applicable.
(e) Available Information. The Partnership does not have an Internet address. The Partnership will provide paper copies of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports free of charge upon request.
(f) Reports to Security Holders. Not applicable.
(g) Enforceability of Civil Liabilities Against Foreign Persons. Not applicable.
(h) Smaller Reporting Companies. Not applicable.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
As a result of leverage, small changes in the price of the Partnership’s positions may result in major losses.
The trading of commodity interests is speculative, volatile and involves a high degree of leverage. A small change in the market price of a commodity interest contract can produce major losses for the Partnership. Market prices can be influenced by, among other things, changing supply and demand relationships, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events, weather and climate conditions, insects and plant disease, purchases and sales by foreign countries, changing interest rates, pandemics, epidemics and other public health crises.
An investor may lose all of their investment.
Due to the speculative nature of trading commodity interests, an investor could lose all of their investment in the Partnership.
The Partnership will pay substantial fees and expenses regardless of profitability.
Regardless of its trading performance, the Partnership will incur fees and expenses, including but not limited to trading and transaction fees, ongoing selling agent fees, General Partner fees and management fees. Substantial incentive fees may be paid to one or more of the Advisors even if the Partnership experiences a net loss for the full year.
An investor’s ability to redeem Redeemable Units is limited.
An investor’s ability to redeem Redeemable Units is limited and no market exists for the Redeemable Units.
Conflicts of interest exist.
The Partnership is subject to numerous conflicts of interest including those that arise from the fact that:
1. The General Partner and the Partnership’s/Funds’ commodity broker are affiliates;
2. The Advisors, the Partnership’s/Funds’ commodity broker, the General Partner and their respective principals and affiliates may trade in commodity interests for their own accounts;
3. An investor’s financial advisor will receive ongoing compensation for providing services to the investor’s account; and
4. The General Partner, on behalf of the Partnership, may purchase shares from money market mutual funds affiliated and/or unaffiliated with the General Partner.
Investing in Redeemable Units may not provide the desired diversification of an investor’s overall portfolio.
One of the Partnership’s objectives is to add an element of diversification to a traditional stock and bond portfolio, but any benefit of portfolio diversification is dependent upon the Partnership/Funds achieving positive returns and such returns being independent of stock and bond market returns.
Past performance is no assurance of future results.
The Advisors’ trading strategies may not perform as they have performed in the past, and past performance does not necessarily predict future returns. The Advisors have from time to time incurred substantial losses in trading on behalf of clients.
An investor’s tax liability may exceed cash distributions.
Investors are taxed on their share of the Partnership’s income, even though the Partnership does not intend to make any distributions.
The General Partner may allocate the Partnership’s assets to undisclosed advisors.
The General Partner at any time may select and allocate the Partnership’s assets to undisclosed advisors. Investors may not be advised of such changes in advance, or at all. Investors must rely on the ability of the General Partner to select commodity trading advisors and allocate assets among them.
Regulatory changes could restrict the Partnership’s operations and increase its operational costs.
Regulatory changes could adversely affect the Partnership by restricting its markets or activities, limiting its trading and/or increasing the costs or taxes to which investors are subject. Pursuant to the mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010, the CFTC and the Securities and Exchange Commission (the “SEC”) have promulgated rules to regulate trading in swaps and swap dealers and to mandate additional reporting and disclosure requirements and continue to promulgate rules regarding capital and margin requirements, to require that certain swaps be traded on an exchange or a swap execution facility, and to require that derivatives (such as those traded by the Partnership) be moved into central clearinghouses. The CFTC and the prudential regulators that oversee swap dealers have adopted rules regarding margin requirements for certain derivatives. In addition, the CFTC and such prudential regulators have proposed or adopted, respectively, rules regarding capital requirements for swap dealers. These rules may negatively impact the manner in which swap contracts are traded and/or settled, increase the cost of such trades, and limit trading by speculators (such as the Partnership) in futures and over-the-counter (“OTC”) markets.
Speculative position and trading limits may reduce profitability.
The CFTC and U.S. exchanges have established “speculative position limits” on the maximum net long or net short positions which any person or a group of persons may hold or control in particular futures and options on futures. The Advisors believe that established speculative position and trading limits will not materially adversely affect trading for the Partnership. The trading instructions of an Advisor, however, may have to be modified, and positions held by the Partnership directly and indirectly through its investment in the Funds may have to be liquidated, in order to avoid exceeding these limits. Such modification or liquidation could adversely affect the operations and profitability of the Partnership/Funds by increasing transaction costs to liquidate positions and limiting potential profits on liquidated positions.
In January 2021, the CFTC finalized new rules that impose position limits on certain futures and option contracts and physical commodity swaps that are “economically equivalent” to such contracts. In addition to speculative position limits, most commodity exchanges also limit fluctuations in futures contract prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” Such regulations could have an adverse effect on an Advisor’s trading for the Partnership.
The General Partner, the Partnership, the Funds and their respective service providers (including the Advisors) and operations are potentially vulnerable to cyber-security attacks or incidents.
Like other business enterprises, the use of the internet and other electronic media and technology exposes the General Partner, the Partnership, the Funds and their respective services providers and operations, to potential risks from cyber-security attacks or incidents (collectively, “cyber events”). Cyber events may include, for example, unauthorized access to systems, networks or devices, infection from computer viruses or other malicious software code, mishandling or misuse of information and attacks which shut down, disable, slow or otherwise disrupt operations, business processes or website access or functionality. In addition to intentional cyber events, unintentional cyber events can occur. Unintentional cyber events may include, for example, the inadvertent release of confidential information, the mishandling or misuse of information and/or technological limitations or hardware failures (in the markets or otherwise) that constrain the Partnership’s and/or the Funds’ ability to gather, process and communicate information efficiently and securely, without interruption.
Any cyber event could adversely affect the Partnership’s and/or the Funds’ business, financial condition or results of operations and cause the Partnership and/or the Funds to incur financial loss and expense, as well as face exposure to regulatory penalties or legal claims, reputational damage and additional costs associated with corrective measures. A cyber-security breach could also jeopardize a limited partner’s personal, confidential, proprietary or other information processed and stored in, and transmitted through, the General Partner’s or a service provider’s computer systems. A cyber event may cause the Partnership, the Funds or their respective service providers to lose proprietary information, suffer data corruption, lose operational capacity (such as, for example, the loss of the ability to process transactions, calculate the Partnership’s net asset value, or allow investors to transact business) and/or fail to comply with applicable privacy and other laws. Among other potentially harmful effects, cyber events also may result in theft, unauthorized monitoring and failures in the physical infrastructure or operating systems that support the Partnership, the Funds or their respective service providers.
The nature of malicious cyber-attacks is becoming increasingly sophisticated and none of the General Partner, the Partnership nor the Funds can control whether a cyber-event will adversely affect the cyber systems of the Advisors or other third-party service providers.
Tax Laws Are Subject To Change at Any Time.
Tax laws and court and Internal Revenue Service (“IRS”) interpretations thereof are subject to change at any time, possibly with retroactive effect.
Prospective investors are urged to consult with their tax advisors with respect to regulatory or administrative developments and proposals, and their potential effects on them based on their unique circumstances.
The continuing spread of a new strain of coronavirus, which causes the viral disease known as COVID-19, may adversely affect our investments and operations.
Since its discovery in December 2019, a new strain of coronavirus, which causes the viral disease known as 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.
The 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 directives 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.
Given the continuing development of this situation, it is not possible to accurately predict how the market disruptions caused by 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 February 22, 2022, the United States and several European nations announced sanctions against Russia in response to Russia’s mobilization of forces and threat of invasion of the Ukraine, and governments around the world imposed, and may in the future impose, additional sanctions on Russia in response to its continued escalation of this conflict. On February 24, 2022, Russian President Putin commenced a full-scale invasion of Russia’s 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 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 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.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

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ITEM 2. PROPERTIES
Item 2. Properties.
The Partnership does not own or lease any properties. The General Partner operates out of facilities provided by Morgan Stanley and/or one of its subsidiaries.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. 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.
The Company has been responding to subpoenas and other requests for information from the Enforcement Division of the U.S. Securities and Exchange Commission and the United States Attorney’s Office for the Southern District of New York in connection with their investigations into various aspects of the Company’s blocks business, certain related sales and trading practices, and applicable controls (the “Investigations”). The Investigations are focused on whether the Company and/or its employees shared and/or used information regarding impending block transactions in violation of federal securities laws and regulations. The Company is continuing to cooperate with the Investigations and is responding to the requests. The Company also faces potential civil liability arising from claims that have been or may be asserted by, among others, block transaction participants who contend they were harmed or disadvantaged including, among other things, as a result of a share price decline allegedly caused by the activities of the Company and/or its employees, or as a result of the Company’s and/or its employees’ failure to adhere to applicable laws and regulations. In addition, the Company has responded to demands from shareholders under Section 220 of the Delaware General Corporation Law for books and records concerning the Investigations.
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.
The Firm has reached agreements in principle with two regulatory agencies-the SEC for $125 million and the CFTC for $75 million- to resolve record-keeping related investigations by those agencies relating to business communications on messaging platforms that had not been approved by the Firm. The Company was one of the entities involved in these investigations, and has recognized a provision of $63 million in anticipation of concluding the settlement with the SEC. On September 27, 2022, the Firm’s settlements with the SEC and the CFTC became effective.
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 State of New Jersey ex. rel. Hayes v. Bank of America Corp., et al. 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.
On May 17, 2013, plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed 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 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”) styled Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al. Plaintiffs 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. Plaintiffs’ motion for class certification was referred by the District Court to a magistrate judge who, on June 30, 2022, issued a report and recommendation that the District Court certify a class. The motion for class certification and the parties’ objections to the report and recommendation are pending before the District Court.
On August 13, 2021, the plaintiff in Camelot Event Driven Fund, a Series of Frank Funds Trust v. Morgan Stanley & Co. LLC, et al. filed in the Supreme Court of NY a purported class action complaint alleging violations of the federal securities laws against ViacomCBS (“Viacom”), certain of its officers and directors, and the underwriters, including the Company, of two March 2021 Viacom offerings: a $1,700 Viacom Class B Common Stock offering and a $1,000 offering of 5.75% Series A Mandatory Convertible Preferred Stock (collectively, the “Offerings”). The complaint alleges, inter alia, that the Viacom offering documents for both issuances contained material omissions because they did not disclose that certain of the underwriters, including the Company, had prime brokerage relationships and served as counterparties to certain derivative transactions with Archegos Capital Management LP, (“Archegos”), a fund with significant exposure to Viacom securities across multiple prime brokers. The complaint, which seeks, among other things, unspecified compensatory damages, alleges that the offering documents did not adequately disclose the risks associated with Archegos’s concentrated Viacom positions at the various prime brokers, including that the unwind of those positions could have a deleterious impact on the stock price of Viacom. On November 5, 2021, the complaint was amended to add allegations that defendants failed to disclose that certain underwriters, including the Company, had intended to unwind Archegos’s Viacom positions while simultaneously distributing the Offerings. On February 6, 2023, the court issued a decision denying the motions to dismiss as to the Company and the other underwriters, but granted the motion to dismiss as to Viacom and the Viacom individual defendants. On February 15 2023, the underwriters, including the Firm, filed their Notices of Appeal of the denial of their motions to dismiss.
Settled Civil Litigation
On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against MS&Co., styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., 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.
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, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A 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.
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 styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An 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 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 in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed 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.
On April 1, 2016, the California Attorney General’s Office filed an action against MS&Co. in California state court styled California v. Morgan Stanley, et al., 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.
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 Alaska Electrical Pension Fund v. BofA Secs., Inc., et al. 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 In re GSE Bonds Antitrust Litigation, 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.
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 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures. Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Market Information. The Partnership has issued no stock. There is no public market for the Redeemable Units.
(b) Holders. The number of holders of Redeemable Units as of February 28, 2023 was 826 for Class A Redeemable Units, 2 for Class D Redeemable Units and 15 for Class Z Redeemable Units.
(c) Dividends. The Partnership did not declare any distributions in 2022 or 2021. The Partnership does not intend to declare distributions in the foreseeable future.
(d) Securities Authorized for Issuance Under Equity Compensatory Plans. None.
(e) Performance Graph. Not applicable.
(f) Recent Sales of Unregistered Securities - Use of Proceeds from Registered Securities. For the year ended December 31, 2022, there were subscriptions of 4,842.6190 Class A Redeemable Units totaling $12,557,500 and 790.3010 Class Z Redeemable Units totaling $1,675,000. For the year ended December 31, 2021, there were subscriptions of 4,927.5530 Class A Redeemable Units totaling $10,121,560 and 194.2000 Class Z Redeemable Units totaling $325,000. For the year ended December 31, 2020, there were subscriptions of 1,834.1890 Class A Redeemable Units totaling $2,670,643 and 224.5500 Class Z Redeemable Units totaling $260,760.
Redeemable Units are issued in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (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 interests in commodity pools.
(g) Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
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 **
Class Z
(a) Total Number
of Redeemable
Units Purchased *
Class Z
(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
October 1, 2022 - October 31, 2022
135.1910
$ 2,713.34
N/A
N/A
N/A
N/A
November 1, 2022 - November 30, 2022
293.4290
$ 2,709.91
72.5510
$ 2,221.58
N/A
N/A
December 1, 2022 - December 31, 2022
209.7030
$ 2,721.77
N/A
N/A
N/A
N/A
638.3230
$ 2,714.53
72.5510
$ 2,221.58
* 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.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
The Partnership, directly and through its investment in the Funds, seeks to achieve capital appreciation through speculative trading of commodity interests on 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. 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 General Partner/Trading Manager manages all business of the Partnership/Funds. The General Partner delegated its responsibility for the investment of the Partnership’s assets to the Advisors. The General Partner/Trading Manager engages a team of approximately 9 professionals, whose primary emphasis is on attempting to maintain quality control among the advisors to the funds operated or managed by the General Partner/Trading Manager. 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 provide processing of subscriptions and redemptions and reporting to limited partners and regulatory authorities. The General Partner also engages staff involved in marketing and sales support. In selecting an Advisor for the Partnership, the General Partner considers, among other factors, the 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 an Advisor and 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/Trading Manager 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/Funds.
While the Partnership and the Funds have the right to seek lower commission rates 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.
The programs traded by each Advisor on behalf of the Partnership are: Millburn - Commodity Program, Ospraie - Commodity Program, Northlander - Commodity Program, Drakewood - Drakewood Prospect Fund Strategy, EMC - Commodity Program and prior to Pan’s termination effective October 31, 2022, Pan - Energy Trading Program and prior to Geosol’s termination effective June 30, 2022, Geosol - U.S. Power and Natural Gas Program and prior to Aquantum’s termination effective December 31, 2020, Aquantum - Aquantum Commodity Spread Program and prior to Harbour Square’s termination effective March 31, 2019, Harbour Square - Discretionary Energy Program and prior to Aventis’s termination effective November 30, 2018, Aventis - Aventis Diversified Commodity Strategy. 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 December 31, 2022 and September 30, 2022, the Partnership’s assets were allocated among the Advisors in the following approximate percentages:
Advisor
December 31, 2022
December 31, 2022
(percentage of
Partners’ Capital)
September 30, 2022
September 30, 2022
(percentage of
Partners’ Capital)
Millburn
$ 57,437,177
37%
$ 41,227,928
28%
Ospraie
47,510,592
31%
37,727,320
25%
Pan
-
0%
35,651,525
24%
Northlander
12,964,185
8%
11,629,331
8%
Drakewood
13,846,564
9%
12,012,416
7%
EMC
8,600,820
6%
7,556,489
5%
Unallocated
14,676,663
9%
4,111,998
3%
Millburn Ridgefield Corporation
Millburn trades the Partnership’s assets in accordance with its Millburn Commodity Program. Millburn is the corporate successor to a futures trading and advisory organization that has been continuously managing assets in the currency and futures markets using quantitative, systematic techniques since 1971. The Millburn Commodity Program trades a diverse group of global commodity futures markets - currently approximately 45 - although it may not trade in all such markets at all times and the number of markets may increase or decrease from time to time. It strives to maintain a diversified portfolio of commodity futures, allocated according to volatility based risk (not face value), subject to constraints, in order to take advantage of global economic cycles and commodity price fluctuations. The portfolio is intended to be as diversified as market liquidity permits, and each market is traded using a diversified set of directional trading systems. Maximum market allocations for each market in the portfolio are determined based on factors including, among others, exchange regulations and depth of market. Millburn seeks to increase the number of commodity futures markets traded in the portfolio over time as new futures contracts become available, but it is also likely that certain futures contracts will be removed from the portfolio due to diminishing liquidity.
Millburn makes its systematically-based investment and trading decisions pursuant to its investment and trading methods, which may include technical trend analysis, certain nontraditional technical systems (i.e., systems falling outside of traditional technical trend analysis) and money management principles, each of which may be revised from time to time. The objective of the investment and trading systems employed by Millburn is to consider multiple data inputs, or “factors,” in order to arrive at relatively near-term return forecasts for each traded instrument, and take appropriate, risk-managed positions. These factors include price data, but also a range of price derivative and non-price data.
Trades generated by quantitative models may be profitable or unprofitable. The Millburn Commodity Program’s objective is to have its profitable trades offset and exceed losses from its unprofitable trades. During periods in which market behavior differs significantly from that analyzed to build models, substantial losses are possible, and even likely. Successful systematic futures trading depends on several elements. Two of the main factors are the development and selection of the trading systems used in each market, and the allocation of portfolio risk among the markets available for trading.
Market environments change over time, and particular systems may perform well in one environment but poorly in another. Likewise, market sectors and individual markets go through periods where systematic trading is very profitable and other periods where no system is able to generate any profits. The goal of Millburn’s research has been to develop and select a mix of systems in each market and to allocate risk across a wide array of markets, so as to contain overall portfolio risk within a targeted range while allowing exposure to profitable opportunities.
Over more than 50 years, Millburn and its predecessor entities have developed hundreds of trading systems. These trading systems generate buy or sell decisions in a particular market based on the analysis of price movements in the market, some non-price information or a combination of both. Of course, systems can be materially different -better in some periods and worse in others. The main distinguishing features are: the time frame over which systems work (intra-day to long term); the granularity of data fed into them (tick data to daily, weekly or monthly frequencies); type (market or economic statistics); source (cash, futures, forward or option markets generated data or government and industry generated statistical information), and the objective of the system (profiting from momentum, mean reversion, trading ranges or volatility). No single approach will work all the time. Therefore, Millburn’s objective is to have several approaches and several data inputs operating in conjunction with one another.
When arriving at the portfolio allocation, Millburn generally seeks maximum diversification subject to liquidity and sector concentration constraints and subject to the mandate of the strategy. Each market is traded using a diversified set of trading systems, which may be optimized for groups of markets, sectors or specific markets. The markets traded and allocations are reviewed at least monthly, although changes may occur more or less frequently. The following factors, among others, are considered in constructing a universe of markets to trade for each portfolio: profitability, liquidity of markets, professional judgment, desired diversification, transaction costs, exchange regulations and depth of market. For the Millburn Commodity Program, the current allocation to any market in the portfolio does not exceed 10%. The portfolio weightings will be determined, taking into account statistical data on the returns in each market, liquidity constraints and Millburn’s judgment and experience.
Risk is a function of both price level and price volatility. For example, for any given level of volatility, a 100,000 barrel crude oil position is worth more and is, therefore, probably more risky with oil at $90 per barrel than with oil at $50 per barrel. Similarly, oil would be more risky if prices are moving in a 5% daily range than if prices are moving in a 1% daily range. Millburn sizes the position in each market taking into account its measurement of risk based on price level and volatility in that market. Market exposure is then managed by the position-sizing models which measure the risk in the portfolio’s position in each market. In the event the model determines that the risk has changed beyond an acceptable threshold, it will signal a change in the position - a decrease in position size when risk increases and an increase in position size when risk decreases. Millburn’s position-sizing models maintain overall portfolio risk and distribution of risk across markets within designated ranges. The position-sizing model manages the position traded by each of the (directional) trading systems discussed above.
In addition, Millburn’s risk management processes focus on money management principles applicable to the portfolio as a whole rather than to individual markets. The first principle is portfolio diversification which attempts to improve the quality of profits by reducing volatility. Additional money management principles applicable to the portfolio as a whole include:
(1) limiting the assets committed as margin or collateral, generally within a range of 5% to 35% of an account’s net assets, though the amount may at any time be higher or lower; and
(2) prohibiting pyramiding - that is, using unrealized profits in a particular market as margin for additional positions solely in the same market.
Another important risk management function is the careful control of leverage or total portfolio exposure. Leverage levels are determined by simulating the entire portfolio - all markets, all systems, all risk control models, the exact weightings of the markets in the portfolio and the proposed level of leverage - over the past five or ten years to determine the portfolio’s simulated risk and return characteristics as well as the worst case experienced by the portfolio in the simulation period. The worst case, or peak-to-trough drawdown, is measured from a daily high in portfolio assets to the subsequent daily low whether that occurs days, weeks or months after the daily high. If Millburn considers the drawdown too severe or the portfolio’s simulated volatility too high, it reduces the leverage or total portfolio exposure. There are, however, no restrictions on the amount of leverage Millburn may use at any given time. Decisions whether to trade a particular market require the exercise of judgment. The decision not to trade certain markets for certain periods, or to reduce the size of a position in a particular market, may result at times in missing significant profit opportunities.
In some cases, Millburn employs discretion in the execution of trades where The Millburn Corporation’s trader expertise plays a role in timing of orders and, from time to time, Millburn may adjust the size of a position, long or short, in any given market indicated by its systematic trading strategies. This exercise of discretion (other than in trade execution) generally occurs only in response to unusual market conditions that may not have been factored into the design of the trading systems and is generally intended to reduce risk. Decisions to make such adjustments also require the exercise of judgment and may include consideration of the volatility of the particular market; the pattern of price movements, both inter-day and intra-day; open interest; volume of trading; changes in spread relationships between various forward contracts; and overall portfolio balance and risk exposure. With respect to the execution of trades, Millburn may rely to an extent upon the judgment of others, including dealers and bank traders. No assurance is given that it will be possible to execute trades regularly at or near the desired buy or sell point.
The trading method, systems and money management principles utilized by Millburn are proprietary and confidential. The foregoing description is general and is not intended to be complete. Millburn and its principals may, from time to time, trade futures, forward, and option contracts and securities for their own proprietary accounts. Such trades may or may not be in accordance with the Millburn trading program described above. The trading records of those accounts are not available for inspection.
Ospraie Management, LLC
Ospraie trades the Partnership’s assets in accordance with the Commodity Program. The primary investment objective is the appreciation of capital through active, leveraged trading and investment on a global basis primarily in a portfolio of commodities and related derivative instruments. Such commodity trading includes futures, forward, option and swap contracts and physical commodities in energy, industrial metals, precious metals, grains, softs/meats, freight and related markets, among other commodity sectors. The cornerstone of Ospraie’s approach to commodity investing is fundamental research. Ospraie uses a similar analytical methodology for each commodity market in which it elects to invest. This methodology incorporates the multiple variables that determine the end price of a commodity, including, but not limited to, the available supply of the commodity and the cost of production including extracting or harvesting, transporting, processing and distributing such commodity. It also incorporates current and projected demand for the commodity based on relative and absolute price levels and global economic factors. In addition, the relative availability of inventory in respect of a specified commodity to the world markets is factored into Ospraie’s analytical model. This analytical methodology guides Ospraie’s investment decisions with respect to an industry and results in a view as to its likely economic prospects. The investment thesis is then expressed in the global capital markets principally through futures and options instruments. The majority of the portfolio will include long/short directional investments based on Ospraie’s view on the future movements of prices of applicable commodities. Ospraie will also seek to maximize returns by investing in relative value opportunities, including investments based on intra-commodity curve related spreads (i.e., entering into a long and short position in a commodity interest with different delivery months) and inter-commodity price spreads (i.e., entering into a long position in a commodity interest and entering into a short position in a related commodity interest). Ospraie may also invest in foreign exchange, primarily for hedging purposes.
While the portfolio will generally be based upon Ospraie’s long-term views, the investment process will also include a subjective overlay as to the short-term profitability of an investment. Ospraie intends to dynamically size and scale back its trades based on its continued fundamental analysis, current level of conviction, the likely timing of realization, and current market conditions applicable to each investment. The portfolio will be principally comprised of highly liquid investment assets in order to maximize liquidity for investors. The portfolio’s liquidity will be achieved through the use of various instruments to access what Ospraie believes is the most efficient combination of liquidity and risk/reward consideration for each position.
Pan Capital Management L.P.
Pan traded the Partnership’s assets allocated to it directly pursuant to its Energy Trading Program, a proprietary, discretionary trading program. The Energy Trading Program’s primary objective was to produce absolute returns through active trading of the U.S. energy markets, while offering investors an opportunity to diversify their overall portfolios. The Energy Trading Program also strived to minimize the risk of capital loss.
Pan traded listed exchange-traded futures and options on futures in the U.S. natural gas market and, with the consent of the General Partner, other liquid U.S. energy markets, including, but not limited to, electricity and crude oil. With the General Partner’s consent Pan may also trade swaps on behalf of the Partnership. Pan based energy trading on fundamental analysis rather than market timing and seeks to structure trades with asymmetric risk return.
Pan firmly believed solid and thorough fundamental analysis, rigorous risk management and deep understanding of energy markets are required to achieve the Energy Trading Program’s investment objectives.
Northlander Commodity Advisors LLP
The portion of the Partnership’s assets that are allocated to Northlander for trading are not invested in commodity interests directly. Northlander’s allocation of the Partnership’s assets is currently invested in NL Master. Northlander trades the Partnership’s assets allocated to it pursuant to its Northlander Commodity Program. The Northlander Commodity Program is a commodity focused trading program which invests in energy products globally, but with an emphasis on European power, European gas, European emissions, and international coal markets. The program is an absolute return strategy which seeks to identify value in mispriced markets through careful fundamental analysis by focusing on market dynamics and market structure and then expressing its thesis through its proprietary portfolio construction and risk management procedures.
Geosol Capital, LLC
The portion of the Partnership’s assets that were allocated to Geosol for trading were not invested in commodity interests directly. Geosol’s allocation of the Partnership’s assets were invested in GSL Master. Geosol traded the Partnership’s assets in accordance with its U.S. Power and Natural Gas Program. Geosol used proprietary fundamental valuation analysis combined with their proprietary profit maximizing risk management framework to identify a variety of trade opportunities and execution possibilities in North American energy markets, including electricity and natural gas, using listed commodity futures and options. The Trading Manager and Geosol have agreed that the volatility applied to the assets allocated to Geosol shall initially be 50.0% (one half) of the volatility typically employed for the trading of the program.
Upon identifying opportunities through fundamental analysis (i.e., supply, demand, storage and power dispatch stack), Geosol then determined the most appropriate means of capturing the identified value. Geosol allocated risk based on predetermined calculations of maximum acceptable loss exposure associated with each strategy and commodity. Geosol employs several different types of risk models based on the characteristics of each strategy and commodity, and will periodically shift risk allocations between commodities and risk books based on the opportunities observed in the marketplace. Geosol believes that flexible risk allocations tend to produce greater total returns in a multi-commodity book due to higher average capital utilization. The risk process measures profit/loss and position by strategy and commodity on a daily basis.
In managing the trading activity for the Partnership, Geosol strived to trade GSL Master pari passu with Geosol Capital Onshore I, LP subject to the targeted volatility differential as described above and/or directed (in writing) by the General Partner/Trading Manager.
Drakewood Capital Management Limited
Drakewood trades the Partnership’s assets allocated to it pursuant to the Drakewood Prospect Fund Strategy. Pursuant to the Drakewood Prospect Fund Strategy, Drakewood invests the Partnership’s assets primarily in a portfolio of risk positions in precious, non-ferrous and ferrous metal futures, forward contracts and related options, and derivative instruments. Other commodities may be traded from time to time, and may also invest in LME warrants, although these instruments are expected to constitute a relatively minor part of the portfolio. Investments made pursuant to the Drakewood Prospect Fund Strategy investments are expected to be concentrated in precious, non-ferrous and ferrous metal strategies and the Program’s investments are not expected to be diversified.
The Drakewood Prospect Fund Strategy is designed to gain exposure to opportunities in the majority of actively traded metals while limiting exposure in any one particular metal. The intent of this strategy is to increase opportunities for gain, while managing risk in order to provide more consistent returns.
Based on the fundamentally driven investment approach of the Drakewood Prospect Fund Strategy, Drakewood will often hold generally directional positions - either predominantly long or short depending on price drivers for each individual metal. The Drakewood Prospect Fund Strategy is expected to be neither long nor short biased through the cycle but rather to take a fundamental view over a one, two, five and ten year time frame and take positions accordingly. Long long-term core positions will be augmented by shorter shorter-term trading positions around each core position to manage short short-term price risk. In normal circumstances there may be daily trading activity on the portfolio even though the core fundamental view will persist for a year or more. Due to the nature of commodities futures trading, gross exposures may be much higher than net asset value due to the nature of having numerous offsetting positions, such as calendar spreads.
EMC Capital Advisors, LLC
EMC trades the Partnership’s assets allocated to it pursuant to the EMC Commodity Program. The investment strategy employed in the EMC Commodity Program seeks to provide long-term positive returns with low correlation to equity, fixed income and hedge fund portfolios. EMC employs quantitative, systematic trading models across a broad range of liquid global commodity and currency markets. Sectors traded include precious and base metals, energies, agricultural and soft commodities.
Aquantum GmbH
Aquantum traded the Partnership’s assets allocated to it pursuant to its Aquantum Commodity Spread Program. The Aquantum Commodity Spread Program was a systematic commodity market-neutral trading program. It was designed to benefit from seasonal price dislocations in the forward structure of numerous commodity futures markets across all sectors (energy, softs, grains, livestock, and metals) which are the result of changing market participants’ expectations and fundamental factors like weather, climate, trends in consumption, harvest cycles, feed and storage costs, which typically trigger supply and demand dislocations.
While the Aquantum Commodity Spread Program may have combined multiple spread positions per market, each individual trade was implemented as an intra-market calendar spread and was placed according to a 100% systematic methodology. Due to the seasonal character of the patterns traded, the Aquantum Commodity Spread Program was a “time” based strategy.
Harbour Square Capital Management LLC
Harbour Square traded the Partnership’s assets allocated to it pursuant to its Discretionary Energy Program. The Discretionary Energy Program focused on a proprietary process that involved applying simulations to in-house models that emulated the fundamental elements of natural gas supply and demand to build distributions of possible fundamental outcomes. Harbour Square analyzed the changes to these distributions to determine underlying skew variations throughout time. This analysis of the change and rate of change in fundamental distributions while evaluating the concurrent natural gas price movements along the forward curve allowed Harbour Square to identify optimal risk/reward investment opportunities. Harbour Square looked to capitalize on short-to-intermediate term price dislocations by trading exchange-cleared futures, options and swaps in the U.S. natural gas market.
Aventis Asset Management, LLC
Aventis traded the Partnership’s assets allocated to it pursuant to its Aventis Diversified Commodity Strategy. The Aventis Diversified Commodity Strategy was a proprietary trading program developed and refined by Aventis, which was the synthesis of disparate fundamental views and technical indicators overlaid with strict risk management policies on a position, sector and portfolio basis. The Aventis Diversified Commodity Strategy had the following characteristics:
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Ensemble of Three Sub-Programs: The Aventis Diversified Commodity Strategy was based on an ensemble of three discretionary sub-programs: spreads, directional and short term trading. This type of trading was based primarily on the fundamentals of the market (i.e., changes in supply or demand of a commodity). It also included supply and demand of the pit (i.e., discovery of over bought and over sold conditions).
•
Spread Trading: Approximately 60% of trading activity was based on calendar, intra-market and inter-market spreads. Intra-market spreads are where one is simultaneously long and short different delivery months of the same contract (i.e., long April Live Cattle versus short June Live Cattle). Inter-market spreads are where one is long one contract and simultaneously short a completely different contract (i.e., long December Natural Gas and short December Crude Oil).
•
Directional Trading: Approximately 35% of the strategy was directional in nature utilizing outright and spread positions.
•
Short Term Trading: Approximately 5% of the strategy was involved in short term trading.
•
Markets Followed: The Aventis Diversified Commodity Strategy traded on behalf of the Partnership in the following markets, among others: grains, currencies, energies, softs, meats and metals.
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Risk Management: Effective risk management was also a crucial aspect of the program. Account size, expectation, volatility of markets traded and the nature of other positions taken were all factors in deciding whether to take a position and determining the amount of equity committed to that position.
Please note that the percentage of assets allocated to the three discretionary sub-programs (spreads, directional and short term trading) was made pursuant to Aventis’s sole discretion and not in order to maintain any constant percentage allocation among the different sub-programs. As a result, the amount of assets allocated to each sub-program, both on a dollar amount and percentage basis, varied greatly over the life of the Partnership’s investment.
Trading decisions may have required the exercise of judgment by Aventis. Therefore, successful trading depended on Aventis’s trading ability, knowledge and judgment. Aventis exercised its judgment and discretion in interpreting the data generated by its trading program, and made all decisions regarding trading, including selecting the markets which were followed and traded. In addition, Aventis determined the method by which orders were placed, the types of orders that were placed, the overall leverage for the portfolio, and, when applicable, the time at which orders were placed with, and executed by, a broker.
The trading program that was followed by Aventis did not assure successful trading. Investment decisions made in accordance with the Aventis Diversified Commodity Strategy was based on an assessment of available market information. However, because of the large quantity of information at hand, the number of available facts that may have been overlooked and the variables that may have shifted, any investment decision must, in the final analysis, have been based on the judgment of Aventis.
The decision by Aventis not to trade certain markets or not to make certain trades may have resulted at times in missing price moves and hence profits of great magnitude, which other trading advisors who were willing to trade these markets may have been able to capture. Aventis’s approach was dependent in part on the existence of certain technical or fundamental indicators. There have been periods in the past when there were no such market indicators present.
Aventis believed that the development of a trading strategy was a continual process. As a result of further analysis and research, changes were made from time to time in the specific manner in which the Aventis Diversified Commodity Strategy evaluated price movements in various markets.
The Aventis Diversified Commodity Strategy was a proprietary and confidential program, and the foregoing description is, of necessity, general and is not intended to be exhaustive. Consequently, an investor cannot determine the full details of the program, or whether the program was being followed. There was no assurance that any trading strategy of Aventis was able to produce profitable results. As a managed futures partnership, the Partnership’s performance is dependent upon the successful trading of the Advisors to achieve the Partnership’s objectives. It is the business of the General Partner to monitor an Advisor’s performance to assure compliance with the Partnership’s trading policies and to determine if the Advisor’s performance is meeting the Partnership’s objectives.
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 financial statements included in “Item 8. Financial Statements and Supplementary Data.”
For the period January 1, 2022 through December 31, 2022, the average allocation by commodity market sector for NL Master and Drakewood Master was as follows:
NL Master
Energy
100%
Drakewood Master
Currencies
7%
Metals
93%
(a) Liquidity.
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 and restricted cash, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts, options purchased at fair value and investment in U.S. Treasury bills 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 investment in the Funds and its direct investments. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the year ended December 31, 2022.
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 them to enter and exit trades without noticeably moving the market.
(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 such 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 clearinghouse, 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 purchases 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 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, 2022 through December 31, 2022, the Partnership’s average margin to equity ratio (i.e., the percentage of assets on deposit required for margin) was approximately 9.9%. 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 and the Funds are parties to financial instruments with 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 or 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.
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.
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 from fluctuations due to 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.
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 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 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 Partnership/Funds have credit risk and concentration risk, as MS&Co. or an MS&Co. affiliate are 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. or an MS&Co. affiliate, the Partnership’s/Funds’ counterparty is an exchange or clearing organization.
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. The limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
The General Partner/Trading Manager monitors and attempts to mitigate the Partnership’s/Funds’ risk exposure on a daily basis through financial, credit and risk management monitoring systems, and believes, accordingly, 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/Trading Manager to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, exchange-cleared swap and option contracts by sector, margin requirements, gain and loss transactions and collateral positions. (See also “Item 8. Financial Statements and Supplementary Data.” for further information on financial instrument risk included in the notes to the financial statements.)
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.
Other than the risks inherent in commodity futures, forwards, options and swaps trading, 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 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, subscriptions and 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, pandemics, epidemics and other health crises, 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, clearing fees, ongoing selling agent fees, management fees and General Partner fees. The level of these expenses is dependent upon trading performance and the level of net assets maintained. In addition, the amount of interest income earned by the Partnership is dependent upon (1) the average daily equity maintained in cash in the Partnership’s and/or 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.
No forecast can be made as to the level of redemptions in any given period. A limited partner may require the Partnership to redeem some or all of its Redeemable Units at their net asset value 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 are generally funded out of the Partnership’s cash holdings and/or redemptions from the Funds.
For the year ended December 31, 2022, 4,280.7070 Class A Redeemable Units were redeemed totaling $11,192,915, 11.1970 Class Z General Partner Redeemable Units were redeemed totaling $25,000 and 119.2400 Class Z Redeemable Units were redeemed totaling $263,645. For the year ended December 31, 2021, 6,758.4960 Class A Redeemable Units were redeemed totaling $13,372,859 and 114.7580 Class Z General Partner Redeemable Units were redeemed totaling $190,000. For the year ended December 31, 2020, 12,583.3140 Class A Redeemable Units were redeemed totaling $17,690,739 and 255.8790 Class Z General Partner Redeemable Units were redeemed totaling $300,000.
For the year ended December 31, 2022, there were subscriptions of 4,842.6190 Class A Redeemable Units totaling $12,557,500 and 790.3010 Class Z Redeemable Units totaling $1,675,000. For the year ended December 31, 2021, there were subscriptions of 4,927.5530 Class A Redeemable Units totaling $10,121,560 and 194.2000 Class Z Redeemable Units totaling $325,000. For the year ended December 31, 2020, there were subscriptions of 1,834.1890 Class A Redeemable Units totaling $2,670,643 and 224.5500 Class Z Redeemable Units totaling $260,760.
(c) Results of Operations.
For the year ended December 31, 2022, the net asset value per Class A Redeemable Unit increased 18.8% from $2,290.21 to $2,721.77. For the year ended December 31, 2022, the net asset value per Class D Redeemable Unit increased 18.8% from $1,816.10 to $2,158.32. For the year ended December 31, 2022, the net asset value per Class Z Redeemable Unit increased 19.8% from $1,864.35 to $2,232.72. For the year ended December 31, 2021, the net asset value per Class A Redeemable Unit increased 57.7% from $1,451.82 to $2,290.21. For the year ended December 31, 2021, the net asset value per Class D Redeemable Unit increased 57.7% from $1,151.27 to $1,816.10. For the year ended December 31, 2021, the net asset value per Class Z Redeemable Unit increased 59.0% from $1,172.43 to $1,864.35. For the year ended December 31, 2020, the net asset value per Class A Redeemable Unit increased 8.0% from $1,344.11 to $1,451.82. For the year ended December 31, 2020, the net asset value per Class D Redeemable Unit increased 8.8% from $1,057.77 to $1,151.27. For the year ended December 31, 2020, the net asset value per Class Z Redeemable Unit increased 9.7% from $1,069.04 to $1,172.43.
The Partnership experienced a net trading gain before fees and expenses for the year ended December 31, 2022 of $34,296,988. Gains were primarily attributable to the Partnership’s/Funds’ trading of commodity futures in energy, grains, indices, livestock and softs and were partially offset by losses in currencies and metals. The net trading gain or loss for the Partnership is discussed under “Item 8. Financial Statements and Supplementary Data.”
During the first quarter, the most notable gains were experienced during January, February, and March from long positions in natural gas futures as prices rallied to start the year on tight gas storage supplies and steady winter heating demand. Additional gains within the energies were experienced from long futures positions in crude oil and refined oil products as oil prices advanced in the lead up to Russia’s invasion of Ukraine. Further gains in the energy markets were recorded from long futures positions in coal, carbon emission allowances, and electrical power. Within the soft commodities, gains were recorded during March from long positions in sugar, cotton, and cocoa futures as inflationary pressures pushed most commodity prices higher. The Partnership’s overall trading gains for the first quarter were partially offset by small trading losses within the grains markets during March from short positions in wheat futures as prices spiked amid increasing demand for U.S. grain exports. Losses were recorded in the metals sector throughout the quarter from positions in both industrial and precious metals. Smaller losses were incurred within the livestock sector during January from short positions in lean hog futures as prices moved higher on increased demand from pork processors.
During the second quarter, the Partnership’s 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 continuation of the war between Russia and Ukraine threatened to curtail European grain exports. 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 second 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. Smaller losses were experienced during April and June from currency hedge positions in the British pound.
During the third quarter, the Partnership’s most notable gains were achieved within the energy sector during July and August from long positions in U.S. and European natural gas futures as supply constraints and heavy demand from power production due to summer heatwaves in both regions boosted prices. In the soft commodities sector, gains were recorded primarily due to positions in cocoa futures during August and September as the Partnership’s sub-advising managers successfully traded around both bullish and bearish price moves in the global cocoa markets. Additional gains were experienced within the grains primarily during July from long positions in corn and soybean oil futures. Gains were also achieved from short positions in lean hog futures throughout the quarter as prices declined on an outlook for weakening consumer demand due to inflation pushing commodity prices higher earlier in the year. A portion of the Partnership’s gains for the third quarter was offset by losses incurred within the metals markets during July from long positions in silver futures as a strengthening U.S. dollar diminished demand for precious metals. Smaller losses were experienced during August and September from long British pound currency hedging positions as the value of pound declined versus the U.S. dollar.
During the fourth quarter, the most notable profits were achieved within the energy complex from short positions in global natural gas futures as mild weather in the U.S. diminished demand and European governments announced potential price curbs on gas heading into the winter. Further gains were recorded from positions in oil’s refined products, namely unleaded gasoline and heating oil. Gains within the soft commodity markets were experienced during November from long positions in cocoa futures as prices rose early in the month amid supply chain concerns in the West African growing regions. The Partnership’s gains for the fourth quarter were partially offset by losses incurred within the metals markets during November and December from short positions in gold and silver futures as prices advanced on increasing investor demand for precious metals and a weakening U.S. dollar. Losses were also recorded during October from long positions in wheat and soybean futures as prices declined amid an outlook for easing inflationary pressures on commodity markets.
The Partnership experienced a net trading gain before fees and expenses for the year ended December 31, 2021 of $63,677,137. 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 quarter of 2021, the most notable gains were experienced during February from long positions in U.S. electrical power futures as extreme cold weather severely impacted parts of the U.S., driving power futures prices dramatically higher. Additional gains in this sector were recorded during January and February from long positions in natural gas, crude oil, refined oil products, and carbon emissions allowance futures. Gains within the grains markets were achieved throughout the first quarter primarily from long positions in corn futures as strong consumer demand and supply constraints pushed prices higher. Within the metals markets, gains were recorded during February from long positions in copper futures as the outlook for global industrial growth boosted industrial metals prices. During February, further gains were achieved within the soft commodities from long positions in coffee futures as prices advanced amid reports of weaker-than-normal harvests in South America. The Partnership’s overall trading gains for the first quarter were partially offset by small trading losses within the livestock markets from short positions in lean hog futures as an outlook for increased consumer demand moved pork prices higher throughout most of the quarter.
During the second quarter of 2021, the most notable gains were achieved within the energy sector during April, May and June from long futures positions in crude oil, natural gas, and European carbon emissions as prices trended higher on an outlook for growing global energy demand. Within the metals sector, gains were recorded during April and May from long positions in gold and copper futures as prices advanced on a weakening U.S. dollar and diminishing global inventories. Additional gains were experienced from long positions in coffee futures during April and May as drought conditions threatened South American coffee harvests. The Partnership’s gains for the second quarter were partially offset by losses within the livestock sector during May from short positions in lean hog futures as prices surged higher in anticipation of strong summer pork consumption demand. Within the grains markets, losses were recorded during April from short positions in wheat futures as prices rallied as industry reports indicated a decline in U.S. farm acreage dedicated to grain crops.
During the third quarter of 2021, the most notable gains were achieved within the energy sector during July, August, and September from long positions in U.S. and European natural gas futures as growing global energy demand and constrictions in supply chains combined to push prices higher. Additional gains within the energies were experienced throughout the third quarter from long positions in coal and electrical power futures. Gains within the grains sector were recorded during July from short positions in corn futures as prices declined on signs of weakening demand for U.S. grain exports. Further gains were achieved during July from long positions in coffee futures and during August from long positions in cocoa futures as unexpectedly cold weather in key South American growing regions threatened crops. Within the metals complex, gains were experienced during August from long positions in aluminum futures as prices surged amid speculation political turmoil in West African production regions could disrupt supply chains. Gains were also recorded within the livestock markets during August from positions in lean hog futures.
During the fourth quarter of 2021, the most notable profits were recorded within the energy complex during October, November and December from short positions in natural gas futures as prices trended lower amid a mild start to the winter weather season. Additional gains in the energies were recorded during November and December from long positions in European carbon emission futures as prices surged on an outlook for greater global actions to combat climate change. The Partnership’s gains for the fourth quarter were partially offset by losses incurred within the grains sector during October, November, and December from short positions in corn futures as prices moved higher throughout the quarter as inflationary pressures boosted prices. Within the metals markets, losses were experienced during November from long positions in copper futures as prices declined as the emergence of a new COVID-19 variant spurred fears for the growth of the global economy. Additional losses were incurred within the soft commodities sector during October, November, and December from positions in coffee futures.
The results of operations for the twelve months ended 2020 is discussed under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
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 twelve months ended December 31, 2022 increased by $1,196,751 and $2,010,627, respectively, as compared to the corresponding periods in 2021. The increase in interest income was primarily due to higher interest rates during the three and twelve months ended December 31, 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 twelve months ended December 31, 2022 decreased by $64,097 and $219,052, 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 twelve months ended December 31, 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 twelve months ended December 31, 2022 increased by $38,678 and $202,305, respectively, as compared to the corresponding periods in 2021. The increase was due to higher average adjusted net assets during the three and twelve months ended December 31, 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 twelve months ended December 31, 2022 increased by $60,811 and $354,238, respectively, as compared to the corresponding periods in 2021. The increase was due to higher average net assets during the three and twelve months ended December 31, 2022 as compared to the corresponding periods in 2021.
General Partner 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 twelve months ended December 31, 2022 increased by $42,653 and $213,595, respectively, as compared to the corresponding periods in 2021. This increase was due to higher average net assets during the three and twelve months ended December 31, 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 twelve months ended December 31, 2022 resulted in incentive fees of $917,729 and $6,568,293, respectively. Trading performance for the three and twelve months ended December 31, 2021 resulted in incentive fees of $1,305,166 and $11,419,401, 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.
The Partnership pays professional fees, which generally include professional fees made up of legal and accounting expenses, as well as certain offering costs and filing, administrative, reporting and data processing fees. Professional fees for the years ended December 31, 2022 and 2021 were $471,475 and $434,587, respectively.
In the General Partner’s/Trading Manager’s opinion, the Partnership’s Advisors continue to employ trading methods consistent with the objectives of the Partnership/Funds and expectations of the Advisors’ respective programs. The General Partner/Trading Manager monitors the Advisors’ performance on a daily, weekly, monthly and annual basis to assure that these objectives are met.
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, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events, changes in interest rates, pandemics, epidemics and other public health crises. To the extent that market trends exist and the Advisors are able to identify them, the Partnership/Funds expect to increase capital through operations.
In allocating substantially all of 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 Advisor’s 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.
The Partnership, directly or indirectly 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 their trading activities in emerging market instruments, 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 and the 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 noncompliance 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 the General Partner’s authorization, and that financial information utilized by the General Partner and communicated to external parties, including the Partnership’s Redeemable Unit holders, creditors and regulators, is free of material errors.
(g) Critical Accounting Policies.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 expenses during the reporting period. As a result, actual results could differ from these estimates, and those differences could be material. A summary of the Partnership’s significant accounting policies is described in Note 2 to the Partnership’s financial statements included in “Item 8. Financial Statements and Supplementary Data.”
As of December 31, 2022, the Partnership’s most significant accounting policy is the valuation of its investment in the Funds and in futures, option and forward contracts and U.S. Treasury bills, as applicable. The fair value of the investment in the Funds is determined based on the Partnership’s (1) net contribution to the Funds and (2) its allocated share of the undistributed profits and losses, including realized gains (losses) and net change in unrealized gains (losses), of the Funds. 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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Introduction
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. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
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 contracts 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.
“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.
Materiality as used in this section is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, optionality and multiplier features of the Partnership’s/Funds’ market sensitive instruments.
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 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 (such as the terms of particular contracts and the number of market risk sensitive instruments held during or at the end of the reporting period).
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.
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 any one-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-term one-day price fluctuation.
In the case of market sensitive instruments which are not exchange-traded (almost exclusively currencies in the case of the Partnership/Funds), the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.
The fair value of the Partnership’s/Funds’ futures and forward positions does not have any optionality component. However, the Advisors may trade commodity options. The Value at Risk associated with options is reflected in the following table as the margin requirement attributable to the instrument underlying each option. Where this instrument is a futures contract, the futures margin has been used, and where this instrument is a physical commodity, the futures-equivalent margin has been used. This calculation is conservative in that it assumes that the fair value of an option will decline by the same amount as the fair value of the underlying instrument, whereas, in fact, the fair values of the options traded by the Partnership/Funds in almost all cases fluctuate to a lesser extent than those of the underlying instruments.
In quantifying the Partnership’s/Funds’ Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been added to determine each trading category’s aggregate Value at Risk. The diversification effects resulting from the fact that the Partnership’s/Funds’ positions are rarely, if ever, 100% positively correlated have not been reflected.
The Partnership’s and the Funds’ Trading Value at Risk in Different Market Sectors
Value at Risk tables represent a probabilistic assessment of the risk of loss in market sensitive instruments. As of December 31, 2022, Northlander and Drakewood trade the Partnership’s assets indirectly in master fund managed accounts established in the name of the master funds over which they have been granted limited authority to make trading decisions. EMC, Millburn and Ospraie 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.
The following table indicates the trading Value at Risk associated with the Partnership’s open positions by market category as of December 31, 2022. As of December 31, 2022, the Partnership’s total capitalization was $155,036,001.
December 31, 2022
Market Sector
Value at Risk
% of Total
Capitalization
Currencies
$ 340,400
0.22
%
Energy
4,933,385
3.18
Grains
1,807,775
1.17
Livestock
123,668
0.08
Metals
1,914,494
1.23
Softs
1,331,326
0.86
Total
$ 10,451,048
6.74
%
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 investments in the Funds as of December 31, 2022 and 2021, and the highest, lowest and average values during the twelve months ended December 31, 2022 and 2021, as applicable. All open contracts trading risk exposures have been included in calculating the figures set forth below.
As of December 31, 2022 and 2021, the Partnership’s Value at Risk for the portion of its assets that are traded directly was as follows:
December 31, 2022
Twelve Months Ended December 31, 2022
Market Sector
Value at Risk
% of Total
Capitalization
High
Value at Risk
Low
Value at Risk
Average
Value at Risk *
Currencies
$ 277,754
0.18 %
$ 650,375
$ 27,610
$ 225,543
Energy
3,630,315
2.34
21,935,256
2,047,212
7,218,635
Grains
1,807,775
1.17
2,726,092
385,530
1,284,208
Livestock
123,668
0.08
198,121
28,270
99,482
Metals
1,151,668
0.74
2,842,004
645,208
1,493,636
Softs
1,331,326
0.86
1,801,192
439,965
1,210,242
Total
$ 8,322,506
5.37 %
* Annual average of daily Values at Risk.
December 31, 2021
Twelve Months Ended December 31, 2021
Market Sector
Value at Risk
% of Total
Capitalization
High
Value at Risk
Low
Value at Risk
Average
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 December 31, 2022, NL Master’s total capitalization was $45,265,820, and the Partnership owned approximately 28.6% of NL Master. As of December 31, 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:
December 31, 2022
Twelve Months Ended December 31, 2022
Market Sector
Value at Risk
% of Total
Capitalization
High
Value at Risk
Low
Value at Risk
Average
Value at Risk *
Energy
$ 4,556,188
10.07 %
$ 12,485,381
$ 2,176,917
$ 6,028,438
Total
$ 4,556,188
10.07 %
* Annual 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
Market Sector
Value at Risk
% of Total
Capitalization
High
Value at Risk
Low
Value at Risk
Average
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 December 31, 2022, Drakewood Master’s total capitalization was $43,497,389, and the Partnership owned approximately 31.8% of Drakewood Master. As of December 31, 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:
December 31, 2022
Twelve Months Ended December 31, 2022
Market Sector
Value at Risk
% of Total
Capitalization
High
Value at Risk
Low
Value at Risk
Average
Value at Risk *
Currencies
$ 196,999
0.45 %
$ 343,915
$ -
$ 209,170
Metals
2,398,825
5.51
5,048,668
36,300
3,087,344
Total
$ 2,595,824
5.96 %
* Annual average of daily Values at Risk.
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 100.0% 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
Market Sector
Value at Risk
% of Total
Capitalization
High
Value at Risk
Low
Value at Risk
Average
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.
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership/Funds is typically many times the applicable margin requirement (margin requirements generally range between 1% and 15% of contract face value, although an exchange may increase margin requirements on short notice), as well as many times the capitalization of the Partnership/Funds. The magnitude of the Partnership’s/Funds’ open positions creates a “risk of ruin” not typically found in most other investment vehicles. Because of the size of their positions, certain market conditions - unusual, but historically recurring from time to time - could cause the Partnership/Funds to incur severe losses over a short period of time. The foregoing Value at Risk tables - as well as the past performance of the Partnership/Funds - give no indication of this “risk of ruin.”
Non-Trading Risk
The Partnership/Funds have non-trading market risk on its foreign cash balances not needed for margin. These balances and any market risk they may represent are immaterial.
A decline in short-term interest rates would result in a decline in the Partnership’s/Funds’ cash management income. This cash flow risk is not considered to be material.
Materiality, as used throughout this section, is based on an assessment of reasonably possible market movements and any associated potential losses, taking into account the leverage, optionality and multiplier features of the Partnership’s/Funds’ market-sensitive instruments, in relation to the Partnership’s/Funds’ net assets.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership’s/Funds’ market risk exposures - except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Partnership/Funds manage their primary market risk exposures - constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Partnership’s/Funds’ primary market risk exposures as well as the strategies used and to be used by the General Partner and the Advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Partnership’s/Funds’ risk controls to differ materially from the objectives of such strategies. Government interventions, pandemics, epidemics and other public health crises, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the management strategies of the Partnership/Funds. There can be no assurance that the Partnership’s/Funds’ current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long- term. Investors must be prepared to lose all or substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the Partnership at December 31, 2022, by market sector. It may be anticipated, however, that these market exposures will vary materially over time.
Energy. The Partnership’s primary energy market exposure is to price movements in natural gas, crude oil, and oil related products, often resulting from political developments in the Middle East, adverse weather conditions, and other factors contributing to supply and demand. Further energy market exposure is to the carbon emission, European and U.S. electric power, and coal markets which are subject to price movements driven by geopolitical events, climate related regulation, and supply and demand related factors. Energy prices can be volatile and substantial profits and losses, which have been experienced in the past, are expected to continue to be experienced in these markets in the future.
Metals. The Partnership’s primary metal market exposure as of December 31, 2022, was to fluctuations in the prices of nickel, copper, iron, aluminum, lead, zinc, gold, nickel, tin, palladium, and silver.
Softs. The Partnership’s trading risk exposure in soft commodities is primarily to agricultural-related price movements, which are often directly affected by severe or unexpected weather conditions. Cocoa, sugar, coffee, and cotton accounted for the majority of the Partnership’s soft commodities exposure as of December 31, 2022.
Grains. The Partnership’s trading risk exposure in the grains is primarily to agricultural price movements, which are often directly affected by severe or unexpected weather conditions. The soybean complex, wheat, corn, and palm oil accounted for the majority of the Partnership’s grain exposure as of December 31, 2022.
Livestock. The Partnership’s primary risk exposure in livestock is to fluctuations in cattle and hog prices.
Currencies. The Partnership’s currency exposure is to exchange rate fluctuations, primarily fluctuations that disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Partnership’s primary currency exposure as of December 31, 2022, is to the British pound as a result of the hedging of non-U.S. dollar denominated commodity positions. The General Partner does not anticipate that the risk profile of the Partnership’s currency sector to be significant in the future.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the Partnership/Funds as of December 31, 2022.
Foreign Currency Balances. The Partnership/Funds may hold various foreign balances. The Advisors regularly convert foreign currency balances to U.S. dollars in an attempt to manage the Partnership’s/Funds’ non-trading risk.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The General Partner/Trading Manager monitors and attempts to mitigate 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.
The General Partner/Trading Manager monitors the Partnership’s/Funds’ performance and the concentration of open positions, and consults with the Advisors concerning the Partnership’s/Funds’ overall risk profile. If the General Partner/Trading Manager felt it necessary to do so, the General Partner/Trading Manager could require an Advisor to close out positions as well as enter positions traded on behalf of the Partnership/Funds. However, any such intervention would be a highly unusual event. The General Partner/Trading Manager primarily relies on the Advisors’ own risk control policies while maintaining a general supervisory overview of the Partnership’s/Funds’ market risk exposures.
The Advisors apply their own risk management policies to their trading. The Advisors often follow diversification guidelines, margin limits and stop loss points to exit a position. The Advisors’ research of risk management often suggests ongoing modifications to their trading programs.
As part of the General Partner’s risk management, the General Partner periodically meets with the Advisors to discuss their risk management and to look for any material changes to the Advisors’ portfolio balance and trading techniques. The Advisors are required to notify the General Partner of any material changes to their programs.
0.0006250.0008330.0016670.001250.0010420.0010420.001250.00050.0008330.0010422019 2020 2021 2022

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
.
CERES TACTICAL COMMODITY L.P.
The following financial statements and related items of the Partnership are filed under this Item 8: Oath or Affirmation, Management’s Report on Internal Control over Financial Reporting, Report of Independent Registered Public Accounting Firm (Ernst & Young LLP, Boston, MA, PCAOB ID: 42), for the years ended December 31, 2022, 2021, and 2020; Statements of Financial Condition at December 31, 2022 and 2021; Condensed Schedules of Investments at December 31, 2022 and 2021; Statements of Income and Expenses for the years ended December 31, 2022, 2021, and 2020; Statements of Changes in Partners’ Capital for the years ended December 31, 2022, 2021, and 2020; and Notes to Financial Statements. Additional financial information has been filed as Exhibits to this Form 10-K.
To the Limited Partners of
Ceres Tactical Commodity L.P.
To the best of the knowledge and belief of the undersigned, the information contained herein is accurate and complete.
By:
Patrick T. Egan
President and Director
Ceres Managed Futures LLC
General Partner,
Ceres Tactical Commodity L.P.
Ceres Managed Futures LLC
522 Fifth Avenue
New York, NY 10036
(855) 672-4468
Management’s Report on Internal Control over
Financial Reporting
The management of Ceres Tactical Commodity L.P. (the “Partnership”), Ceres Managed Futures LLC, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f)
under the Securities Exchange Act of 1934 and for our assessment of internal control over financial reporting. The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Partnership’s internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management and directors of the Partnership; and
(iii) 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.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The management of Ceres Tactical Commodity L.P. has assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth in the Internal Control-Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, management concluded that the Partnership maintained effective internal control over financial reporting as of December 31, 2022 based on the criteria referred to above.
Patrick T. Egan
Brooke Lambert
President and Director
Chief Financial Officer
Ceres Managed Futures LLC
Ceres Managed Futures LLC
General Partner,
General Partner,
Ceres Tactical Commodity L.P.
Ceres Tactical Commodity L.P.
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
Tel: +1 617 266 2000
Fax: +1 617 266 5843
www.ey.com
Report of Independent Registered Public Accounting Firm
To the Partners of Ceres Tactical Commodity L.P.,
Opinion on the Financial Statements
We have audited the accompanying statements of financial condition of Ceres Tactical Commodity L.P. (the “Partnership”), including the condensed schedules of investments, as of December 31, 2022 and 2021, the related statements of income and expenses, and changes in partners’ capital for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2022 and 2021, and the results of its operations and changes in its partners’ capital for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to perform, an audit of the Partnership’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2022 and 2021, by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to those charged with governance and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters.
We have served as the auditor of the Partnership since 2017.
Boston, MA
March 17, 2023
Ceres Tactical Commodity L.P.
Statements of Financial Condition
December 31, 2022 and 2021
December 31,
December 31,
Assets:
Investment in Funds (1)
, at fair value (Note 6)
$ 26,810,748
$ 31,910,757
Redemptions receivable from the Funds
654,211
9,530,301
Equity in trading account:
Unrestricted cash (Note 3c)
120,640,640
83,266,107
Restricted cash (Note 3c)
8,517,141
7,622,510
Net unrealized appreciation on open futures contracts
1,648,041
2,520,777
Net unrealized appreciation on open forward contracts
386,766
32,498
Options purchased, at fair value (premiums paid $385,463 and $6,171,271 at December 31, 2022 and 2021, respectively)
616,956
11,866,605
Total equity in trading account
131,809,544
105,308,497
Interest receivable (Note 3c)
388,632
2,728
Total assets
$ 159,663,135
$ 146,752,283
Liabilities and Partners’ Capital:
Liabilities:
Options written, at fair value (premiums received $484,852 and $6,265,420 at December 31, 2022 and 2021, respectively)
$ 733,905
$ 7,039,257
Accrued expenses:
Ongoing selling agent fees (Note 3d)
96,686
85,818
Management fees (Note 3b)
145,402
125,544
General Partner fees (Note 3a)
99,130
87,151
Incentive fees (Note 3b)
2,731,240
10,012,065
Professional fees
225,008
186,105
Redemptions payable to General Partner (Note 7)
25,000
50,000
Redemptions payable to Limited Partners (Note 7)
570,763
1,255,919
Total liabilities
4,627,134
18,841,859
Partners’ Capital (Notes 1 and 7):
General Partner, Class Z, 736.9210 and 748.1180 Redeemable Units outstanding at December 31, 2022 and 2021, respectively
1,645,339
1,394,753
Limited Partners, Class A, 54,987.0707 and 54,425.1587 Redeemable Units outstanding at December 31, 2022 and 2021, respectively
149,662,300
124,645,209
Limited Partners, Class D, 600.0580 Redeemable Units outstanding at December 31, 2022 and 2021
1,295,117
1,089,766
Limited Partners, Class Z, 1,089.8110 and 418.7500 Redeemable Units outstanding at December 31, 2022 and 2021, respectively
2,433,245
780,696
Total partners’ capital (net asset value)
155,036,001
127,910,424
Total liabilities and partners’ capital
$ 159,663,135
$ 146,752,283
Net asset value per Redeemable Unit:
Class A
$ 2,721.77
$ 2,290.21
Class D
$ 2,158.32
$ 1,816.10
Class Z
$ 2,232.72
$ 1,864.35
(1)
Defined in Note 1.
See accompanying notes to financial statements.
Ceres Tactical Commodity L.P.
Condensed Schedule of Investments
December 31, 2022
Number of
Contracts
Fair Value
% of Partners’
Capital
Futures Contracts Purchased
Currencies
$ (134,909 )
(0.09)
%
Energy
1,904,844
1.23
Grains
431,164
0.28
Livestock
40,700
0.03
Metals
(20,621 )
(0.01)
Softs
319,245
0.20
Total futures contracts purchased
2,540,423
1.64
Futures Contracts Sold
Currencies
(28,841 )
(0.02)
Energy
(779,927 )
(0.51)
Grains
(105,482 )
(0.07)
Livestock
(2,420 )
(0.00)
*
Metals
(7,121 )
(0.00)
*
Softs
31,409
0.02
Total futures contracts sold
(892,382 )
(0.58)
Net unrealized appreciation on open futures contracts
$ 1,648,041
1.06
%
Unrealized Appreciation on Open Forward Contracts
Metals
$ 2,687,181
1.73
%
Total unrealized appreciation on open forward contracts
2,687,181
1.73
Unrealized Depreciation on Open Forward Contracts
Metals
(2,300,415 )
(1.48)
Total unrealized depreciation on open forward contracts
(2,300,415 )
(1.48)
Net unrealized appreciation on open forward contracts
$ 386,766
0.25
%
Options Purchased
Calls
Metals
$ 607,086
0.39
%
Puts
Livestock
9,570
0.01
Metals
0.00
*
Total options purchased (premiums paid $385,463)
$ 616,956
0.40
%
Options Written
Calls
Grains
$ (19,635 )
(0.01)
%
Metals
(695,142 )
(0.45)
Puts
Energy
(6,750 )
(0.00)
*
Grains
(12,078 )
(0.01)
Metals
(300 )
(0.00)
*
Total options written (premiums received $484,852)
$ (733,905 )
(0.47)
%
Fair Value
% of Partners’
Capital
Investment in the Funds
CMF NL Master Fund LLC
$ 12,964,184
8.36
%
CMF Drakewood Master Fund LLC
13,846,564
8.93
Total investment in the Funds
$ 26,810,748
17.29
%
* Due to rounding.
See accompanying notes to financial statements.
Ceres Tactical Commodity L.P.
Condensed Schedule of Investments
December 31, 2021
Number of
Contracts
Fair Value
% of Partners’
Capital
Futures Contracts Purchased
Currencies
$ 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
2,925,360
2.29
GLOBEX NAT GAS LD Dec 23
1,984,400
1.55
Other
2,294
1,051,178
0.82
Grains
37,245
0.03
Indices
(1,154,113 )
(0.90)
Livestock
0.00
*
Metals
134,848
0.11
Softs
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
(6,817,820 )
(5.33)
GLOBEX NAT GAS LD Mar 24
(1,558,690 )
(1.22)
Other
3,371
(2,197,193 )
(1.72)
Grains
115,235
0.09
Indices
233,958
0.18
Livestock
(12,440 )
(0.01)
Metals
(17,100 )
(0.01)
Softs
(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
$ 2,333,825
1.83
%
Total unrealized appreciation on open forward contracts
2,333,825
1.83
Unrealized Depreciation on Open Forward Contracts
Metals
(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
551,393
0.43
Puts
Energy
661,421
0.52
Metals
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
(551,393 )
(0.43)
Puts
Energy
2,179
(2,553,333 )
(2.00)
Metals
(130,377 )
(0.10)
Softs
(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.
Ceres Tactical Commodity L.P.
Statements of Income and Expenses
For the Years Ended December 31, 2022, 2021 and 2020
Investment Income:
Interest income (Note 3c)
$ 1,711,586
$ 26,691
$ 234,681
Interest income allocated from the Funds (Note 3c)
337,112
11,380
62,837
Total investment income
2,048,698
38,071
297,518
Expenses:
Expenses allocated from the Funds
171,514
265,252
309,367
Clearing fees related to direct investments (Note 3c)
852,246
1,071,298
855,470
Ongoing selling agent fees (Note 3d)
1,106,049
903,744
1,318,996
Management fees (Note 3b)
1,671,236
1,316,998
1,361,440
General Partner fees (Note 3a)
1,130,236
916,641
666,898
Incentive fees (Note 3b)
6,568,293
11,419,401
2,241,270
Professional fees
471,475
434,587
318,626
Total expenses
11,971,049
16,327,921
7,072,067
Net investment loss
(9,922,351 )
(16,289,850 )
(6,774,549 )
Trading Results:
Net gain (losses) on trading of commodity interests and investments in the Funds:
Net realized gains (losses) on closed contracts
33,409,218
18,211,530
14,839,905
Net realized gains (losses) on closed contracts allocated from the Funds
5,901,306
37,773,316
(573,110 )
Net change in unrealized gains (losses) on open contracts
(5,398,962 )
5,495,078
(1,421,890 )
Net change in unrealized gains (losses) on open contracts allocated from the Funds
385,426
2,197,213
735,132
Total trading results
34,296,988
63,677,137
13,580,037
Net income (loss)
$ 24,374,637
$ 47,387,287
$ 6,805,488
Net income (loss) per Redeemable Unit (Note 8): *
Class A
$ 431.56
$ 838.39
$ 107.71
Class D
$ 342.22
$ 664.83
$ 93.50
Class Z
$ 368.37
$ 691.92
$ 103.39
Weighted average Redeemable Units outstanding:
Class A
54,936.4620
54,414.5840
60,513.3041
Class D
600.0580
600.0580
600.0580
Class Z
1,602.9174
1,113.3481
1,208.2984
*
Represents the change in net asset value per Redeemable Unit.
See accompanying notes to financial statements.
Ceres Tactical Commodity L.P.
Statements of Changes in Partners’ Capital
For the Years Ended December 31, 2022, 2021 and 2020
Class A
Class D
Class Z
Total
Amount
Redeemable
Units
Amount
Redeemable
Units
Amount
Redeemable
Units
Amount
Redeemable
Units
Partners’ Capital, December 31, 2019
$ 90,062,572
67,005.2267
$ 634,723
600.0580
$ 1,195,989
1,118.7550
$ 91,893,284
68,724.0397
Subscriptions - Limited Partners
2,670,643
1,834.1890
-
-
260,760
224.5500
2,931,403
2,058.7390
Redemptions - General Partner
-
-
-
-
(300,000 )
(255.8790 )
(300,000 )
(255.8790 )
Redemptions - Limited Partners
(17,690,739 )
(12,583.3140 )
-
-
-
-
(17,690,739 )
(12,583.3140 )
Net income (loss)
6,631,199
-
56,105
-
118,184
-
6,805,488
-
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
10,121,560
4,927.5530
-
-
325,000
194.2000
10,446,560
5,121.7530
Redemptions - General Partner
-
-
-
-
(190,000 )
(114.7580 )
(190,000 )
(114.7580 )
Redemptions - Limited Partners
(13,372,859 )
(6,758.4960 )
-
-
-
-
(13,372,859 )
(6,758.4960 )
Net income (loss)
46,222,833
-
398,938
-
765,516
-
47,387,287
-
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
12,557,500
4,842.6190
-
-
1,675,000
790.3010
14,232,500
5,632.9200
Redemptions - General Partner
-
-
-
-
(25,000 )
(11.1970 )
(25,000 )
(11.1970 )
Redemptions - Limited Partners
(11,192,915 )
(4,280.7070 )
-
-
(263,645 )
(119.2400 )
(11,456,560 )
(4,399.9470 )
Net income (loss)
23,652,506
-
205,351
-
516,780
-
24,374,637
-
Partners’ Capital, December 31, 2022
$ 149,662,300
54,987.0707
$ 1,295,117
600.0580
$ 4,078,584
1,826.7320
$ 155,036,001
57,413.8607
Net asset value per Redeemable Unit:
Class A
Class D
Class Z
2020:
$1,451.82
$1,151.27
$1,172.43
2021:
$2,290.21
$1,816.10
$1,864.35
2022:
$2,721.77
$2,158.32
$2,232.72
See accompanying notes to financial statements.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
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 or 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 sold 11,925 redeemable 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 and is the trading manager (the “Trading Manager”) of NL Master (as defined below) and Drakewood Master (as defined below). The General Partner was also the Trading Manager of GSL Master (as defined below) and Aquantum Master (as defined below) prior to GSL Master’s and Aquantum Master’s respective terminations. 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 December 31, 2022, all trading decisions are made for the Partnership by Millburn Ridgefield Corporation (“Millburn”), Ospraie Management, LLC (“Ospraie”), Northlander Commodity Advisors LLP (“Northlander”), Drakewood Capital Management Limited (“Drakewood”) and EMC Capital Advisors, LLC (“EMC”) (each, an “Advisor” and, collectively, the “Advisors”), each, a registered commodity trading advisor. On October 31, 2022, Pan Capital Management L.P. (“Pan”) ceased to act as a commodity trading advisor to the Partnership. 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. On December 31, 2020, the Partnership fully redeemed its investment in CMF Aquantum Master Fund LLC (“Aquantum Master”). Also effective on December 31, 2020, Aquantum GmbH (“Aquantum”) ceased to act as a commodity trading advisor to the Partnership. 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. References herein to the “Advisors” may also include, as relevant, Geosol, Pan and Aquantum.
During the periods covered by this report, the Partnership’s/Funds’ commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant.
The Partnership, CMF NL Master Fund LLC (“NL Master”) and CMF Drakewood Master Fund LLC (“Drakewood Master”) have entered, and (prior to their respective terminations) GSL Master and Aquantum 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 the “Funds” may also include, as relevant, GSL Master and Aquantum Master.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
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 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 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 of 0.75% (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. For the period from July 1, 2020 to December 31, 2020, Class A Redeemable Units were subject to a monthly ongoing selling agent fee equal to 1/12 of 1.00% (a 1.00% annual rate) of the adjusted net assets of Class A Redeemable Units as of the end of each month. Prior to July 1, 2020, Class A Redeemable units were subject to a monthly ongoing selling agent fee equal to 1/12 of 2.00% (a 2.00% annual rate) of the adjusted net assets of Class A Redeemable Units as of the end of each month. Effective January 1, 2021, the Partnership ceased offering Class D Redeemable Units.
Millburn and Ospraie 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 and Ospraie’s Commodity Program, respectively. As of September 1, 2022, EMC directly trades the Partnership’s assets allocated to EMC through a managed account in the name of the Partnership pursuant to EMC’s Commodity Program.
The Partnership will be liquidated upon the first to occur of the following: December 31, 2055; the net asset value per Redeemable Unit decreases to less than $400 as of a close of any business day; or under certain other circumstances as set forth in the limited partnership agreement of the Partnership, as may be amended or restated from time to time (the “Limited Partnership Agreement”). In addition, the General Partner may, in its sole discretion, cause the Partnership to dissolve if the Partnership’s aggregate net assets decline to less than $1,000,000.
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:
a. Use of Estimates
. The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates, and those differences could be material.
b. Profit Allocation
. The General Partner and each limited partner of the Partnership share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each, except that no limited partner is liable for obligations of the Partnership in excess of its capital contribution and profits, if any, net of distributions or redemptions and losses, if any.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
c. Statement of Cash Flows
. The Partnership has not provided a Statement of Cash Flows, as permitted by Accounting Standards Codification (“ASC”) 230, “Statement of Cash Flows.”
The Statements of Changes in Partners’ Capital is included herein, and as of and for the years ended December 31, 2022, 2021 and 2020, the Partnership carried no debt and all of the Partnership’s and the Funds’ investments were carried at fair value and classified as Level 1 or Level 2 measurements.
d. Partnership’s Investment in the Funds
. The Partnership carries its investment in the Funds based on the Partnership’s (1) net contribution to the Funds and (2) its allocated share of the undistributed profits and losses, including realized gains or losses and net change in unrealized gains or losses, of the Funds.
e. Partnership’s/Funds’ Derivative Investments
. All commodity interests held by the Partnership/Funds, including derivative financial instruments and derivative commodity instruments, are held for trading purposes. The commodity interests are recorded on the trade date and open contracts are recorded at fair value (as described in Note 5, “Fair Value Measurements”) 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. 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.
f. Partnership’s Cash
. The Partnership’s restricted and unrestricted cash includes cash denominated in foreign currencies of $1,864,283
(cost of $1,812,172) and $162,449 (cost of $168,901) as of December 31, 2022 and 2021, respectively.
g. Income Taxes
. Income taxes have not been recorded as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses. The Partnership follows the guidance of ASC 740, “Income Taxes,”
which prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are “more-likely-than-not”
of being sustained “when challenged” or “when examined” by the applicable tax authority. Tax positions determined not to meet the more-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 Partnership’s Statements of Income and Expenses in the years in which the position is claimed or expected to be claimed. The General Partner has concluded that there are no significant 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 2019 through 2022 tax years remain subject to examination by U.S. federal and most state tax authorities.
h. Investment Company Status
. The Partnership has been deemed to be an investment company since inception. Accordingly, the Partnership follows the investment company accounting and reporting guidance of Accounting Standards Update 2013-08,
“Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements”
and reflects its investments at fair value with unrealized gains and losses resulting from changes in fair value reflected in the Statements of Income and Expenses.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
i. Net Income (Loss) per Redeemable Unit
. Net income (loss) per Redeemable Unit for each Class is calculated in accordance with ASC 946, “Financial Services - Investment Companies.”
See Note 8, “Financial Highlights.”
3.
Agreements:
a. Limited Partnership Agreement:
The General Partner administers the business and affairs of the Partnership, including selecting one or more advisors to make trading decisions for the Partnership. The Partnership pays the General Partner a monthly General Partner fee in return for its services to the Partnership equal to 1/12 of 0.75% (0.75% per year) of month-end
net assets of the Partnership. Month-end
net assets, for the purpose of calculating the General Partner fee are Net Assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s management fee, incentive fee accrual, the General Partner fee and any redemptions or distributions as of the end of such month. The General Partner fee is allocated proportionally to each Class based on the net asset value of the respective Class. This fee may be increased or decreased at the discretion of the General Partner.
b. Management Agreement:
The General Partner, on behalf of the Partnership, entered into management agreements (each, a “Management Agreement”) with the Advisors. The Advisors are not affiliated with one another, are not affiliated with the General Partner or MS&Co. and are not responsible for the organization or operation of the Partnership. The Partnership pays Millburn a monthly management fee equal to 1/12 of 1.0% (1.0% per year) of month-end
Net Assets allocated to Millburn. Prior to January 1, 2021, the Partnership paid Millburn a monthly management fee equal to 1/12 of 2.0% (2.0% per year) of month-end
Net Assets allocated to Millburn. The Partnership pays Ospraie a monthly management fee equal to 1/12 of 1.5% (1.5% per year) of month-end
Net Assets allocated to Ospraie. The Partnership pays Northlander a monthly management fee equal to 1/12 of 1.25% (1.25% per year) of month-end
Net Assets allocated to Northlander. The Partnership pays Drakewood a monthly management fee equal to 1/12 of 1.5% (1.5% per year) of month-end
Net Assets allocated to Drakewood. The Partnership pays EMC a monthly management fee equal to 1/12 of 0.60% (0.60% per year) of month-end
Net Assets allocated to EMC. Prior to its termination on October 31, 2022, Pan was paid a monthly management fee equal to 1/12 of 1.25% (1.25% per year) of month-end
Net Assets allocated to Pan. Prior to its termination on June 30, 2022, Geosol was paid a monthly management fee equal to 1/12 of 1.0% (1.0% per year) of month-end
Net Assets allocated to Geosol. Prior to its termination on December 31, 2020, Aquantum was paid a monthly management fee equal to 1/12 of 1.25% (1.25% per year) of month-end
Net Assets allocated to Aquantum. Month-end
Net Assets, for the purpose of calculating management fees are Net Assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s management fee, incentive fee accrual, the General Partner fee and any redemptions or distributions as of the end of such month. An Advisor’s management fee is allocated proportionally to each Class based on the net asset value of the respective Class.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
In addition, the Partnership is obligated to pay each Advisor an incentive fee. The Partnership pays Ospraie, Northlander, Drakewood and EMC each an incentive fee, payable annually, equal to 20% of New Trading Profits, as defined in each Management Agreement, earned by the relevant Advisor for the Partnership during each calendar year. The Partnership pays Millburn an incentive fee, payable annually, equal to 27.5% of New Trading Profits, as defined in the Management Agreement, earned by Millburn for the Partnership during the calendar year. Prior to January 1, 2021, Millburn was eligible to receive an incentive fee, payable annually, equal to 20% of New Trading Profits, as defined in the Management Agreement. Prior to its termination on October 31, 2022, Pan was eligible to receive a quarterly incentive fee equal to 20% of New Trading Profits, as defined in the Management Agreement, earned by Pan for the Partnership each quarter. Prior to its termination on June 30, 2022, Geosol was eligible to receive an incentive fee, payable annually, equal to 20% of New Trading Profits, as defined in the Management Agreement, earned by Geosol for the Partnership each calendar year. Prior to its termination on December 31, 2020, Aquantum was eligible to receive a semi-annual incentive fee of 20% of New Trading Profits, as defined in the Management Agreement, earned by Aquantum for the Partnership each calendar half-year. An Advisor’s incentive fee is allocated proportionally to each Class based on the net asset value of the respective Class. To the extent an Advisor incurs a loss for the Partnership, the Advisor will not be paid an incentive fee until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership. Each Management Agreement can be terminated upon notice by either party.
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 among the Advisors and may allocate assets to additional advisors at any time.
c. Customer Agreement:
The Partnership has entered into a customer agreement with MS&Co. (the “Partnership Customer Agreement”). Under the Partnership Customer Agreement, the Partnership pays 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”) directly and indirectly through its investment in the Funds. Clearing fees are allocated to the Partnership based on its proportionate share of each Fund. Clearing fees are also borne directly by the Partnership for its direct trading. Clearing fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed. All of the Partnership’s assets available for trading in commodity interests not held in the Funds’ accounts at MS&Co. are deposited in the Partnership’s accounts at MS&Co. The Partnership’s cash deposited by MS&Co. is held in segregated bank accounts to the extent required by Commodity Futures Trading Commission regulations. The Partnership’s restricted cash is equal to the cash portion of assets on deposit to meet margin requirements, as determined by the exchange or counterparty, and required by MS&Co. At December 31, 2022 and 2021, the amount of cash held for margin requirements was $8,517,141 and $7,622,510, respectively. Cash that is not classified as restricted cash is therefore classified as unrestricted cash. MS&Co. has agreed to pay the Partnership interest 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 at the rate equal to the monthly average of the 4-week
U.S. Treasury bill discount rate. The Partnership Customer Agreement may generally be terminated upon notice by either party.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
d. Selling Agreement:
The Partnership has entered into a selling agreement (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 to 0.75% per year of the adjusted month-end
net assets of Class A Redeemable Units and Class D Redeemable Units, respectively. For the period from July 1, 2020 to December 31, 2020, the Partnership paid Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to 1.0% per year of the adjusted month-end
net assets of Class A Redeemable Units. Prior to July 1, 2020, the Partnership paid Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to 2.0% per year of month-end
net assets of Class A Redeemable Units. The ongoing selling agent fee received by Morgan Stanley Wealth Management is shared with the properly registered or exempted financial advisors of Morgan Stanley Wealth Management 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. Month-end
Net Assets, for the purpose of calculating ongoing selling agent fees are Net Assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s ongoing selling agent fee, management fee, incentive fee accrual, the General Partner fee and other expenses and any redemptions or distributions as of the end of such month.
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.
The Partnership Customer Agreement and the Funds’ futures brokerage account agreements with MS&Co. (the “Master Customer Agreements” and, together with the Partnership Customer Agreement, the “Customer Agreements”) 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,
“Balance Sheet,”
have been met.
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 years ended December 31, 2022 and 2021 were 26,310 and 31,981, respectively. The monthly average number of metals forward contracts traded directly by the Partnership during the years ended December 31, 2022 and 2021 were 992 and 1,489, respectively. The monthly average number of option contracts traded directly by the Partnership during the years ended December 31, 2022 and 2021 were 4,255 and 5,497, 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.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
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 December 31, 2022 and 2021, respectively.
December 31, 2022
Gross
Amounts
Recognized
Gross Amounts
Offset in the
Statements of
Financial
Condition
Amounts
Presented in the
Statements of
Financial
Condition
Gross Amounts Not Offset in the
Statements of Financial Condition
Financial
Instruments
Cash Collateral
Received/
Pledged *
Net Amount
Assets
Futures
$ 3,458,980
$ (1,810,939 )
$ 1,648,041
$ -
$ -
$ 1,648,041
Forwards
2,687,181
(2,300,415 )
386,766
-
-
386,766
Total assets
$ 6,146,161
$ (4,111,354 )
$ 2,034,807
$ -
$ -
$ 2,034,807
Liabilities
Futures
$ (1,810,939 )
$ 1,810,939
$ -
$ -
$ -
$ -
Forwards
(2,300,415 )
2,300,415
-
-
-
-
Total liabilities
$ (4,111,354 )
$ 4,111,354
$ -
$ -
$ -
$ -
Net fair value
$ 2,034,807
*
Gross
Amounts
Recognized
Gross Amounts
Offset in the
Statements of
Financial
Condition
Amounts
Presented in the
Statements of
Financial
Condition
Gross Amounts Not Offset in the
Statements of Financial Condition
December 31, 2021
Financial
Instruments
Cash Collateral
Received/
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.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
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 December 31, 2022 and 2021, respectively.
December 31,
Assets
Futures Contracts
Energy
$ 2,380,931
Grains
532,999
Livestock
62,710
Metals
6,542
Softs
475,798
Total unrealized appreciation on open futures contracts
3,458,980
Liabilities
Futures Contracts
Currencies
(163,750 )
Energy
(1,256,014 )
Grains
(207,317 )
Livestock
(24,430 )
Metals
(34,284 )
Softs
(125,144 )
Total unrealized depreciation on open futures contracts
(1,810,939 )
Net unrealized appreciation on open futures contracts
$ 1,648,041
*
Assets
Forward Contracts
Metals
$ 2,687,181
Total unrealized appreciation on open forward contracts
2,687,181
Liabilities
Forward Contracts
Metals
(2,300,415 )
Total unrealized depreciation on open forward contracts
(2,300,415 )
Net unrealized appreciation on open forward contracts
$ 386,766
**
Assets
Options Purchased
Livestock
$ 9,570
Metals
607,386
Total options purchased
$ 616,956
***
Liabilities
Options Written
Energy
$ (6,750 )
Grains
(31,713 )
Metals
(695,442 )
Total options written
$ (733,905 )
****
* 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.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
December 31,
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
33,395,257
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.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
The following table indicates the trading gains and losses, by market sector, on derivative instruments traded directly by the Partnership for the years ended December 31, 2022, 2021 and 2020, respectively.
Sector
Currencies
$ (287,598 )
$ (83,859 )
$ 28,365
Energy
26,081,057
20,738,877
11,685,245
Grains
1,485,096
946,520
902,146
Indices
547,781
90,103
(153,769 )
Livestock
55,105
(781,028 )
(251,731 )
Metals
(2,518,796 )
1,725,808
(580,364 )
Softs
2,647,611
1,070,187
1,788,123
Total
$ 28,010,256
*****
$ 23,706,608
*****
$ 13,418,015
*****
*****
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
. Fair value is defined as the value 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 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
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 and for the years ended December 31, 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).
Ceres Tactical Commodity L.P.
Notes to Financial Statements
December 31, 2022
Total
Level 1
Level 2
Level 3
Assets
Futures
$
3,458,980
$
3,458,980
$
-
$
-
Forwards
2,687,181
-
2,687,181
-
Options purchased
616,956
616,956
-
-
Total assets
$
6,763,117
$
4,075,936
$
2,687,181
$
-
Liabilities
Futures
$
1,810,939
$
1,810,939
$
-
$
-
Forwards
2,300,415
-
2,300,415
-
Options written
733,905
733,905
-
-
Total liabilities
$
4,845,259
$
2,544,844
$
2,300,415
$
-
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 December 31, 2022 and 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.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
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.
On December 1, 2018, the Partnership allocated a portion of its assets to Aquantum, which were managed and traded directly by Aquantum pursuant to Aquantum’s Commodity Spread Program through a trading account in the Partnership’s name from December 1, 2018 until May 31, 2019. Effective June 1, 2019, the assets allocated to Aquantum were transferred into Aquantum Master, a limited liability company organized under the limited liability company laws of the State of Delaware, through which they were managed and traded by Aquantum pursuant to the same strategy. Effective December 31, 2020, the Partnership fully redeemed its investment in Aquantum Master.
The General Partner is not aware of any material changes to the trading programs discussed above or in Note 1, “Organization” during the year ended December 31, 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 also charged directly at the Partnership level.
At December 31, 2022, the Partnership owned approximately 28.6% of NL Master and 31.8% of Drakewood Master. At December 31, 2021, the Partnership owned approximately 26.0% of NL Master and 100.0% 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.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
Summarized information reflecting the total assets, liabilities and members’ capital of the Funds is shown in the following tables:
December 31, 2022
Total Assets
Total Liabilities
Total Capital
NL Master
$ 47,648,689
$ 2,382,869
$ 45,265,820
Drakewood Master
45,395,672
1,898,283
43,497,389
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
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 year ended December 31, 2022
Net Investment
Income (Loss)
Total Trading
Results
Net Income (Loss)
GSL Master
$ (49,612 )
$ 3,221,886
$ 3,172,274
NL Master
445,839
12,749,845
13,195,684
Drakewood Master (a)
296,516
(1,107,864 )
(811,348 )
For the year ended December 31, 2021
Net Investment
Income (Loss)
Total Trading
Results
Net Income (Loss)
GSL Master
$ (180,767 )
$ 31,753,338
$ 31,572,571
NL Master
(264,783 )
29,103,122
28,838,339
(a)
From May 1, 2022, commencement of operations for Drakewood Master, through December 31, 2022.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
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:
December 31, 2022
For the year ended December 31, 2022
% of
Partners’
Capital
Expenses
Net
Income
(Loss)
Funds
Fair
Value
Income
(Loss)
Clearing
Fees
Professional
Fees
Investment
Objective
Redemptions
Permitted
GSL Master
-
%
$ -
$ 3,254,806
$ 29,730
$ 52,803
$ 3,172,273
Commodity Portfolio
Monthly
NL Master
8.36
%
12,964,184
3,497,469
20,694
14,519
3,462,256
Commodity Portfolio
Monthly
Drakewood Master (a)
8.93
%
13,846,564
(128,431 )
33,486
20,282
(182,199 )
Commodity Portfolio
Monthly
$ 26,810,748
$ 6,623,844
$ 83,910
$ 87,604
$ 6,452,330
December 31, 2021
For the year ended December 31, 2021
% of
Partners’
Capital
Expenses
Net
Income
(Loss)
Funds
Fair
Value
Income
(Loss)
Clearing
Fees
Professional
Fees
Investment
Objective
Redemptions
Permitted
GSL Master
16.36
%
$ 20,926,428
$ 31,762,143
$ 120,488
$ 69,086
$ 31,572,569
Commodity Portfolio
Monthly
NL Master
8.59
%
10,984,329
8,219,766
60,522
15,156
8,144,088
Commodity Portfolio
Monthly
$ 31,910,757
$ 39,981,909
$ 181,010
$ 84,242
$ 39,716,657
(a)
The Partnership first invested into Drakewood Master on May 1, 2022.
7.
Subscriptions, Distributions and Redemptions:
Subscriptions are accepted monthly from investors who become limited partners on the first day of the month after their subscription is processed. Distributions are made on a pro-rata
basis at the sole discretion of the General Partner. No distributions have been made to date. The General Partner does not intend to make any distributions of the Partnership’s profits. A limited partner may require the Partnership to redeem its Redeemable Units at their net asset value per Redeemable Unit 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.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
8.
Financial Highlights:
Financial highlights for the limited partner Classes as a whole for the years ended December 31, 2022, 2021 and 2020 were as follows:
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/year): *
Net realized and unrealized gains (losses)
$ 607.42
$ 481.94
$ 479.03
$ 1,130.71
$ 894.58
$ 891.22
$ 217.51
$ 171.18
$ 157.53
Net investment loss
(175.86 )
(139.72 )
(110.66 )
(292.32 )
(229.75 )
(199.30 )
(109.80 )
(77.68 )
(51.64 )
Increase (decrease) for the period/year
431.56
342.22
368.37
838.39
664.83
691.92
107.71
93.50
105.89
Net asset value per Redeemable Unit, beginning of period/year
2,290.21
1,816.10
1,864.35
1,451.82
1,151.27
1,172.43
1,344.11
1,057.77
1,066.54
Net asset value per Redeemable Unit, end of period/year
$ 2,721.77
$ 2,158.32
$ 2,232.72
$ 2,290.21
$ 1,816.10
$ 1,864.35
$ 1,451.82
$ 1,151.27
$ 1,172.43
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 ***
(6.8 )
%
(6.8 )
%
(4.7 )
%
(14.7 )
%
(14.5 )
%
(12.3 )
%
(7.9 )
%
(7.0 )
%
(5.1 )
%
Operating expenses
3.7
%
3.7
%
3.1
%
4.4
%
4.4
%
3.6
%
5.6
%
4.8
%
4.2
%
Incentive fees
4.5
%
4.5
%
3.5
%
10.3
%
10.1
%
8.7
%
2.6
%
2.5
%
1.0
%
Total expenses
8.2
%
8.2
%
6.6
%
14.7
%
14.5
%
12.3
%
8.2
%
7.3
%
5.2
%
Total return:
Total return before incentive fees
23.9
%
23.9
%
23.6
%
71.9
%
71.7
%
71.1
%
10.7
%
11.5
%
10.9
%
Incentive fees
(5.1 )
%
(5.1 )
%
(3.8 )
%
(14.2 )
%
(14.0 )
%
(12.1 )
%
(2.7 )
%
(2.7 )
%
(1.0 )
%
Total return after incentive fees
18.8
%
18.8
%
19.8
%
57.7
%
57.7
%
59.0
%
8.0
%
8.8
%
9.9
%
* 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/year. 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.
** For the period from February 1, 2020 to December 31, 2020.
*** Interest income less total expenses.
**** Annualized (except for incentive fees) and for the period from February 1, 2020 to December 31, 2020.
The above ratios and total return may vary for individual investors based on the timing of capital transactions during the year. 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.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
9.
Financial Instrument Risks:
In the normal course of business, the Partnership and the Funds are parties to financial instruments with 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 or over-the-counter
(“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.
Futures Contracts
. The Partnership and 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 Partnership and 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 Partnership and the Funds. When the contract is closed, the Partnership and 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 Partnership’s/Funds’ Statements of Income and Expenses.
London Metal Exchange Forward Contracts
. Metal contracts traded on the London Metal Exchange (“LME”) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead, nickel, tin, zinc or other metals. LME contracts traded by the Partnership and the Funds are cash settled based on prompt dates published by the LME. Variation margin may be made or received by the Partnership and 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 Partnership and 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 Partnership and 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 metal contracts are included in the Partnership’s/Funds’ Statements of Income and Expenses.
Options
. The Partnership and the Funds may purchase and write (sell) both exchange-listed and OTC options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Partnership/Funds write an option, the premium received is recorded as a liability in the Partnership’s/Funds’ Statements of Financial Condition and marked-to-market
daily. When the Partnership/Funds purchase an option, the premium paid is recorded as an asset in the Partnership’s/Funds’ Statements of Financial Condition and marked-to-market
daily. Net realized gains (losses) and net change in unrealized gains (losses) on option contracts are included in the Partnership’s/Funds’ Statements of Income and Expenses.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
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.
Futures-style options
. The Partnership and the Funds may trade futures-style option contracts. Unlike traditional option contracts, the premiums for futures-style option contracts are not received or paid upon the onset of the trade. The premiums are recognized and received or paid as part of the sales price when the contract is closed. Similar to a futures contract, variation margin for the futures-style option contract may be made or received by the Partnership/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 Partnership/Funds. Transactions in futures-style option 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. Futures-style option contracts are presented as part of “Net unrealized appreciation on open futures contracts” or “Net unrealized depreciation on open futures contracts,” as applicable, in the Partnership’s/Funds’ Statements of Financial Condition. Net realized gains (losses) and net change in unrealized gains (losses) on futures-style option contracts are included in the Partnership’s/Funds’ Statements of Income and Expenses.
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 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 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 Partnership/Funds have credit risk and concentration risk, as MS&Co. or an MS&Co. affiliate are 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. or an MS&Co. affiliate, the Partnership’s/Funds’ counterparty is an exchange or clearing organization.
The General Partner/Trading Manager monitors and attempts to mitigate 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/Trading Manager to statistically analyze actual trading results with 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. The limited liability is a result of the organization of the Partnership as a limited partnership under New York law.
Ceres Tactical Commodity L.P.
Notes to Financial Statements
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 its discovery in December 2019, a new strain of coronavirus, which causes the viral disease known as 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.
The 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
directives 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.
Given the continuing development of this situation, it is not possible to accurately predict how the market disruptions caused by 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 February 22, 2022, the United States and several European nations announced sanctions against Russia in response to Russia’s mobilization of forces and threat of invasion of the Ukraine, and governments around the world imposed, and may in the future impose, additional sanctions on Russia in response to its continued escalation of this conflict. On February 24, 2022, Russian President Putin commenced a full-scale invasion of Russia’s 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.
10.
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, other than disclosed below, there were no subsequent events requiring adjustment to or disclosure in the financial statements.
On February 1, 2023, the Partnership allocated a portion of its assets to Opus Futures, LLC (“Opus”). Opus directly trades the Partnership’s assets allocated to it through a managed account in the name of the Partnership pursuant to Opus’s Advanced Ag Program.
Selected unaudited quarterly financial data for the Partnership for the years ended December 31, 2022 and 2021 is summarized below:
For the period from
October 1, 2022 to
December 31, 2022
For the period from
July 1, 2022 to
September 30, 2022
For the period from
April 1, 2022 to
June 30, 2022
For the period from
January 1, 2022 to
March 31, 2022
Total investment income
$ 1,210,903
$ 641,966
$ 172,406
$ 23,423
Total expenses
(2,258,197 )
(1,822,192 )
(3,716,961 )
(4,173,699 )
Total trading results
4,213,214
4,290,652
10,733,894
15,059,228
Net income (loss)
$ 3,165,920
$ 3,110,426
$ 7,189,339
$ 10,908,952
Increase (decrease) in net asset value per Redeemable Unit:
Class A
$ 55.74
$ 54.23
$ 127.50
$ 194.09
Class D
$ 44.20
$ 43.01
$ 101.10
$ 153.91
Class Z
$ 49.91
$ 48.50
$ 108.10
$ 161.86
For the period from
October 1, 2021 to
December 31, 2021
For the period from
July 1, 2021 to
September 30, 2021
For the period from
April 1, 2021 to
June 30, 2021
For the period from
January 1, 2021 to
March 31, 2021
Total investment income
$ 14,152
$ 11,882
$ 2,905
$ 9,132
Total expenses
(2,614,080 )
(3,003,456 )
(2,754,020 )
(7,956,365 )
Total trading results
7,958,774
9,847,519
8,853,961
37,016,883
Net income (loss)
$ 5,358,846
$ 6,855,945
$ 6,102,846
$ 29,069,650
Increase (decrease) in net asset value per Redeemable Unit:
Class A
$ 95.63
$ 122.68
$ 111.21
$ 508.87
Class D
$ 75.84
$ 97.28
$ 88.18
$ 403.53
Class Z
$ 81.46
$ 103.06
$ 93.35
$ 414.05

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. 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) and 15d-15(e) under the Exchange Act) as of December 31, 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’s internal control over financial reporting is 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:
· 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.
The report included in “Item 8. Financial Statements and Supplementary Data.” includes the General Partner’s report on internal control over financial reporting (“Management’s Report”).
There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended December 31, 2022 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
Item 9B. 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 December 31, 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.
On February 1, 2023, the Partnership allocated a portion of its assets to Opus Futures, LLC (“Opus”). Opus directly trades the Partnership’s assets allocated to it through a managed account in the name of the Partnership pursuant to Opus’s Advanced Ag Program.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
The Partnership has no directors or executive officers and its affairs are managed by its General Partner. Investment decisions are made by the Advisors.
The directors and executive officers of the General Partner are Patrick T. Egan (President and Chairman of the Board of Directors of the General Partner), Brooke Lambert (Chief Financial Officer), Steven Ross (Director), Victoria Eckstein (Director) and Tatiana Segal (Director). Each director holds office until the earlier of his or her death, resignation or removal. Vacancies on the board of directors may be filled by either (i) the majority vote of the remaining directors or (ii) MSD Holdings, as the sole member of the General Partner. The officers of the General Partner are designated by the General Partner’s board of directors. Each officer will hold office until his or her successor is designated and qualified or until his or her death, resignation or removal.
Directors of the General Partner are responsible for overall corporate governance of the General Partner and meet periodically to consider strategic decisions regarding the General Partner’s activities. Under CFTC rules, each Director of the General Partner is deemed to be a principal of the General Partner and, as a result, is listed as such with NFA. Patrick T. Egan and Steven Ross serve on the General Partner’s Investment Committee and are the trading principals responsible for allocation decisions (or supervising those responsible).
Patrick T. Egan, age 54, has been a Director of the General Partner since December 2010. Since December 2010, Mr. Egan has been a principal and registered as an associated person of the General Partner, and is an associate member of NFA. Since October 2014, Mr. Egan has served as President and Chairman of the Board of Directors of the General Partner. Since August 2013, Mr. Egan has been registered as a swap associated person of the General Partner. From September 2013 to May 2014, Mr. Egan served as a Vice President of Morgan Stanley Strategies LLC, formerly known as Morgan Stanley GWM Feeder Strategies LLC, which acts as a general partner to multiple alternative investment entities, and Morgan Stanley AI GP LLC, formerly known as Morgan Stanley HedgePremier GP LLC, which acts as a general partner and administrative agent to numerous hedge fund feeder funds. From September 2013 to May 2014, Mr. Egan was registered as an associated person and listed as a principal of each such entity. Since January 2013, each such entity has been registered as a commodity pool operator with the CFTC. Mr. Egan was responsible for overseeing the implementation of certain CFTC and NFA regulatory requirements applicable to such entities. From June 2009 to December 2014, Mr. Egan was employed by Morgan Stanley Smith Barney LLC, a financial services firm, where his responsibilities included serving as Executive Director and as Co-Chief Investment Officer for Morgan Stanley Managed Futures from June 2009 through June 2011 and as Chief Risk Officer for Morgan Stanley Managed Futures from June 2011 through October 2014. Since October 2014, Mr. Egan has been responsible for the day-to-day operations and management of Morgan Stanley Managed Futures. Since January 2015, Mr. Egan has been employed by the General Partner. From November 2010 to October 2014, Mr. Egan was registered as an associated person of Morgan Stanley Smith Barney LLC. From April 2007 through June 2009, Mr. Egan was employed by MS & Co., a financial services firm, where his responsibilities included serving as Head of Due Diligence and Manager Research for Morgan Stanley’s Managed Futures Department. From April 2007 through June 2009, Mr. Egan was registered as an associated person of MS & Co. From March 1993 through April 2007, Mr. Egan was employed by Morgan Stanley DW Inc., a financial services firm, where his initial responsibilities included serving as an analyst and manager within the Managed Futures Department (with primary responsibilities for product development, due diligence, investment analysis and risk management of the firm’s commodity pools) and later included serving as Head of Due Diligence and Manager Research for Morgan Stanley’s Managed Futures Department. From February 1998 through April 2007, Mr. Egan was registered as an associated person of Morgan Stanley DW Inc. From August 1991 through March 1993, Mr. Egan was employed by Dean Witter Intercapital, the asset management arm of Dean Witter Reynolds, Inc., where his responsibilities included serving as a mutual fund administration associate. Mr. Egan also served as a Director from November 2004 through October 2006, and from November 2006 through October 2008 of the Managed Funds Association’s Board of Directors, a position he was elected to by industry peers for two consecutive two-year terms. Mr. Egan earned his Bachelor of Business Administration degree with a concentration in Finance in May 1991 from the University of Notre Dame.
Brooke Lambert, age 39, has been the Chief Financial Officer, Treasurer and a principal of the General Partner since May 2022. Ms. Lambert has been employed by Morgan Stanley Investment Management, a financial services firm, since July 2014, where her responsibilities include serving as a Vice President and managing the accounting, financial reporting and regulatory reporting of the commodity pools operated by the General Partner. From July 2009 to July 2014, Ms. Lambert was employed by Morgan Stanley Smith Barney, a financial services firm, where her responsibilities included serving as a Vice President responsible for the accounting, financial reporting and regulatory reporting of the commodity pools operated by the General Partner. Before joining Morgan Stanley, Ms. Lambert was employed by Citigroup Alternative Investments, a financial services firm, from January 2006 through July 2009, where her responsibilities included serving as an Assistant Vice President responsible for the accounting, financial reporting and regulatory reporting of Citigroup Alternative Investments’ managed futures funds. Ms. Lambert earned her Bachelor of Science in Finance in May 2005 from Towson University.
Steven Ross, age 51, has been a principal of the General Partner since July 2014 and a Director of the General Partner since February 2016. Mr. Ross has been employed by Morgan Stanley Investment Management, a financial services firm, since September 2005, where his responsibilities include serving as an Assistant Treasurer of Morgan Stanley with respect to certain investment vehicles publicly offered by Morgan Stanley. Mr. Ross is also an Executive Director of the Morgan Stanley Fund Administration Group where he is responsible for finance and accounting matters for certain private funds offered by Morgan Stanley. Before joining Morgan Stanley Investment Management, Mr. Ross was employed by JPMorgan Investor Services Co., a financial services firm, from December 1997 through September 2005, where his responsibilities included serving as a Vice President responsible for the accounting of certain funds sponsored by JPMorgan Chase & Co. and other large fund families serviced by JPMorgan Investor Services Co. From April 1997 to December 1997, Mr. Ross was employed by Investors Bank & Trust, a financial services firm, where his responsibilities included performing mutual fund accounting for financial services firms. Mr. Ross began his career at Putnam Investments LLC, a financial services firm, where he was responsible for providing broker services for certain funds sponsored by Putnam Investments LLC from August 1996 to April 1997. Mr. Ross received a B.S. in Accounting from Rhode Island College in May 1995.
Victoria Eckstein, age 41, has been a Director of the General Partner since June 30, 2022, and a principal of the General Partner since July 14, 2022. Since November 2022, Ms. Eckstein has served as Chief Operating Officer of Calvert Research and Management, an investment management company focused on responsible investments. Since December 2020, Ms. Eckstein has served as a Managing Director of Morgan Stanley Investment Management Inc. (“MSIM”), and from December 2020 to November 2022 served as Chief Operating Officer of the Solutions & Multi-Asset Group at MSIM, a collection of business units offering alpha-centric, multi-asset or multi-manager investment solutions. From December 2016 to December 2020, Ms. Eckstein served as an Executive Director of MSIM and from April 2010 to December 2016, Ms. Eckstein served as a Vice President of MSIM. From April 2010 to December 2020, Ms. Eckstein primarily managed the day-to-day non-investment functions of the Portfolio Solutions Group, a business unit offering multi-asset, multi-manager managed portfolios. From January 2007 to April 2010, Ms. Eckstein was employed by Morgan Stanley Smith Barney LLC, a financial services firm, where her responsibilities included trade execution, portfolio analysis, external manager selection and research coverage. Ms. Eckstein received her Juris Doctorate from the Benjamin N. Cardozo School of Law in 2006 and her Bachelor of Arts, magna cum laude, from Brandeis University in 2003.
Tatiana Segal, age 54, has been a Director of the General Partner since June 30, 2022, and a principal of the General Partner since July 1, 2022. She has also been a principal of MSIM since October 31, 2019. Ms. Segal joined MSIM as a Managing Director and Head of Risk Management in August 2019. She is responsible for risk management across MSIM business units and risk categories, including investment, operational, and franchise risk, and is a member of the Investment Management Operating Committee and a chair of the Investment Management Risk Committee. In June 2022, in addition to her original role, Tatiana was appointed as Global Head of Non-Financial Risk for Investment Management to manage existing and emergent non-financial risks across the division. She has since been appointed a member of Morgan Stanley’s NFR Steering Committee and Enterprise Controls Committee. From August 2011 to August 2019, Tatiana was a partner and Head of Risk Management at SkyBridge Capital Management, a global alternative investments firm, where she was also a member of the Manager Selection, Portfolio Allocation and Real Estate Investment Committees. Prior to joining SkyBridge in August 2011, she was a Managing Director and Chief Risk Officer at Cerberus Capital Management, LLC from January 2009 through July 2011. Before joining Cerberus, Ms. Segal was Managing Director and Chief Risk Officer for Diamond Lake Investment Group from February 2008 through September 2008. From May 2006 through January 2008, Ms. Segal was a Senior Risk Manager at Citigroup Alternative Investments, where she was responsible for independent risk oversight of a multi-billion hedge fund and fund of funds portfolio. From October 2000 through April 2006, Ms. Segal was a Director of Market Risk at Nomura Securities, Inc. Prior to joining Nomura Securities, she was Risk Manager at BNP Paribas from January 1999 through October 2000 and a Risk Manager at Goldman, Sachs & Co., Ltd. from October 1995 through January 1999. Ms. Segal started her career at BlackRock Financial Management, Inc. from January 1993 through September 1995, as a portfolio analyst within BlackRock’s Institutional Accounts Division. Ms. Segal graduated from Columbia University in January 1993 with a Bachelor’s Degree in Economics. Ms. Segal is a Co-Chair of Risk Peer Advisory Group NY for 100 Women in Finance, as well as a contributing member of the council of The Directors and Chief Risk Officers. She serves as a board member of the Tenement Museum.
The Partnership has not adopted a code of ethics that applies to officers because it has no officers. In addition, the Partnership has not adopted any procedures by which investors may recommend nominees to the Partnership’s board of directors and has not established an audit committee because it has no board of directors.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
The Partnership has no directors or executive officers. As a limited partnership, the business of the Partnership is managed by the General Partner, which is responsible for the administration of the business affairs of the Partnership. As of January 1, 2019, the Partnership pays the General Partner a monthly General Partner fee equal to an annual rate of 0.75% (paid monthly) of the Partnership’s adjusted month-end net assets. Prior to January 1, 2019, the Partnership paid the General Partner a monthly General Partner fee equal to an annual rate of 1.0% (paid monthly) of the Partnership’s adjusted month-end net assets.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
(a) Security ownership of certain beneficial owners. As of February 28, 2023, the Partnership knows of no persons who beneficially own more than 5% of the Redeemable Units outstanding.
(b) Security ownership of management. Under the terms of the Limited Partnership Agreement, the Partnership’s affairs are managed by the General Partner. The following table indicates securities owned by the General Partner as of December 31, 2022:
(1) Title of Class
(2) Name of
Beneficial Owner
(3) Amount and
Nature of
Beneficial
Ownership
(4) Percent of
Class
Class Z Redeemable Units
General Partner
736.9210
40.3%
(c) Changes in control. None.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships, Related Transactions and Director Independence.
(a) Transactions with related persons. None.
(b) Review, approval or ratification of transactions with related persons. Not applicable.
(c) Promoters and certain control persons. MS&Co., Morgan Stanley Wealth Management and the General Partner could be considered promoters for purposes of item 404(c) of Regulation S-K. The nature and the amounts of compensation each promoter received or will receive, if any, from the Partnership are set forth under “Item 1. Business.”, “Item 8. Financial Statements and Supplementary Data.” and “Item 11. Executive Compensation.”

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services.
(1) Audit Fees. The aggregate fees billed for each of the last two fiscal years for professional services rendered by Ernst & Young LLP (“EY”) for the years ended December 31, 2022 and 2021 for the audits of the Partnership’s annual financial statements, reviews of financial statements included in the Partnership’s Forms 10-Q and 10-K and other services normally provided in connection with regulatory filings or engagements were:
2022 $149,976
2021 $140,977
(2) Audit-Related Fees. None.
(3) Tax Fees. The Partnership did not pay EY any amounts in 2022 and 2021 for professional services in connection with tax compliance, tax advice and tax planning.
(4) All Other Fees. None.
(5) Not Applicable.
(6) Not Applicable.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules.
(1) Financial Statements:
Statements of Financial Condition at December 31, 2022 and 2021.
Condensed Schedules of Investments at December 31, 2022 and 2021.
Statements of Income and Expenses for the years ended December 31, 2022, 2021 and 2020.
Statements of Changes in Partners’ Capital for the years ended December 31, 2022, 2021 and 2020.
Notes to Financial Statements.
(2) Exhibits:
3.1(a)
Certificate of Limited Partnership dated April 15, 2005 (filed as Exhibit 3.1 to the General Form for Registration of Securities on Form 10 filed on April 30, 2007 and incorporated herein by reference).
(b)
Certificate of Amendment of the Certificate of Limited Partnership dated September 21, 2005 (filed as Exhibit 3.1(a) to the General Form for Registration of Securities on Form 10 filed on April 30, 2007 and incorporated herein by reference).
(c)
Certificate of Amendment of the Certificate of Limited Partnership dated September 19, 2008 (filed as Exhibit 3.1(c) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
(d)
Certificate of Amendment of the Certificate of Limited Partnership dated September 28, 2009 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 30, 2009 and incorporated herein by reference).
(e)
Certificate of Amendment of the Certificate of Limited Partnership dated June 29, 2010 (filed as Exhibit 3.1(e) to the Current Report on Form 8-K filed on July 2, 2010 and incorporated herein by reference).
(f)
Certificate of Amendment of the Certificate of Limited Partnership dated September 2, 2011 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on September 7, 2011 and incorporated herein by reference).
(g)
Certificate of Amendment of the Certificate of Limited Partnership dated January 28, 2013 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on February 4, 2013 and incorporated herein by reference).
(h)
Certificate of Amendment of the Certificate of Limited Partnership dated August 7, 2013 (filed as Exhibit 3.1(h) to the Quarterly Report on Form 10-Q filed on August 14, 2013 and incorporated herein by reference).
(i)
Certificate of Amendment to the Certificate of Limited Partnership dated February 28, 2017 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on March 6, 2017 and incorporated herein by reference).
3.2(a)
Fifth Amended and Restated Limited Partnership Agreement (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on November 17, 2016 and incorporated herein by reference).
3.2(b)
Amendment Number 1 to the Fifth Amended and Restated Limited Partnership Agreement, effective June 13, 2018 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on June 15, 2018 and incorporated herein by reference).
4.1
Description of Securities (filed as Exhibit 4.1 to the Annual Report on Form 10-K filed on March 25, 2021 and incorporated herein by reference).
10.1(a)
Amended and Restated Commodity Futures Customer Agreement between the Partnership and MS&Co., effective September 4, 2013 (filed as Exhibit 10.9 to the Quarterly Report on Form 10-Q filed on November 14, 2013 and incorporated herein by reference).
(b)
U.S. Treasury Securities Purchase Authorization Agreement between the Partnership and MS&Co., effective June 1, 2015 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on November 4, 2015 and incorporated herein by reference).
10.2 (a)
Amended and Restated Alternative Investment Selling Agent Agreement among the Partnership, the General Partner and Morgan Stanley Wealth Management, effective March 3, 2016 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on March 8, 2016 and incorporated herein by reference).
(b)
Amendment to the Amended and Restated Alternative Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management, effective as of June 23, 2020 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on July 8, 2020 and incorporated herein by reference).
10.3
Form of Subscription Agreement (filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q filed on November 14, 2012 and incorporated herein by reference).
10.4(a)
Management Agreement among the Partnership, the General Partner and Aventis Asset Management LLC (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on February 4, 2013 and incorporated herein by reference).
(b)
Amendment No. 1 to the Management Agreement among the Partnership, the General Partner and Aventis Asset Management, LLC (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on March 6, 2014 and incorporated herein by reference).
10.5
Amended and Restated Management Agreement dated as of January 1, 2021, by and among the Partnership, the General Partner and Millburn Ridgefield Corporation (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on January 7, 2021 and incorporated herein by reference).
10.6
Management Agreement dated as of October 13, 2017, by and among the Partnership, the General Partner and Ospraie Management, LLC (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on October 19, 2017 and incorporated herein by reference).
10.7
Management Agreement dated as of January 1, 2018, by and among the Partnership, the General Partner and Harbour Square Capital Management LLC (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on January 4, 2018 and incorporated herein by reference).
10.8
Management Agreement dated as of December 1, 2018, by and among the Partnership, the General Partner and Aquantum GmbH (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on December 6, 2018 and incorporated herein by reference).
10.9
Management Agreement dated as of January 1, 2019, by and among the Partnership, the General Partner and Pan Capital Management, LP (filed as Exhibit 10.2 to the Current Report on Form 8-K filed on December 6, 2018 and incorporated herein by reference).
10.10(a)
Escrow Agreement among the General Partner, Morgan Stanley Smith Barney LLC and The Bank of New York (filed as Exhibit 10.7(a) to the Annual Report on Form 10-K filed on March 27, 2013 and incorporated herein by reference).
(b)
Amendment No. 5 to Escrow Agreement among the General Partner, Morgan Stanley Smith Barney LLC and The Bank of New York (filed as Exhibit 10.7(b) to the Annual Report on Form 10-K filed on March 27, 2013 and incorporated herein by reference).
10.11
Management Agreement dated as of April 1, 2019, by and among the Partnership, the General Partner and Northlander Commodity Advisors LLP (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on April 5, 2019 and incorporated herein by reference).
10.12
Management Agreement dated as of October 13, 2020, by and among the Partnership, the General Partner and Geosol Capital, LLC (filed as Exhibit 10.1 to the Current Report on Form 8-K on November 5, 2020 and incorporated herein by reference).
10.13
Management Agreement among the Partnership, the General Partner and Drakewood Capital Management Limited, LLC (filed as Exhibit 10.1 to the Current Report on Form 8-K on May 1, 2022 and incorporated herein by reference).
11.1
Amended and Restated Master Services Agreement, by and among the Partnership, the General Partner and SS&C Technologies, Inc. (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 6, 2015 and incorporated herein by reference).
99.1
Financial Statements of CMF GSL Master Fund LLC.
99.2
Financial Statements of CMF NL Master Fund LLC.
99.3
Financial Statements of CMF Drakewood Master Fund LLC.
The exhibits required to be filed by Item 601 of Regulation S-K are incorporated herein by reference:
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).
32.1
Section 1350 Certification (Certification of President and Director) (filed herewith).
32.2
Section 1350 Certification (Certification of Chief Financial Officer) (filed herewith).
101.INS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
104.Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)