EDGAR 10-K Filing

Company CIK: 1052354
Filing Year: 2021
Filename: 1052354_10-K_2021_0001193125-21-100624.json

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ITEM 1. BUSINESS
Item 1. Business
(a) General development of business
Man-AHL Diversified I L.P., a Delaware limited partnership (the “Partnership”), was organized in September 1997 under the Delaware Revised Uniform Limited Partnership Act and commenced trading operations on April 3, 1998, for the purpose of engaging in the speculative trading of physical commodities, futures and forward contracts and related instruments. The Partnership was formerly named AHL Diversified (USA) L.P., but was renamed in February 2002. The Partnership is a “feeder” fund in a “master-feeder” structure, whereby the Partnership invests substantially all of its assets in Man AHL Diversified Trading Company L.P. (the “Trading Company”). AHL Partners LLP (the “Trading Advisor”), a United Kingdom limited liability partnership, is the Partnership’s and the Trading Company’s trading advisor. The Trading Advisor also serves as the Partnership’s commodity pool operator. Man Investments (USA) Corp. (the “General Partner”), a Delaware corporation, is the Partnership’s general partner. The Trading Advisor is an affiliate of the General Partner. Man Investments Limited, a United Kingdom private limited company, that is part of Man Group plc (“Man Group”), is the managing member of the Trading Advisor, and Man Investments Holdings Inc., a Delaware corporation that is part of Man Group, is the sole shareholder of the General Partner.
On January 28, 2008, the Partnership filed a registration statement under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). The registration statement, which was subsequently amended, became effective on or about March 28, 2008. The Partnership offers two classes of units of limited partnership interest in the Partnership (“Units”): Class A Units are generally offered; Class B Units are offered to employee benefit plans, IRAs and other retirement plans and accounts. The two Classes of Units are identical to each other except that Class B Units may be purchased, transferred, held and redeemed in a minimum amount of $10,000. On April 1, 2009, the Partnership added two new series of Units: Class A Series 2 Units (“Class A-2”) and Class B Series 2 Units (“Class B-2”). Except as described in section (c) below, Class A-2 and Class B-2 units are identical to Class A and B units, respectfully.
Although the Partnership uses the term “class” to distinguish between certain interests in the Partnership, the Partnership does not believe that the differences between such interests are sufficient to make them separate “classes” under Section 12(g) of the Exchange Act, as all of the interests in the Partnership, regardless of “class,” are of substantially similar character and the holders of which enjoy substantially similar rights and privileges. The holders of interests in the Partnership (regardless of “class”) share pro rata in the Partnership’s profits and losses, enjoying no preferences over one another during the life of the Partnership or upon dissolution and otherwise have identical rights under the Partnership’s Limited Partnership Agreement, as amended or supplemented from time to time (the “Limited Partnership Agreement”). The only differences among the “classes” relate to fees and minimum investment.
The General Partner became the general partner of the Partnership as of April 1, 2005 when Man-AHL (USA) Corp., the Partnership’s original general partner and trading advisor (“Man-AHL”), appointed it as such. In addition to the appointment of the General Partner, Man-AHL appointed Man-AHL (USA) Limited to serve as the trading advisor to the Partnership commencing as of April 1, 2005. Following the appointments of the General Partner as a general partner and Man-AHL (USA) Limited as the trading advisor, Man-AHL resigned as a general partner and trading advisor of the Partnership. The General Partner agreed to continue the Partnership without interruption or change. On June 1, 2014, the General Partner appointed the Trading Advisor as trading advisor of the Partnership, and Man-AHL (USA) Limited resigned as trading advisor. The Trading Advisor implements the same trading program and employs substantively the same personnel as did Man-AHL (USA) Limited. The General Partner controls and manages the business of the Partnership, but has otherwise delegated its investment management authority and commodity pool operator responsibilities with respect to the Partnership to the Trading Advisor. Purchasers of Units, as the Partnership’s “Limited Partners,” have no right to participate in management or control of the Partnership. The offices of the Partnership, where its books and records are kept, are located at the office of the General Partner: 452 5th Ave., 27th Floor, New York, NY, 10018; telephone (212) 649-6600.
(c) Narrative description of business
The Partnership engages in speculative trading of physical commodities, futures contracts, spot and forward contracts, swaps and options and other related instruments, directly and indirectly through an investment in the Trading Company, pursuant to the trading strategies employed by the Trading Advisor. The Partnership invests substantially all of its assets in the Trading Company.
The investment objective of the AHL Diversified Program is to deliver capital growth for commensurate levels of volatility over the medium term, independent of the movement of the stock and bond markets, through the speculative trading, directly and
indirectly, of futures, options and forward contracts, swaps and other financial derivatives both on and off exchange. The AHL Diversified Program trades globally in several market sectors, including without limitation, currencies, bonds, energies, stock indices, interest rates, credit, metals, agriculturals and volatility. In the future, the AHL Diversified Program may, to a limited extent, invest in stocks.
The AHL Diversified Program employs a systematic, statistically based investment strategy that is designed to identify and capitalize on trends and other inefficiencies in markets around the world. Trading signals are generated and executed via a finely tuned trading and implementation infrastructure. This process is quantitative, meaning that investment decisions are entirely driven by mathematical models based on quantitative analysis of historical relationships. It is underpinned by rigorous risk control, ongoing research, diversification and the constant quest for efficiency. Trading takes place around-the-clock and real-time price information is used to respond to price moves across a diverse range of global markets.
As well as emphasizing sector and market diversification, the AHL Diversified Program has been constructed to achieve diversification by combining various investment strategies. The AHL Diversified Program invests in a diversified portfolio of instruments which may include futures, options and forward contracts, swaps and other financial derivatives both on and off exchange. The AHL Diversified Program trades approximately 250 markets and these markets may be accessed directly or indirectly and include, without limitation, stock indices, bonds, currencies, short-term interest rates, energies, credits, metals, agriculturals and volatility.
Another important aspect of diversification is the fact that the models generate signals across different timeframes, ranging from intra-day to several months. In line with the principle of diversification, the approach to portfolio construction and asset allocation is premised on the importance of deploying investment capital across the full range of sectors and markets. Particular attention is paid to correlation of markets and sectors, expected returns, trading costs and market liquidity. Portfolios are regularly reviewed and, when necessary, adjusted to reflect changes in these factors. The Trading Advisor also has a systematic process for adjusting market risk exposure in real time to reflect changes in the volatility of individual markets.
As the success of the AHL Diversified Program is largely dependent on its systems, the Trading Advisor is committed to investing in leading computer technology. The Trading Advisor (inclusive of affiliates) also maintains a disaster recovery site where a back-up trading system runs permanently and in parallel with the main system.
The AHL Diversified Program uses margin and considerable leverage to reach model allocations.
The AHL Diversified Program is supported by a dedicated team of investment specialists that continually seek to extend the range and versatility of the original investment techniques. As such, the Trading Advisor may increase the number and diversity of markets, strategies and instruments traded directly or indirectly by the AHL Diversified Program.
The Trading Advisor is paid a monthly management fee, payable in arrears, in an amount equal to 0.1667% of the month-end Net Asset Value of the Partnership (as defined in the Limited Partnership Agreement) whether or not the Partnership is profitable (approximately 2% annually). The General Partner is paid a monthly general partner administrative fee in an amount equal to 0.0833% of the month-end Net Asset Value of the Partnership whether or not the Partnership is profitable (approximately 1% annually) in respect to Class A-1 and Class B-1 units. The Trading Advisor may pay a portion of its management fee to the General Partner, and the General Partner may share a portion of its administrative fee with the Placement Agent (as defined below).
The Partnership will pay the Trading Advisor an incentive fee equal to 20% of the Net New Appreciation (as defined in the Limited Partnership Agreement), if any, achieved by the Partnership as of the end of such calendar month. Net New Appreciation achieved during a calendar month means the excess, if any, of (a) the Net Asset Value of the Partnership as of the end of a calendar month (without reduction for any incentive fees accrued or paid to the Trading Advisor for the calendar month or for any redemptions or distributions effected during or as of the end of such calendar month and without increase for any additional capital contributions effected during or as of the end of such calendar month) over (b) the Net Asset Value of the Partnership as of the end of the most recent prior calendar month for which an incentive fee was accrued or paid to the Trading Advisor, with clause (b) reduced by the amount of the incentive fee accrued or paid for such prior calendar month and also reduced by any redemptions or distributions, and increased by any contributions, effected as of or subsequent to the end of such prior calendar month through the first day of the calendar month referred to in clause (a), above.
Man Investments Inc., an affiliate of the General Partner and Trading Advisor, is the lead placement agent for the Partnership (the “Placement Agent”). In connection with various services provided by the Placement Agent to the Partnership related to the offer and sale of interests in the Partnership and the ongoing servicing of its investors, the Partnership will pay the Placement Agent a servicing fee equal to, in respect to Class A Units and Class B Units, 0.0833% of the month-end Net Asset Value of such Units (approximately 1% annually), and in respect of Class A-2 Units and Class B-2 Units, 0.0625% of the month-end Net Asset Value of such Units (approximately 0.75% annually), whether or not the Partnership is profitable as of the end of each
month. The Placement Agent may pass all or a portion of the servicing fee on to certain other selling and services agents. In addition, Units purchased through such selling and services agents may be subject to the payment of an additional upfront selling commission of up to 3% of the purchase price of the Units.
The Partnership’s organizational and initial offering fees and expenses were paid by the Partnership and have been completely amortized. The Partnership pays all of its expenses incurred in the ordinary course of its business. The Partnership also pays its extraordinary expenses, if any.
The Trading Company utilizes a number of brokers in the performance of its trading activities. Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated serve as the Trading Company’s futures brokers; the Royal Bank of Scotland, HSBC Bank PLC and Deutsche Bank AG, London Branch serve as the Trading Company’s foreign exchange prime brokers; J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC and Credit Suisse Securities (USA) LLC act as the clearing members for centrally cleared credit default swap index transactions engaged in by the Trading Company; and the Trading Company conducts certain over-the-counter (“OTC”) interest rate swap trading through J.P. Morgan Chase Bank N.A. and Deutsche Bank AG, London Branch (collectively, the “Brokers”). The Partnership is charged brokerage commissions at institutional rates, inclusive of all applicable National Futures Association (the “NFA”), exchange, clearing and other transaction fees. In connection with trading spot and forward contracts in the interbank foreign currency markets, the Partnership pays clearing fees of between $3.25 and $4.00 per transaction as well as dealer profits, which cannot be quantified, embedded in dealer quotes.
The Partnership invests substantially all of its assets in the Trading Company. Most of the Trading Company’s assets will be held in cash or United States (“U.S.”) government securities in accounts in the name of the Trading Company at the Brokers or a bank, which currently is The Bank of New York Mellon, and in order to conduct futures trading activities, will be transferred, as necessary, into segregated accounts at the Brokers. Approximately 10% to 40% of the Trading Company’s assets will be committed as margin for derivative positions. The Brokers may receive compensating balance treatment and excess interest income on the Partnership’s assets, through the Trading Company, held at the Brokers in the form of cash.
The Trading Company engages in trading on non-U.S. exchanges and markets. In connection with trading on non-U.S. exchanges and markets, the brokers may either maintain Trading Company assets in accordance with the requirements of the Commodity Futures Trading Commission (the “CFTC”) Rule 30.7 or may redeposit Trading Company assets with non-U.S. banks and brokers which may not be subject to regulatory schemes comparable to those applicable to the Brokers.
Regulation
Under the Commodity Exchange Act, as amended (the “CEA”), commodity exchanges and trading in futures and swaps (as defined in the CEA) are subject to regulation by the CFTC. The NFA, a “registered futures association” under the CEA, is the only non-exchange self-regulatory organization for futures industry professionals. The CFTC has delegated to the NFA responsibility for the registration of “commodity trading advisors,” “commodity pool operators,” “futures commission merchants,” “swap dealers,” “introducing brokers” and their respective associated persons and “floor brokers” and “floor traders.” The CEA requires commodity pool operators and commodity trading advisors, such as the General Partner and Trading Advisor, respectively, and commodity brokers, swap dealers, or futures commission merchants to be registered and to comply with various reporting and record keeping requirements. The CFTC may suspend a commodity pool operator’s or trading advisor’s registration if it finds that its trading practices tend to disrupt orderly market conditions or in certain other situations. In the event that the registration of the Trading Advisor as a commodity pool operator or commodity trading advisor were terminated or suspended, the Trading Advisor would be unable to fulfill its obligations as the Partnership’s commodity pool operator or implement the AHL Diversified Program on behalf of the Partnership. Should the Trading Advisor’s registrations be suspended, termination of the Partnership might result.
In addition to such registration requirements, the CFTC and certain commodity exchanges have established limits on the maximum net long or net short position which any person may hold or control in particular commodities. Most exchanges also limit the changes in futures contract prices that may occur during a single trading day.
The CFTC has proposed a separate position limits rule for 28 so-called “exempt” (i.e. metals and energy) and agricultural futures and options contracts and their economically equivalent swap contracts. As of January 31, 2020, these proposed separate position limits have not been adopted, and it is unclear whether the Trading Advisor will be required to modify its trading on behalf of its clients, including the Trading Company, with respect to certain futures contracts which may have an adverse effect on the Partnership.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Risk of Loss. Investing in the Partnership is speculative and involves substantial risks. You should not invest unless you can afford to lose your entire investment.
General. The transactions in which the Trading Advisor generally will engage on behalf of the Partnership involve significant risks. Growing competition may limit the Trading Advisor’s ability to take advantage of trading opportunities in rapidly changing markets. No assurance can be given that investors will realize a profit on their investment. Moreover, investors may lose all or some of their investment. Because of the nature of the trading activities, the results of the Partnership’s operations may fluctuate from month to month and from period to period. Accordingly, investors should understand that the results of a particular period will not necessarily be indicative of results in future periods.
Markets Are Volatile and Difficult to Predict. Trading in futures is a speculative activity. Futures prices may be highly volatile. Market prices are difficult to predict and are influenced by many factors, including: changes in interest rates; governmental, agricultural, trade, fiscal, monetary and exchange control programs and policies; weather and climate conditions; changing supply and demand relationships; national and international political and economic events; and the changing philosophies and emotions of market participants. In addition, governments intervene in particular markets from time to time, both directly and by regulation, often with the intent to influence prices. The effects of government intervention may be particularly significant in the financial instrument and currency markets, and may cause such markets to move rapidly.
Trading Is Highly Leveraged. The low margin deposits normally required in futures trading permit an extremely high degree of leverage. A relatively small movement in the price of a futures contract may result in immediate and substantial loss or gain to a trader holding a position in such contract. For example, if at the time of purchase 10% of the price of a futures contract is deposited as margin, a 10% decrease in the price of the futures contract would, if the contract were then closed out, result in a total loss of the margin deposit before any deduction for brokerage commissions. Consequently, like other leveraged investments, a futures trade may result in losses in excess of the amount invested. Forward contracts involve similar leverage and also may require deposits of margin as collateral. Swaps and OTC derivative instruments are also highly leveraged transactions.
Markets May Be Illiquid. At times, it may not be possible for the Trading Advisor to obtain execution of a buy or sell order at the desired price or to liquidate an open position, either due to market conditions on exchanges or due to the operation of “daily price fluctuation limits” or “circuit breakers.” For example, most U.S. commodity exchanges limit fluctuations in most futures contract prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” During a single trading day, no trades may be executed at prices beyond the daily limit. Futures contract prices occasionally have moved to the daily limit for several consecutive days with little or no trading.
Even when futures prices have not moved to the daily limit, the Trading Advisor might not be able to obtain execution of trades at favorable prices if little trading in the contracts which the Trading Advisor wishes to trade is taking place. Also, an exchange or governmental authority may suspend or restrict trading on an exchange (or in particular futures traded on an exchange) or order the immediate settlement of a particular instrument.
Options trading may be restricted in the event that trading in the underlying instrument becomes restricted. Options trading also may be illiquid at times regardless of the condition of the market in the underlying instrument. In either event, it will be difficult for the Trading Advisor to realize gains or limit losses on option positions by offsetting them or to change positions in the market.
Trading in OTC derivative instruments is conducted with individual counterparties rather than on organized exchanges. There have been periods during which forward and swap contract dealers have refused to quote prices for forward and swap contracts or have quoted prices with an unusually wide spread between the bid and asked price.
Speculative Position Limits May Restrict Futures Trading. Speculative position limits prescribe the maximum net long or short futures contract and options positions which any person or group may hold or control in particular futures contracts. All futures contracts and options on futures contracts traded on commodity exchanges located in the United States, with the exception of contracts on certain major non-U.S. currencies, are subject to speculative position limits established either by the CFTC or the relevant exchange.
All trading accounts owned or managed by the Trading Advisor and its principals will be combined for the purposes of speculative position limits. Such limits could adversely affect the profitability of the Trading Company and, consequently, of the Partnership. For example, the Trading Advisor could be required to liquidate futures positions at an unfavorable time in order to comply with such limits. However, the Trading Advisor does not believe that existing speculative position limits will materially adversely affect its ability to manage the Trading Company’s account.
Cash Flow. Futures contract gains and losses are marked-to-market daily for purposes of determining margin requirements. Option positions generally are not, although short option positions will require additional margin if the market moves against the position. Due to these differences in margin treatment between futures and options, there may be periods in which positions on both sides must be closed down prematurely due to short-term cash flow needs. If this were to occur during an adverse move in a spread or straddle relationship, a substantial loss could occur.
Decisions Based on Trends and Technical Analysis. The trading decisions of the Trading Advisor will be based in part on trading strategies which utilize mathematical analyses of technical factors relating to past market performance. The buy and sell signals generated by a technical, trend-following trading strategy are based upon a study of actual daily, weekly and monthly price fluctuations, volume variations and changes in open interest in the markets. The profitability of any technical, trend-following trading strategy depends upon the occurrence in the future of significant, sustained price moves in some of the markets traded. The Trading Company and, consequently, the Partnership may incur substantial trading losses:
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during periods when markets are dominated by fundamental factors that are not reflected in the technical data analyzed by the program;
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during prolonged periods without sustained moves in one or more of the markets traded; or
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during “whip-saw” markets, in which potential price trends start to develop but reverse before actual trends are realized.
In the past there have been prolonged periods without sustained price moves in various markets. Presumably, such periods will recur. A series of volatile reverses in price trends may generate repeated entry and exit signals in trend-following systems, resulting in unprofitable transactions and increased brokerage commission expenses. Technical, trend-following trading systems are used by many other traders. At times, the use of such systems may:
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result in traders attempting to initiate or liquidate substantial positions in a market at or about the same time;
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alter historical trading patterns;
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obscure developing price trends; or
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affect the execution of trades.
Model and Data Risk. The Trading Advisor relies heavily on proprietary mathematical quantitative models (each a “Model” and collectively, “Models”) and data developed both by the Trading Advisor and those supplied by third parties (collectively, “Data”) rather than granting trade-by-trade discretion to the Trading Advisor’s investment professionals. In combination, Models and Data are used to construct investment decisions, to value both current and potential investments (including, without limitation, for trading purposes, and for the purposes of determining the Net Asset Value of the Partnership), to provide risk management insights and to assist in hedging the Partnership’s positions and investments. Models and Data are known to have errors, omissions, imperfections and malfunctions (collectively, “System Events”).
The Trading Advisor seeks to reduce the incidence and impact of System Events, to the extent feasible, through a combination of internal testing, simulation, real-time monitoring and the use of independent safeguards in the overall portfolio management process, often in the software code itself. Despite such testing, monitoring and independent safeguards, System Events will result in, among other things, the execution of unanticipated trades, the failure to execute anticipated trades, delays in the execution of anticipated trades, the failure to properly allocate trades, the failure to properly gather and organize available data, the failure to take certain hedging or risk reducing actions and/or the taking of actions which increase certain risk(s)-all of which may have materially adverse effects on the Partnership. System Events in third-party provided Data is generally entirely outside of the control of the Trading Advisor.
The research and modeling processes engaged in by the Trading Advisor on behalf of its managed funds is extremely complex and involves the use of financial, economic, econometric and statistical theories, research and modeling; the results of this investment approach must then be translated into computer code. Although the Trading Advisor seeks to hire individuals skilled in each of these functions and to provide appropriate levels of oversight and employ other mitigating measures and processes, the complexity of the individual tasks, the difficulty of integrating such tasks, and the limited ability to perform “real world” testing of the end product, even with simulations and similar methodologies, raise the chances that Model code may contain one or more coding errors, thus potentially resulting in a System Event and further, one or more of such coding errors could adversely affect the Partnership’s investment performance.
The investment strategies of the Trading Advisor are highly reliant on the gathering, cleaning, culling and performing of analysis of large amounts of Data. Accordingly, Models rely heavily on appropriate Data inputs. However, it is impossible and impracticable to factor all relevant, available Data into forecasts, investment decisions and other parameters of the Models. The Trading Advisor will use its discretion to determine what Data to gather with respect to each investment strategy and what subset of that Data the Models take into account to produce forecasts which may have an impact on ultimate investment decisions. In addition, due to the automated nature of Data gathering, the volume and depth of Data available, the complexity and often manual nature of Data cleaning, and the fact that the substantial majority of Data comes from third-party sources, it is
inevitable that not all desired and/or relevant Data will be available to, or processed by, the Trading Advisor at all times. Irrespective of the merit, value and/or strength of a particular Model, it will not perform as designed if incorrect Data is fed into it which may lead to a System Event potentially subjecting the Partnership to a loss. Further, even if Data is input correctly, “model prices” anticipated by the Data through the Models may differ substantially from market prices, especially for financial instruments with complex characteristics, such as derivatives, in which the Partnership may invest.
Where incorrect or incomplete Data is available, the Trading Advisor may, and often will, continue to generate forecasts and make investment decisions based on the Data available to it. Additionally, the Trading Advisor may determine that certain available Data, while potentially useful in generating forecasts and/or making investment decisions, is not cost effective to gather due to, among other factors, the technology costs or third-party vendor costs and, in such cases, the Trading Advisor will not utilize such Data. The Trading Advisor has full discretion to select the Data it utilizes. The Trading Advisor may elect to use or may refrain from using any specific Data or type of Data in generating forecasts or making trading decisions with respect to the Models. The Data utilized in generating forecasts or making trading decisions underlying the Models may not be (i) the most accurate data available or (ii) free of errors. The Data set used in connection with the Models is limited. The foregoing risks associated with gathering, cleaning, culling and analysis of large amounts of Data are an inherent part of investing with a quantitative, process-driven, systematic adviser such as the Trading Advisor.
When Models and Data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose the Partnership to potential losses and such losses may be compounded over time. For example, by relying on Models and Data, the Trading Advisor may be induced to buy certain investments at prices that are too high, to sell certain other investments at prices that are too low, or to miss favorable opportunities altogether. Similarly, any hedging based on faulty Models and Data may prove to be unsuccessful and when determining the Net Asset Value of the Partnership, any valuations of the Partnership’s investments that are based on valuation Models may prove to be incorrect. In addition, Models may incorrectly forecast future behavior, leading to potential losses on a cash flow and/or a mark-to-market basis. Furthermore, in unforeseen or certain low-probability scenarios (often involving a market event or disruption of some kind), Models may produce unexpected results which may or may not be System Events.
Errors in Models and Data are often extremely difficult to detect, and, in the case of Models, the difficulty of detecting System Events may be exacerbated by the lack of design documents or specifications. Regardless of how difficult their detection appears in retrospect, some System Events may go undetected for long periods of time and some may never be detected. Finally, the Trading Advisor will detect certain System Events that it chooses, in its sole discretion, not to address or fix, and the third party software will lead to System Events known to the Trading Advisor that it chooses, in its sole discretion, not to address or fix. The degradation or impact caused by these System Events can compound over time. The Trading Advisor generally will not perform a materiality analysis on the potential impact of a System Event. The Trading Advisor believes that the testing and monitoring performed on Models will enable the Trading Advisor to identify and address those System Events that a prudent person managing a quantitative, systematic and computerized investment program would identify and address by correcting the underlying issue(s) giving rise to the System Events, however there is no guarantee of the success of such processes. Investors should assume that System Events and their ensuing risks and impact are an inherent part of investing with a process-driven, systematic investment manager such as the Trading Advisor.
Accordingly, the Trading Advisor does not expect to disclose discovered System Events to its investors. The Partnership will bear the risks associated with the reliance on Models and Data including bearing all losses related to System Events other than in relation to losses arising from the Trading Advisor’s willful misconduct, negligence or breach of fiduciary obligations.
Trade Systems and Execution of Orders. The Trading Advisor relies extensively on computer programs, systems, technology, Data and Models to implement its execution strategies and algorithms. The Trading Advisor’s investment strategies, trading strategies and algorithms depend on its ability to establish and maintain an overall market position in a combination of financial instruments selected by the Trading Advisor. There is a risk that the Trading Advisor’s proprietary algorithmic trading systems may not be able to adequately react to a market event without serious disruption. Further, trading strategies and algorithms may malfunction causing severe losses. While the Trading Advisor has employed tools to allow for human intervention to respond to significant system malfunctions, it cannot be guaranteed that losses will not occur in such circumstances as unforeseen market events and disruptions and execution system issues.
Orders may not be executed in a timely and efficient manner due to various circumstances, including, without limitation, trading volume surges or systems failures attributable to the Trading Advisor, the Trading Advisor’s counterparties, brokers, dealers, agents or other service providers. In such event, the Trading Advisor might only be able to acquire or dispose of some, but not all, of the components of such position, or if the overall position were to need adjustment, the Trading Advisor might not be able to make such adjustment. As a result, the Partnership would not be able to achieve the market position selected by the Trading Advisor, which may result in a loss.
Trade Error Risk. The complex execution modalities operated by the Trading Advisor and the speed and volume of trading invariably result in occasional trades being executed which, with the benefit of hindsight, were not required or intended by the
execution strategy or occasional trades not being executed when they should have been. To the extent a trade error is caused by counterparty, such as a broker, the Trading Advisor generally, to the extent reasonable and practical, attempts to recover any loss associated with such trade error from such counterparty. To the extent a trade error is caused by the Trading Advisor, a formalized process is in place for the documentation and resolution of such trade errors. Given the volume, diversity and complexity of transactions executed by the Trading Advisor on behalf of the Partnership, investors should assume that trade errors will occur on occasion. If such trade errors result in gains to the Partnership, such gains will generally be retained by the Partnership. However, if a trade error result in losses, they will be borne by the Trading Advisor in accordance with its internal policies unless otherwise determined by the General Partner.
Trading in OTC Markets Will Expose the Partnership to Risks Not Applicable to Trading on Organized Exchanges. The Partnership, through the Trading Company, may engage in OTC derivative transactions, such as: currency forward contracts traded in the interbank market; options on currency forward contracts; and swap transactions.
In general, there is much less governmental regulation and supervision of transactions in the OTC markets than of transactions entered into on organized exchanges. Most of the protections afforded to participants on U.S. and certain non-U.S. exchanges, such as daily price fluctuation limits and the performance guarantee of an exchange clearinghouse, will not be available in connection with OTC transactions. Consequently, the Partnership will be exposed to greater risk of loss through default than if it confined its trading to organized exchanges.
A portion of the Partnership’s assets may be traded in forward contracts. Such forward contracts are generally not traded on exchanges and are executed directly through forward contract dealers. However, certain forward currency exchange contracts are regulated as swaps by the CFTC and have begun being voluntarily traded on swap execution facilities. Some of these contracts may be required to be centrally cleared by a regulated U.S. clearinghouse, and may be required to be traded on a regulated exchange in the future. There is no limitation on the daily price moves of forward contracts, and a dealer is not required to continue to make markets in such contracts. There have been periods during which forward contract dealers have refused to quote prices for forward contracts or have quoted prices with an unusually wide spread between the bid and asked price. Arrangements to trade forward contracts may therefore experience liquidity problems. The Partnership therefore will be subject to the risk of credit failure or the inability of or refusal of a forward contract dealer to perform with respect to its forward contracts.
When trading currency forward contracts, the Trading Company may hedge the foreign currencies in order to limit the Trading Company’s exposure to fluctuations in exchange rates. However, there is no guarantee that such hedging will be successful.
Enhanced Regulation of the OTC Derivatives Markets. The European Market Infrastructure Regulation (“EMIR”) seeks comprehensively to regulate the OTC derivatives market in Europe including, in particular, imposing mandatory central clearing, trade reporting and, for non-centrally cleared trades, risk management obligations on counterparties. Similarly, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”), enacted in July 2010, includes provisions that substantially increase the regulation of the OTC derivatives markets. The Reform Act requires that a substantial portion of OTC derivatives must be executed in regulated markets and be submitted for clearing to regulated clearinghouses, subject to margin requirements. OTC derivative dealers also are required to post margin to the clearinghouses through which they clear their customers’ trades instead of using such margin in their operations as was widely permitted before the Reform Act. Taken together, these regulatory developments have increased and will continue to increase the OTC derivative dealers’ costs, and these increased costs are generally passed through to other market participants in the form of higher upfront and mark-to-market margin, less favorable trade pricing, and the imposition of new or increased fees including clearing account maintenance fees.
The CFTC also requires certain derivatives transactions that were previously executed on a bilateral basis in the OTC markets to be executed through a regulated futures or swap exchange or execution facility. Similarly, under EMIR, European regulators may require a substantial proportion of such derivatives transactions to be bought on exchange and/or centrally cleared. The SEC is also expected to impose similar requirements on certain security-based derivatives in the near future, though it is not yet clear when these parallel SEC requirements will go into effect. Such requirements may make it more difficult and costly for investment funds, including the Partnership and/or the Trading Company, to enter into highly tailored or customized transactions. They may also render certain strategies in which the Partnership might otherwise engage impossible or so costly that they will no longer be economical to implement. The overall impact of EMIR and the Reform Act on the Partnership remains uncertain and it is unclear how the OTC derivatives markets will adapt to these new regulatory regimes.
Exchanges for Physicals/Swaps/Risk. While not a regular practice for the Trading Company, it may in rare instances engage in transactions known as exchanges for physicals (“EFP”), exchanges for swaps (“EFS”), or exchanges for risk/OTC derivatives (“EFR”). An EFP/EFS/EFR is a purchase or sale of a spot commodity/swap/derivative, as applicable, in conjunction with an offsetting sale or purchase of a corresponding futures contract involving the same or equivalent underlying commodity or instrument, without making an open and competitive trade for the futures contract on the exchange. EFPs, EFSs and EFRs
are a permitted exception to the general requirement of the CEA that all futures contracts must be competitively executed on an exchange. They are permitted pursuant to the rules of the relevant exchanges, which vary from exchange to exchange. If the EFP, EFS or EFR does not comply with specific exchange requirements, particularly regarding possessing documentation evidencing possession of the underlying commodity or instrument, then the CFTC or the exchange may deem the transaction to be an illegal off-exchange futures contract. In addition, every EFP, EFS or EFR involves the transfer of an underlying commodity or entry into a swap or derivative on a bilateral basis, as applicable, with a counterparty in exchange for a related cleared futures contract. There is, therefore, counterparty credit risk if the counterparty or its clearing member on the futures leg fails to perform. Unlike other futures contracts that are deemed cleared by the clearinghouse upon trade matching or at the end of the business day, futures contracts arising out of EFPs, EFSs or EFRs may, under various clearinghouse rules, not be deemed accepted by the clearinghouse until the next business day.
Options on Futures Contracts May Be More Volatile Than Futures Contracts. The Trading Advisor may trade options on futures contracts. Options are speculative in nature and are highly leveraged. The purchaser of an option risks losing the entire purchase price of the option. The seller (writer) of an option risks losing the difference between the premium received for the option and the price of the underlying futures contract that the writer must purchase upon exercise of the option. Additionally, the seller and writer of the options lose any commissions and fees associated with such transactions. This could subject the writer to unlimited risk in the event of an increase in the price of the contract to be purchased or delivered. Successful trading of options on futures contracts requires a trader to accurately determine near-term market volatility because it often has an immediate impact on the price of outstanding options. Accurate determination of near-term volatility is more important to successful options trading than it is to long-term futures contract trading strategies because such volatility generally does not have as significant an effect on the prices of futures contracts.
Trading on Non-U.S. Exchanges and Markets Will Expose the Partnership to Risks Not Applicable to Trading on U.S. Exchanges and Markets. The Partnership, through the Trading Company, may engage in trading on non-U.S. exchanges and markets. The Partnership will be subject to the risk of fluctuations in the currency exchange rate between the local currency and the U.S. dollar and to the possibility of exchange controls. Trading on such exchanges and markets generally involves other risks not applicable to trading on U.S. exchanges and markets.
For example, such exchanges and markets:
•
may not provide the same assurances of the integrity (financial and otherwise) of the marketplace and its participants as do U.S. exchanges and markets;
•
may exercise less regulatory oversight and supervision over transactions and participants in transactions;
•
may not afford all participants an equal opportunity to execute trades;
•
may be subject to a variety of political influences and the possibility of direct governmental intervention;
•
may have different clearance and settlement procedures for transactions than U.S. exchanges and markets. There have been times when settlement procedures have been unable to keep pace with the volume of transactions on certain exchanges and markets, making it difficult to conduct trades; and
•
may be “principals’ markets” in which performance is the responsibility only of the member with whom the trader has dealt (the counterparty) rather than the responsibility of an exchange or clearing association. Each transaction on such an exchange or market may subject the Partnership to the risk of the counterparty’s credit failure or inability or refusal to perform its obligations.
Institutional Risks. Institutions, such as the banks and brokers, will have custody of the assets of the Partnership. These firms may encounter financial difficulties that impair the operating capabilities or the capital position of the Partnership, the Trading Company or the General Partner.
Counterparty Risk. The Partnership will be subject to the risk of the inability of counterparties to perform with respect to transactions, particularly uncleared swap and currency forward transactions, whether due to insolvency, bankruptcy or other causes, which could subject the Partnership to substantial losses. In an effort to mitigate such risks, the General Partner and Trading Advisor will attempt to limit transactions to counterparties, which are established, well-capitalized and creditworthy.
Affiliated Parties - Conflicts of Interest. Under the terms of the Limited Partnership Agreement, the General Partner has the authority to engage trading advisors to make trading decisions for the Partnership. Since the Trading Advisor is an affiliate of the General Partner, the General Partner has a conflict of interest with respect to its responsibilities to manage the
Partnership for the benefit of the Limited Partners, and to prevent violations of the Partnership’s trading policies and to monitor for excessive trading by the Trading Advisor. In addition, the General Partner has a conflict of interest with respect to its responsibility to review the trading performance of the Partnership and a disincentive to terminate the advisory relationship between the Trading Advisor and the Partnership. There have been no arm’s-length negotiations with respect to the management and incentive fees that the Trading Advisor will charge the Trading Company or with respect to the other terms of the advisory agreement entered into with the Trading Advisor.
MiFID II. Each of the European Union’s re-cast Markets in Financial Instruments Directive (2014/65/EU) (the “MiFID II Directive”), the delegated and implementing European Union (“EU”) regulations made thereunder, the laws and regulations introduced by Member States of the EU to implement the MiFID II Directive and the EU’s Markets in Financial Instruments Regulation (600/2014) (“MiFIR” and, together with the MiFID II Directive, “MiFID II”) impose new regulatory obligations on the Trading Advisor. These regulatory obligations may impact on, and constrain the implementation of, the investment strategy of the Partnership and lead to increased compliance obligations upon and accrued expenses for the Trading Advisor and/or the Partnership.
Epidemics and Pandemics. Since the mid-1990s, the world has seen a number of outbreaks of new viral illnesses of varying severity, including avian flus, Severe Acute Respiratory Syndrome (SARS), Middle East Respiratory Syndrome (MERS), the H1N1 Flu (Swine Flu), and COVID-19 caused by the novel Coronavirus known as SARS-CoV-2. The responses to these outbreaks have varied as has their impact on human health, local economies, national economies and the global economy, and it is impossible at the outset of any such outbreak to estimate accurately what the ultimate impact of any such outbreak will be. Protective measures taken by governments and the private sector, including the General Partner and Trading Advisor, to mitigate the spread of any such illness, including travel restrictions and outright bans, quarantines, work-from-home arrangements, mandatory business closures and shelter-in-place orders may lead to, or may be expected to lead to, wide spread economic damage, resulting in severe disruptions in the markets in which the Partnership trades and, potentially, adversely affecting the Partnership’s profit potential; and the spread of any such illness within the offices of the General Partner and/or the Trading Advisor, the Partnership’s service providers, and/or the exchanges and other components of market infrastructure could severely impair the operational capabilities of the General Partner and/or the Trading Advisor, the Partnership’s service providers or various markets themselves resulting in harm to the Partnership’s business and its operating results.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties.
The Partnership does not own or use any physical properties in the conduct of its business. The General Partner and various service providers perform services for the Partnership from their offices.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
The General Partner is not aware of any pending legal proceedings to which either the Partnership is a party or to which any of its assets are subject. In addition there are no pending material legal proceedings involving either the General Partner or Trading Advisor.

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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 the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Market Information.
There is no trading market for the Units, and none is likely to develop. Units may be redeemed upon 10 days’ written notice to the General Partner at their Net Asset Value as of the last business day of each calendar month; provided, however, that each Limited Partner must maintain a minimum investment of $25,000 and $10,000, respectively of Class A Units (or Class A-2 Units) and Class B Units (or Class B-2 Units), in the Partnership following any redemption initiated by such Limited Partner in order to remain invested in the Partnership.
(b) Holders.
As of December 31, 2020, there were 290 holders of Class A Units, 30 holders of Class A-2 Units, 327 holders of Class B Units and 0 holders of Class B-2 Units.
(c) Dividends.
No distributions or dividends have been made on the Units, and the General Partner has no present intention to make any.
(d) Securities Authorized for Issuance Under Equity Compensation Plans.
None.
(e) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.
The Partnership may admit additional Limited Partners to the Partnership and permit additional capital contributions to be made to the Partnership as of the first business day of any calendar month or at such other times as the General Partner may determine. On the first business day of October 2020, November 2020 and December 2020, the Partnership sold Class A Units to existing and new Limited Partners in the amount of $0, $109,999 and $0, respectively; Class A-2 Units to existing and new Limited Partners in the amount of $0, $208,001 and $0, respectively; Class B Units to existing and new Limited Partners in the amount of $0, $0 and $210,000, respectively; and Class B-2 Units to existing and new Limited Partners in the amount of $0, $0 and $0, respectively. There were no underwriting discounts or commissions in connection with the sales of the Units described above.
(f) Issuer Purchases of Equity Securities.
Pursuant to the Limited Partnership Agreement, a Limited Partner may redeem some or all of its Units as of the last business day of each calendar month at the then current month-end Net Asset Value. The redemption of Units has no impact on the value of Units that remain outstanding, and Units are not reissued once redeemed. The following table summarizes the amount of Units redeemed during the three months ended December 31, 2020:
Class A Units
Class A-2 Units
Class B Units
Class B-2 Units
Date of
Redemption:
Amount
Redeemed:
Amount
Redeemed:
Amount
Redeemed:
Amount
Redeemed:
(last business day)
October 2020
$ 554,965
-
$ 324,502
-
November 2020
$ 1,556,220
-
$ 915,701
-
December 2020
$ 496,299
-
$ 818,334
-
TOTAL
$ 2,607,484
-
$ 2,058,537
-

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data.
The following is a summary of operations for the fiscal years 2020, 2019, 2018, 2017 and 2016 and total assets of the Partnership at December 31, 2020, 2019, 2018, 2017 and 2016.
For the
Year Ended
December 31,
For the Year
Ended
December 31,
For the Year
Ended
December 31,
For the Year
Ended
December 31,
For the Year
Ended
December 31,
Revenue:*
Total net realized and unrealized gains (losses)
$ 9,655,632
$ 13,208,515
$ 1,245,752
$ 18,205,710
$ (7,289,110 )
Interest income
510,991
1,856,022
1,764,072
854,933
293,762
Other Income
102,311
-
-
-
Expenses:**
Incentive fees
-
-
-
-
-
Management fees
2,603,364
2,811,368
3,276,649
3,796,264
4,734,252
Servicing fees
871,180
941,605
1,098,660
1,272,301
1,588,234
Brokerage commissions
138,727
190,659
284,613
486,447
652,371
Administrative expenses
865,122
915,399
1,182,114
909,312
1,282,068
Net income (loss)
5,688,230
$ 10,307,877
$ (2,832,242 )
$ 12,596,319
$ (15,252,273 )
Total assets
86,720,650
$ 92,358,800
$ 105,907,806
$ 122,096,273
$ 143,034,688
Total Partnership capital
84,817,626
$ 90,128,836
$ 99,736,784
$ 119,598,097
$ 139,406,484
Net Asset Value per outstanding unit - Class A - Series 1
4,040.79
$ 3,773.02
$ 3,379.30
$ 3,449.91
$ 3,120.88
Net Asset Value per outstanding unit - Class A - Series 2
4,682.16
$ 4,317.43
$ 3,818.72
$ 3,849.96
$ 3,439.38
Net Asset Value per outstanding unit Class B - Series 1
4,040.61
$ 3,772.86
$ 3,379.15
$ 3,449.76
$ 3,120.74
Net Asset Value per outstanding unit - Class B - Series 2
-
$ -
$ 3,604.14 ***
$ 3,850.01
$ 3,439.44
Increase (decrease) in Net Asset Value per Class A - Series 1 unit^
237.00
$ 387.36
$ (70.61 )
$ 315.48
$ (331.06 )
Increase (decrease) in Net Asset Value per Class A - Series 2 unit^
395.07
$ 511.82
$ (31.24 )
$ 396.34
$ (219.86 )
Increase (decrease) in Net Asset Value per Class B - Series 1 unit^
253.32
$ 394.51
$ (70.61 )
$ 305.71
$ (319.17 )
Increase (decrease) in Net Asset Value per Class B - Series 2 unit***
-
$ -
$ (245.87 )
$ 410.60
$ (309.74 )
* Allocated to the Partnership from its investment in the Trading Company. The Trading Company generates revenue from the trading of futures, foreign exchange, forward currency contracts and treasury bills.
** Expenses include the Partnership’s allocation of expenses from its investment in the Trading Company in addition to direct expenses of the Partnership.
*** Ending Net Asset Value per unit calculated immediately prior to final redemption.
^ Based on weighted average units outstanding during the year.

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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.
Reference is made to “Item 8. Financial Statements and Supplementary Data.” The information contained therein is essential to, and should be read in conjunction with, the following analysis.
Liquidity and Capital Resources
Units may be offered for sale as of the first business day, and may be redeemed as of the last business day, of each month.
The Partnership raises additional capital only through the sale of Units and capital is increased through trading profits (if any) and interest income. The Partnership does not engage in borrowing. The Partnership, not being an operating company, does not incur capital expenditures. It functions solely as a passive trading vehicle, investing the substantial majority of its assets in the Trading Company. Its remaining capital resources are used only as assets available to make further investments in the Trading Company and to pay Partnership expenses. Accordingly, the amount of capital raised for the Partnership should not have a significant impact on its operations.
Partnership assets not invested in the Trading Company are maintained in cash and cash equivalents in bank accounts or accounts with The Bank of New York Mellon and are readily available to the Partnership. The Partnership may redeem any part or all of its limited partnership interest in the Trading Company at any month-end at the net asset value per unit of the Trading Company. The Trading Company’s assets are generally held as cash or cash equivalents which are used to margin futures and provide collateral for forward contracts and other OTC contract positions and are withdrawn, as necessary, to pay redemptions (to the Partnership and other investors in the Trading Company). Other than potential market-imposed limitations on liquidity, due, for example, to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Trading Company’s futures trading, the Trading Company’s assets are highly liquid and are expected to remain so.
During its operations through December 31, 2020, the Partnership experienced no meaningful periods of illiquidity in any of the numerous markets in which it trades.
Critical Accounting Policies
The Partnership records its transactions in futures contracts, forward contracts and other derivatives, including related income and expenses, on a trade-date basis. Open futures contracts traded on an exchange are valued at fair value, which is based on the closing settlement price on the exchange where the futures contract is traded by the Partnership on the day with respect to which the Partnership’s Net Asset Value is being determined. Open forward contracts and other derivatives are valued at fair value using independent pricing services, which use market observable inputs in their valuations. If the General Partner determines the fair value of an investment cannot be accurately determined pursuant to the foregoing methods, such investment shall be assigned such fair value as the General Partner may determine in its sole discretion.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions, such as accrual of expenses, that affect the amounts and disclosures reported in the financial statements. Based on the nature of the business and operations engaged in by the Partnership, the General Partner believes that the estimates utilized in preparing the Partnership’s financial statements are appropriate and reasonable; however, actual results could differ from the estimates. The estimates do not provide a range of possible results that would require the exercise of subjective judgment. The General Partner further believes that, based on the nature of the business and operations of the Partnership, no other reasonable assumptions relating to the application of the Partnership’s critical accounting estimates other than those to be used would likely result in materially different amounts from those reported. The Partnership’s significant accounting policies are described in detail in Note 2 to the Financial Statements.
Allocations by Market Sector
The following table indicates the percentage of the Partnership’s assets allocated to initial margin for the Partnership’s open trading positions by market sector as of December 31, 2020. The Partnership’s capitalization was $84,817,626 as of December 31, 2020. Also see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” below.
Fiscal Year 2020
Market Sector
Margin Allocation
as of December 31st
% of Capitalization
as of December 31st
Agriculturals
$ 1,280,651
1.51%
Bonds
$ 1,307,752
1.54%
Credit
$ 723,836
0.85%
Currencies
$ 2,777,315
3.27%
Energy
$ 1,042,110
1.23%
Interest rates
$ 589,168
0.69%
Metals
$ 1,982,019
2.34%
Stock indices
$ 4,676,287
5.51%
Total*
$ 14,379,139
16.94%
* Total amount does not foot due to rounding.
Results of Operations
Due to the nature of the Partnership’s trading, the Partnership’s income or loss from operations may vary widely from period to period. Management cannot predict whether the Partnership’s future Net Asset Value per Unit will increase or experience a decline. The Partnership was organized in September 1997 under the Delaware Revised Uniform Limited Partnership Act and commenced operations on April 3, 1998.
Performance Summary
The Partnership is a speculative managed futures fund which trades pursuant to the AHL Diversified Program, indirectly through its investment in the Trading Company. The AHL Diversified Program is a futures and forward OTC price trend-following, trading system. The AHL Diversified Program is entirely quantitative in nature and implements trading positions on the basis of statistical analyses of past price histories. The AHL Diversified Program, like most trend-following systems, is designed in the anticipation that most of its trades will be unprofitable; the objective of overall profitability depends on the system identifying certain major trends which occur and recognizing significant profits from participating in such trends.
The past performance of the AHL Diversified Program is not necessarily indicative of its future results. This is the case with all speculative trading strategies. Moreover, the markets in which the AHL Diversified Program is active have seen major changes in recent years, including the influx of entirely different classes of market participants. These changed circumstances may mean that the markets in which the Trading Advisor has previously traded on behalf of the Trading Company are not necessarily representative of those in which it trades on behalf of the Trading Company currently.
As a speculative futures fund, the Partnership (through the Trading Company) effectively maintains all of its capital in reserve. The Trading Company does not “buy” or “sell” futures or forward contracts in the traditional sense; rather, through taking positions in these markets, the Trading Company, and thus the Partnership indirectly, acquires loss/profit exposure and uses its capital to cover losses and provide margin (which constitutes a good faith deposit towards the Trading Company’s (but not the Partnership’s) obligation to pay such losses) to support its open positions. Each of the Partnership and the Trading Company maintains most of its capital in cash and cash equivalents.
Futures trading programs are proprietary and confidential. As is the case with any speculative futures fund, it is impossible to predict how the Partnership will perform. It is not possible, as it is in the case of an operating business, to predict performance trends, analyze future market conditions or evaluate the likely success or failure of the Partnership.
There are certain general market conditions in which the Partnership is more likely to be profitable than in others. For example, in trendless or stagnant markets, the AHL Diversified Program is unlikely to be profitable. On the other hand, trending markets with substantial price change momentum can be favorable to the AHL Diversified Trading Program. However, because of the continually changing population of market participants as well as supply and demand characteristics, it cannot be predicted how the AHL Diversified Program, and thus the Partnership, will perform in any given market conditions.
31-Dec -20
31-Dec -19
Ending Equity
$ 84,817,626
$ 90,128,836
Net assets decreased $5,311,210 for the year ended December 31, 2020. This decrease was attributable to subscriptions in the amount of $4,408,673, redemptions in the amount of $15,408,113 and net income from operations of $5,688,230.
For the year ended December 31, 2020, the Partnership accrued or paid total expenses of $4,483,238, including $871,180 in servicing fees, $2,603,364 in General Partner administrative fees and Trading Advisor management fees, and $1,008,694 in other expenses. Interest of $510,991 was earned or accrued on the Partnership’s cash and cash equivalent investments.
The Net Asset Value of a Class A Unit increased by $267.77 to $4,040.79. The Net Asset Value of a Class B Unit increased by $267.75 to $4,040.61. The Net Asset Value of a Class A-2 Unit increased by $364.73 to $4,682.16.
Equity trading for the Partnership was largely negative throughout January and February, driven largely by long positioning. In January, Asian indices such as Taiwan’s TAIEX and China’s H-Shares fared worst, offsetting gains from a long position in the Australian SPI 200 Index, while in February, the previously-profitable long position in Australian SPI 200 Index, as well as long positions in S&P TSX 60 Index and the Nikkei Index were among the worst performers. In March, the Partnership’s equity positions turned net-short early on in the month, and these short positions generally ended up the month’s top performers. Most notable of these were in the Hang Seng index and the Russell 2000 Index, while further gains came from a long position in the VIX Volatility Index. In April, a sharp reversal in the equity markets saw losses on the short positioning built up in the Partnership in March, as net short positioning as well as a long VIX position finished in the red overall, with the long VIX position and shorts in TAIEX futures detracting most. This trend continued into May as a strong equity rally drove further losses on the Partnership’s built up short positioning, the worst being the VIX and Tokyo Stock Exchange indices, as well as the Australian SPI 200. The losses continued in June as the Partnership’s equities trading finished the month marginally in the red, despite moving from flat to small net long as the month progressed. In July, the Partnership’s long positioning in equities led the overall portfolio, as the NASDAQ 100 and S&P 500 outperforming developed market peers, more than outweighing an inconsequential loss from a short in the French CAC40 index. The gains in these positions did not continue into August, however, as equity trading finished the month in red, led by losses in the S&P 500 and NASDAQ 100. In October, global equities had their worst week since March, and the Partnership’s overall long positions, particularly in Australian and Swedish indices, posted losses. In November, the overall long positioning proved more profitable, as positions in indices were largely positive, particularly Asian indices such as the Nikkei and Taiwan MSCI. Losses in indices such as the FTSE gave the sector its biggest loss. To end the year, the Partnership saw positive gains in its equity positions, with the Taiwan MSCI index being the top performer on the month.
The Partnership’s fixed income trading started out 2020 as a constant performer, bringing in positive returns throughout the first quarter. The Partnership’s position in Italian bonds brought in positive returns in January, and while such positions experienced losses in February and March, profitable positions in US Treasuries more than made up for any such losses. The profitable positions continued into April and May as positions in Canadian bonds and Short Sterling were top performers in April and UK interest rate futures and shorts in German bonds in May being among the Partnership’s top performers. In June, while the Partnership overall saw very minor losses in fixed income, UK interest rates futures and long positions in Italian bonds experienced positive performance. In the third quarter, the Partnership’s fixed income started strong, as July saw the Partnership’s long positions in Italian 10-year bonds experience the most gains as yields traded below 1% for the first-time since the outset of the pandemic. However, this tread was reversed in August, as largest losses of the month occurred in the Partnership’s predominately long positions in fixed income, driven by long positions in 10 year Gilts and 10 year Australian bonds. September saw the returns level out and end the quarter with minor gains, as a long position in 10-year Italian government bonds was the top performer, offsetting a loss from the Partnership’s short position in German bonds. In the fourth quarter, the Partnership had a downward trend, posting losses in fixed income trading in each of the three months. In October, Losses were experienced trading US and UK markets as benchmark yields nudged higher. These losses continued into November, as prices of bonds broadly fell, and the Partnership saw losses in the Partnership’s German and UK bonds. December saw positive returns from long positions in UK and Italian bonds offset by longs in Australian bonds and shorts in German bonds.
The Partnership’s commodities trading was profitable in the first quarter of 2020, posting gains in all three months. In January, the biggest contributors on both the upside and downside were in energies, as short natural gas positions in the US and UK were positive while long oil positions posted losses. In other commodities, a long palladium position was positive, offsetting losses produced by shorts in coffee and copper. This trend continued into February where energy shorts in US natural gas and oil and shorts in zinc realized gains, more than offsetting losses in precious metals such as silver and platinum as prices became increasingly volatile. In March, the gains were led by the Partnership’s short positions in crude and copper, offsetting losses from agricultural commodity positions, such as longs in cocoa and sugar. The performance of commodities continued into the start of the second quarter, where losses in short copper and shorts in U.S. natural gas were marginally offset by gains in WTI crude oil in April. However, these gains did not continue for the rest of the quarter. In May, the Partnership’s short
positions in crude oil and aluminum, and positions in sugar and wheat, offset gains from soyameal and coffee. In June, short positions in base metals, aluminum in particular, offset profits short positions in US natural gas, and agricultural short positions in sugar and corn offset minor gains from the Partnership’s short position in wheat. To start the third quarter, the Partnership’s long positions in gold and silver were top performers across the portfolio in June, offsetting losses from the Partnership’s short positions in aluminum and coffee, though this trend reversed in August as trading ultimately ended with minor losses for the month. Long positions in copper and silver were top performers, while losses were experienced from short positions in aluminum and wheat. In September, the Partnership’s predominantly long positions in commodities posted losses, as gains from long positions in soybeans, corn and gas oil were not enough to offset losses led by long positions in coffee, silver and brent crude oil. Commodity trading for the Partnership ended the year strong, as the Partnership experienced gains in the sector all three months. In October, this was led by longs in soyabeans and shorts in gas oil and crude oil, offsetting losses in metals, copper in particular. In November, the Partnership’s long positions in soyabeans continued to post positive returns, assisted by a long position in copper; both of these mere more than enough to offset losses from positions in brent crude oil, WTI crude oil and cocoa. In December, the Partnership posted gains from long positions in each of energies, metals, and agriculturals, with soyabeans as the top performer in the asset class.
The Partnership’s currency trading started the year posting minor losses in January, as the Partnership’s long positions in the New Zealand dollar and the South African rand offset gains from short positions in South American currencies such as the Chilean peso against US dollar. The trading changed course, however, posting gains in both February and march, as short positions in the Brazilian real and Australian dollar against the US dollar posted strong returns for both months, offsetting losses from other positions, such as US dollar crosses against developed market currencies such as the Japanese yen and Euro. The performance of the Partnership’s short positions in the Brazilian real continued into the second quarter, as the position posted gains again in April; however, these gains were outweighed by losses in the previously-profitable Australian dollar position. May saw further losses in currency trading, as losses were driven by short Euro and Chilean peso positions. In June, the Partnership’s FX net positioning changed from long to short the US dollar and saw losses, most notably in the Mexican peso and Japanese yen, though these were partially offset by gains in the British pound against the Australian dollar. The third quarter continued this downward trend, as the majority of the Partnership’s July losses came from its FX trading, as established short positions in UK sterling, Chilean peso and the Swiss Franc against the dollar experienced notable losses. In August, the Partnership was able to recover some gains in the currency sector the Partnership’s short positioning in the US dollar, most notably against the Canadian dollar and Indian rupee offset a loss in a short position of the US dollar against the South African rand. In September, the FX trading once again reversed course to finish the third quarter in the red, as the Partnership’s long positions in the US dollar against the UK sterling and the Swedish krona posted some of the Partnership’s largest losses. In October, FX trading finished slightly in the red, as late-month movements hurt longs in many pairs versus the US dollar, such as the Indian rupee and Japanese yen; on the other hand, some positive gains were seen in a long the Chinese renminbi position. In November, the Partnership’s long positions in emerging market FX, most notably the Mexican peso and South African rand experienced gains, while long Euro positioning detracted, however, mainly against the Polish zloty. The Partnership’s performance in currency trading ended the year strong, as commodity currencies such as the South African rand and Australian dollar were top performers for the Partnership, offsetting losses from a short position in the Swiss franc against the US dollar.
Credit trading for the Partnership started the year down, as losses from a long credit position in European 5yr Crossover iTraxx Index in January continued into February, where they were joined by additional losses from positions in the the US 5yr CDX Index. In March the Partnership’s positioning in credit also migrated from long to short as the month progressed and overall trading finished marginally in the black with gains principally coming from high yield credit indices. To start the second quarter, April saw the Partnership’s credit positions post losses after credit spreads tightened, with the Partnership’s short positions in the European 5-year Crossover iTraxx and the US High Yield CDX Index amongst the bottom performers. This continued into May as the Partnership’s index positions ended up in the red, with losses in the European 5yr Crossover iTraxx Index and the US High Yield CDX Index detracting most. Credit trading finished the first half of the year with minor losses in June, as HY spreads steadily widened. The third quarter started out better for the Partnership, as positions posted largely flat performance in July, ending the month marginally in the black. Gains continued into August as all of the Partnership’s credit positions finished in the black, with European indices topping the charts, though this course reversed in September, as the Partnership’s credit trading finished in the red, led by losses from short protection positions in US 5-year CDX index and European 5-year Crossover iTraxx. In October, performance in credit was mixed, though ultimately ended at a loss, as overall positioning flipped from long to short, and performance in European investment-grade names was affected most while similar quality names in the US eked out a small positive return. To finish up the year, credit trading was largely flat in November, which continued into December, when the European 5y Crossover Index was the top-performing instrument in the asset class, while a widening of the US investment grade index generated a loss.
Net assets decreased $9,607,948 for the year ended December 31, 2019. This decrease was attributable to subscriptions in the amount of $1,295,747, redemptions in the amount of $21,211,572 and net income from operations of $10,307,877.
For the year ended December 31, 2019, the Partnership accrued or paid total expenses of $4,858,971, including $941,605 in servicing fees, $2,811,368 in General Partner administrative fees and Trading Advisor management fees, and $1,105,998 in other expenses. Interest of $1,856,022 was earned or accrued on the Partnership’s cash and cash equivalent investments and other income earned was $102,311.
The Net Asset Value of a Class A Unit increased by $393.72 to $3,773.02. The Net Asset Value of a Class B Unit increased by $498.71 to $4,317.43. The Net Asset Value of a Class A-2 Unit increased by $393.71 to $3,772.86.
In the first quarter of 2019, equity trading proved to be a poor performer for the Partnership, as large losses in January driven by the sharp trend reversal in the equity markets’ 2018 performance battered the Partnership’s short positioning. In February and March, the slightly positive returns in the Partnership’s equity positions were mainly driven by the Partnership’s long positions in indices. During the second quarter, the Partnership’s net long equities position made equities the top performing asset class in April, however, a sharp reversal occurred in May as the Partnership’s previously profitable long positions suffered losses that were further exacerbated by losses in the Partnership’s short positions in VIX futures. In June, long stock index positions recovered from their downturn in May and finished slightly positive. Third quarter trading saw further losses in the Partnership’s equity positions as long positions in the Australian SPI 200 futures and the FTSE 100 generated notable losses in August, followed by a mixed performance consisting of losses from longs in the Russell 2000 and Korean KOSPI indices and gains in longs in Euro-STOXX and Australian SPI 200 in September. The Partnership’s fourth quarter equity trading reversed course and saw gains in all three months. In October, minor gains came from index longs in Swedish, Taiwanese and Japanese equity futures. November and December both saw notable gains in equity trading as equity indices continued to reach all-time highs. The Fund’s dominantly long equity positions in the Australian SPI 200, S&P500 and NASDAQ 100 drove much of the gains in November, and the Fund’s long stock index positions, as well as positions in emerging market equities, generated strong gains for the Partnership in December.
The Partnership’s fixed-income trading saw strong performances in the first and second quarter before reversing course towards the end of the third quarter. Gains from the Partnership’s exposure to Israeli swaps and French and German bonds in January and long positions in European and U.S. government bonds in March were enough to outweigh February’s losses in fixed-income trading, which were driven by long exposure to U.S. Treasuries and Italian bonds. The Partnership started the second quarter with losses in its dominantly long fixed income positions, most notably in Short Sterling and Israeli swaps. In May, gains in the Partnership’s positions in U.S. Treasuries and Short Sterling outweighed the smaller number of negative positions, such as Italian bonds. June saw continued strong performance in fixed income, as the Partnership recognized gains from long positions in U.S. and European government bonds. To start the third quarter, gains in Italian 10yr BTPs outweighed losses in U.S. Treasuries in July. In August, gains from the Partnership’s long positions in U.S. 10-year Treasuries and other long-bond positions outweighed the smaller number of modest losing positions in U.S. 2-year notes and Brazilian swaps. In September, the Partnership’s general success in fixed-income trading came to an end, as large losses in multiple positions, particularly U.S. Treasuries, outweighed the small gains from Italian bonds. Fourth quarter fixed-income trading was similarly unprofitable for the Partnership. In October, the Partnership’s positions in Japanese 10Yr bonds, shorter-dated U.S. Treasuries and German bunds drove a majority of the Partnership’s losses in the fixed-income sector. In November, small gains in short-term instruments in U.S. and Australia were not enough to outweigh the Partnership’s losses, led by Italian 10Yr debt. Finally, the Partnership ended the year with minor losses in fixed-income trading as profitable short positions in German and Canadian 10yr bonds were outweighed by losses in long positions in Italian and Australian bonds.
The Partnership’s commodity trading saw both notable gains and losses over the course of the year. In January, short positions in wheat, copper and aluminum outweighed gains on long positions in palladium. The Partnership’s short exposure to oil further contributed to the sector’s monthly losses as oil prices reversed a 3-month trend that had seen crude fall by more than 40%. In February, a long palladium positions and short wheat exposure contributed to the Partnership’s gains in its commodity trading, though the Partnership’s long palladium position led to large losses for the Partnership’s commodities trading in March when a collapse in palladium prices during the last week of March pummeled the Partnership’s long exposure to the metal. April saw the Partnership’s short positions in the wheat market outweigh the losses experienced by Partnership’s short position in U.K. natural gas. Commodity trading had mixed returns in May, and ultimately ended up down, as losses from short positions in grains outweighed gains from short positions in copper and both U.K. and U.S. natural gas markets. In June, commodities trading was once again mixed, with short positions in sugar driving losses and offsetting profits from long positions in palladium and short positions in U.K. and U.S. natural gas markets. The third quarter was again mixed for commodities trading, as July saw the Partnership’s short positions in U.K. natural gas and positions in nickel and coal outweighed gains from short positions in iron ore and longs in gold and carbon emissions, while agricultural trading finished down on the back of losses from sugar. The Partnership’s commodities trading was very profitable in August, led by the Partnership’s long position in metals,
particularly gold and silver, while shorts in sugar and wheat also made gains, helping to offset losses from trading in energies, particularly a short position in RBOB gasoline. Reversing course in September, the Partnership’s largest losses were attributable to its commodities trading, where gains from a long position on palladium, whose price continued to hit record highs, was not sufficient to offset losses from other commodity markets, particularly longs in gold and shorts in sugar and wheat. Continuing this trend, in October, losses from the Partnership’s short position in U.S. natural gas and positions in cocoa and soybeans outweighed gains in its long palladium position, while longs in other metals, particularly nickel, gold and silver led to further losses in November. Positive performance in the Partnership’s short position in U.K. natural gas bolstered the Partnership’s December performance, as commodity trading proved profitable to close out the year.
Trading in currency was mixed for the Partnership over the course of the year. In January, the Partnership’s positions in developed markets, including Canada, Australia and the U.K., provided losses offsetting profitable long positions in certain emerging market currencies, including those of South Africa, Brazil and Turkey, produced positive performance. In February the Partnership’s currency trading but ended the month with negative performance as losses from long exposure to the South African rand and Brazilian Real outdistanced gains from short exposure to the Swedish Krona and Japanese Yen. Continuing this trend into March, the gains made in a short Euro position were outweighed by losses on a range of markets including the Mexican Peso and Turkish Lira. In the second quarter, the Partnership’s net long positions in the U. S. dollar drove the Partnership’s performance: in April, the strength of the U.S. dollar against many currencies led to a strong performance, though the top sector performer in April was a long in the Mexican peso against the U.S. dollar; in May, gains from long U.S. dollar positions against the South Korean won and the Chilean peso were mostly offset by losses generated from short positions in the Japanese Yen, which reached a four-month high against the U.S. dollar; and in June, modest gains on long Russian ruble positions were outweighed by losses from the Partnership’s long positions in U.S. dollar against the South Korean won, Chilean peso, Euro and New Zealand dollar. Dominant long U.S. dollar positions against the Euro and South Korean Won, and short positioning in pounds saw notable gains in July, while losses came from trading in South African rand and Polish zloty. In August, a stronger U.S. dollar broadly benefitted the Partnership’s long U.S. dollar position as the South Korean won and the Chilean peso, alongside other emerging and developed currencies, struggled. September saw losses from the Partnership’s shorts in the Mexican peso and South Korean won overcome gains from shorts in the Euro and Swiss franc and longs in the Turkish lira to end the third quarter on a positive note. This trend did not continue into the fourth quarter, where October saw the Partnership’s net long position in the U.S. dollar experience losses, particularly against the Euro, Sterling, Polish zloty and Turkish lira, which outweighed gains from longs in the Mexican peso and long positioning in Euros against the Norwegian krone. In November, weakened South American currencies lead to profitable a position short in the Chilean peso versus the U.S. dollar, outweighing losses from a long in the Mexican peso against the U.S. dollar. December’s currency trading results were notably mixed, as currency positions made up four of the Partnership’s five top positions, led by a long in the Mexican peso against the U.S. dollar, as well as four of the Partnership’s five bottom positions, led by a short position in the Swiss franc.
Throughout 2019, the Partnership’s credit trading was a steady performer, with positions either remaining largely flat or sustaining slight gains or losses each month. To start the year, credit trading in January was mixed and concluded the month with slightly negative results as losses stemming from long protection positions early in January edged out gains. In February, the Partnership’s credit trading with long exposure to the European 5yr iTraxx Index provided steady gains, and in March, the Partnership continued its positive credit trading performance, finishing the month in positive territory. The Partnership experienced gains in April from investment-grade indices in both the U.S. and Europe that more than offset the losses generated from a long in the Korean KOSPI, The Partnership’s short protection positions generated losses in May due to the widening spread on the E.U. 5-year Crossover iTraxx, though reversed course in June and July, generating gains when credit spreads tightened across all credit indices. Widening spreads in August led to minor losses, while September and October trading was essentially flat, with minor gains for each month being driven from a performance in the U.S., while European credit trading detracted. Credit trading ended the year on a positive note, as investment grade indices tightened in November, benefitting every one of the Partnership’s positions, most notably US 5y CDX. Similarly, in December, every one of the indices traded by the Partnership ended the month in the black, with the most notable performers being investment-grade and high-yield corporate credit in the U.S.
Net assets decreased $19,861,313 for the year ended December 31, 2018. This decrease was attributable to subscriptions in the amount of $4,815,565, redemptions in the amount of $21,844,636 and net loss from operations of $2,832,242.
For the year ended December 31, 2018, the Partnership accrued or paid total expenses of $5,842,070, including $1,098,660 in servicing fees, $3,276,679 in General Partner administrative fees and Trading Advisor management fees, and $1,466,734 in other expenses. Interest of $1,764,072 was earned or accrued on the Partnership’s cash and cash equivalent investments.
The Net Asset Value of a Class A Unit decreased by $70.61 to $3,379.30. The Net Asset Value of a Class B Unit decreased by $31.24 to $3,818.72. The Net Asset Value of a Class A-2 Unit decreased by $70.61 to $3,379.15. The pre-redemption Net Asset Value of a Class B-2 Unit decreased by $245.87 to $3,604.14.
In the equities sector, the Partnership’s positions produced net losses during the first and second quarters. Despite realizing notable profits in January from its long exposure to equity markets, the Partnership’s long positioning subsequently sustained losses in February and March on account of falling equity markets, including a significant one-day points loss in the Dow Jones Industrial Average and the S&P 500. During the second quarter, losses continued to be sustained from short positions in the VIX and Australian SPI 200 indices as well as long exposure to the FTSE Italia All Share index, the Singapore MSCI and the Hang Seng index. Third quarter trading produced negative, yet more neutral returns as losses from long exposure to the Russell 2000 and the Nifty index in September were offset by gains generated from long exposure to the S&P 500 and the Nasdaq 100 in July and August, respectively. Fourth quarter equity trading also brought mixed results. Downward price movements in October battered the Partnership’s positioning in the S&P 500 while the Partnership’s short exposure to the Hang Seng and Kospi indices suffered losses amidst November rebounding in the Asian equity markets. With the S&P 500 losing as much as 16% intra-month, the Partnership realized notable profits from its net short positions in December, particularly with respect to Russell 2000 Index futures.
With respect to fixed-income trading, the Partnership started and ended the year with strong returns but suffered losses in the second and third quarters. Gains were achieved in January and February on short exposure to U.S. 10-year treasuries, while in March, profits from long positions in European 10-year bonds outweighed losses from unprofitable short positions in Canadian and Japanese government bonds. The second and third quarters brought a reversal of fortunes as the Partnership suffered from long exposure to U.S. 5-year treasury notes and the German bund in April, short positioning in Canadian and U.S. Treasuries in May and long European exposure including German bunds and French bonds in July and September. The Partnership thereafter experienced a return to profitability in the fixed-income sector with short positions in U.S. instruments performing positively in October in the face of increasing U.S. interest rates across key maturities. With equity markets experiencing significant volatility in December, the Partnership’s long exposure to Japanese, Australian and U.S. fixed-income instruments generated notable gains despite partially offsetting losses from short positions in Canadian bond futures.
Although starting off the first quarter as a drag on Partnership performance, commodities trading provided mixed results during the course of the year. In January, losses from U.S. natural gas and copper positions outweighed gains from the trading of other energies such as crude oil, and energies and metals trading continued to generate notable losses in February. March performance was mostly flat with gains realized from long energy positioning and short agricultural exposure partially offset by losses sustained from long metals positions. The Partnership experienced more sustained, although modest, positive performance from second quarter commodity trading. In April, the Partnership’s energy trading was the profit leader in large part due to long exposure to Brent crude and UK natural gas, while more modest gains were achieved in May and June from continued long exposure to energies and short positioning in certain agriculturals such as corn. Third and fourth quarter performance was more mixed. In July, long positions in crude oil and short exposure to wheat resulted in net losses despite shorts in metals, sugar and coffee providing gains. August trading produced strong results with the Partnership’s short exposure to silver, copper and coffee generating notable gains and outweighing losses from short positions in natural gas. Long oil positions in September benefitted from a continued rise in oil prices and short exposure to cocoa also performed positively. Losses sustained in October from shorts in sugar and coffee and long oil positions were largely made up in November as the Partnership’s long exposure to U.S. natural gas benefitted from a 50% surge in price during the first two weeks of the month and short oil positions benefitted from a 22% intra-month decline. December trading ended largely even with gains from long palladium, short aluminum and short oil positions mostly offset by losses in other metals and long exposure to U.S. natural gas.
The Partnership’s currency trading was fairly mixed over the year. In January, long exposure to the currencies of several emerging market economies outpaced losses from the Partnership’s exposure to the Swiss franc and Mexican peso. These gains were returned in February, however, from short exposure to the U.S. dollar against the Indian rupee and Brazilian real. Although March gains and losses largely offset each other, April currency trading yielded the weakest performance across the Partnership’s trading sectors with the largest losses resulting from long exposure to the Mexican peso and Russian ruble against the U.S. dollar. May trading experienced a rebound, particularly from a long position in the U.S. dollar against the
Turkish lira which fell to record lows mid-month. Long exposure to U.S. dollars against a range of developed and emerging market currencies continued to serve as the Partnership’s strongest contributors of June performance. The reverse was true in July as short exposure to several emerging market currencies led to the largest detractors from Partnership performance. In August, short positions in Turkish lira against the U.S. dollar benefitted from the lira falling by a third. Such gains were partially offset, however, by short positions in the Canadian dollar and Swedish krona. The theme of mixed performance continued in the fourth quarter where dominant long U.S. positions experienced gains in October while short U.S. dollar positions against developed market currencies suffered in November. Currency trading ended the year also mixed but weakly positive as gains from a short position in the Canadian dollar against the U.S. dollar was largely offset by losses sustained from the Partnership’s switching positions in the Japanese yen.
Trading in the credit sector served as a mild drag on the Partnership’s overall performance in 2018. The Partnership’s exposure to most credit indices, notably in the investment-grade space, generated gains in January as did long credit positions in April and short credit protection in September, however, these gains were outweighed by moderate losses sustained during the remaining months of the year. Widening credit spreads in February, May and November and trend reversals in March each resulted in modest losses for the Partnership. In June, long exposure to Brazilian swaps outweighed gains from long exposure to Taiwanese swaps, while in August, the exposure to EU indices, both main and crossover, suffered and outdistanced gains from U.S. high yield and emerging market credit.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Introduction
Past Results Are Not Necessarily Indicative of Future Performance
The Partnership is a speculative commodity pool. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s main line of business.
Market movements result in frequent changes in the fair market value of the Partnership’s open positions and, consequently, in its earnings and cash flow. The Partnership’s 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 open positions and the liquidity of the markets in which it trades.
The Partnership can rapidly acquire and/or 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 past performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Partnership could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s speculative trading and the recurrence in the markets traded by the Partnership 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 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 included in this section should not be considered to constitute any assurance or representation that the Partnership’s losses in any market sector will be limited to Value at Risk or by the Partnership’s attempts to manage its market risk.
Materiality, as used in this section “Quantitative and Qualitative Disclosures About Market Risk,” 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 market sensitive instruments.
Quantifying the Partnership’s Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Partnership’s 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 Exchange Act). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.
The Partnership’s risk exposure in the various market sectors traded by the General Partner is quantified below in terms of Value at Risk. Due to the Partnership’s mark-to-market accounting, any loss in the fair value of the Partnership’s open positions is directly reflected in the Partnership’s earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).
For regulatory purposes, initial margin requirements have been used by the Partnership as the measure of its Value at Risk. For trading and internal risk monitoring purposes, a different approach based on simulated market movements is used. Initial margin requirements include a credit risk factor and a maintenance margin factor and thus overstate the maximum one-day loss reflected by the maintenance margin requirement by the amount of the credit risk factor used in setting initial margin requirements. Maintenance margin requirements are set by dealers, exchanges and OTC clearing counterparties to equal or exceed 95-99% of the maximum one-day losses in the fair value of any given contract incurred during the time period over which historical price fluctuations are researched for purposes of establishing margin levels. The maintenance margin levels are established by dealers, exchanges and OTC clearing counterparties 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 that are not exchange traded (almost exclusively currencies in the case of the Partnership), dealers’ margins have been used as Value at Risk.
The fair value of the Partnership’s futures and forward positions does not have any optionality component. However, the General Partner may also trade commodity options on behalf of the Partnership. The Value at Risk associated with options would be reflected in the margin requirement attributable to the instrument underlying each option.
In quantifying the Partnership’s 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 aggregated to determine each trading category’s aggregate Value at Risk. The diversification effects resulting from the fact that the Partnership’s positions are rarely, if ever, 100% positively correlated have not been reflected.
The Partnership’s Trading Value at Risk in Different Market Sectors
The following table indicates the average, highest and lowest amount of trading Value at Risk associated with the Partnership’s open positions by market category for the year ended December 31, 2020. During 2020, the Partnership’s average quarter-end capitalization was $87,152,773.
Fiscal Year 2020
Market Sector
Average
Value at
Risk
% of Average
Capitalization
Highest
Value at
Risk
Lowest
Value at
Risk
Agriculturals
$ 1,059,892
1.22%
$ 1,280,651
$ 909,456
Bonds
$ 1,433,257
1.64%
$ 2,070,593
$ 672,596
Credit
$ 538,939
0.62%
$ 723,836
$ 227,288
Currencies
$ 1,822,763
2.09%
$ 2,777,315
$ 880,521
Energies
$ 855,823
0.98%
$ 1,042,110
$ 659,035
Interest rates
$ 1,109,238
1.27%
$ 2,403,527
$ 509,723
Metals
$ 1,399,026
1.61%
$ 1,982,019
$ 1,123,559
Stock indices
$ 2,448,212
2.81%
$ 4,676,287
$ 965,589
Total*
$ 10,667,150
12.24%
16,956,338
5,947,767
Average, highest and lowest Value at Risk amounts relate to the quarter-end amounts during the fiscal year. Average capitalization is the average of the Partnership’s capitalization at the end of each quarter during the fiscal year 2020.
The following table indicates the average, highest and lowest amount of trading Value at Risk associated with the Partnership’s open positions by market category for the year ended December 31, 2019. During 2019, the Partnership’s average quarter-end capitalization was $92,305,861.
Fiscal Year 2019
Market Sector
Average
Value at
Risk
% of Average
Capitalization
Highest
Value at
Risk
Lowest
Value at
Risk
Agriculturals
$ 1,609,470
1.74%
$ 2,146,005
$ 1,308,807
Bonds
$ 1,896,557
2.05%
$ 2,633,413
$ 1,110,140
Credit
$ 2,680,225
2.90%
$ 4,112,343
$ 707,966
Currencies
$ 6,627,233
7.18%
$ 7,420,241
$ 5,893,783
Energies
$ 1,131,506
1.23%
$ 1,583,401
$ 726,702
Interest rates
$ 1,512,215
1.64%
$ 2,121,499
$ 928,514
Metals
$ 1,865,042
2.02%
$ 2,365,864
$ 1,279,515
Stock indices
$ 5,348,285
5.79%
$ 6,585,052
$ 4,144,732
Total*
$ 22,670,533
24.56%
$ 28,967,818
$ 16,100,159
* Certain total amounts do not foot due to rounding.
Average, highest and lowest Value at Risk amounts relate to the quarter-end amounts during the fiscal year. Average capitalization is the average of the Partnership’s capitalization at the end of each quarter during the fiscal year 2019.
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership is typically many times the applicable initial or maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Partnership. The magnitude of the Partnership’s open positions creates a “risk of ruin” not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions - unusual, but historically recurring from time to time - could cause the Partnership to incur severe losses over a short period of time. The foregoing Value at Risk table - as well as the past performance of the Partnership - gives no indication of this “risk of ruin.”
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as any market risk they represent) are immaterial.
The Partnership also has non-trading cash flow risk as a result of holding a substantial portion of its assets in U.S. government securities (Treasury Bills) and interest-bearing bank accounts. These cash and cash equivalents are placed with highly rated counterparties with a priority placed on preservation of capital and reputation (i.e., appropriate level of credit risk, market risk and reputation risk) and liquidity (i.e., appropriate level of liquidity risk).
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership’s market risk exposures - except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the General Partner manages the Partnership’s 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 primary market risk exposures as well as the strategies used and to be used by the General Partner 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 risk controls to differ materially from the objectives of such strategies. Government interventions, 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 risk management strategies of the Partnership. There can be no assurance that the Partnership’s 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 as of December 31, 2020, by market sector.
Fixed Income. Interest rate movements directly affect the price of the sovereign bond futures positions held by the Partnership and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries may materially impact the Partnership’s profitability. The Partnership’s primary interest rate exposure is to interest rate fluctuations in United States, Italy, Australia, United Kingdom and Canada. However, the Partnership also may take positions in futures contracts on the government debt of smaller nations. The General Partner anticipates that G-7 interest rates, both long-term and short-term, will remain the primary market exposure of the Partnership for the foreseeable future.
Currencies. Exchange rate risk is the principal market exposure of the Partnership. The Partnership’s currency exposure is to exchange rate fluctuations, primarily fluctuations which 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 trades in a large number of currencies, including cross-rates - i.e., positions between two currencies other than the U.S. dollar. As of December 31, 2020, the Partnership’s primary currency exposures were in the U.S. dollar versus the Euro, Mexican Peso, Australian Dollar and South African Rand.
Stock Indices. The Partnership’s primary equity exposure, through stock index futures, is to equity price risk in the G-7 countries. As of December 31, 2020, the Partnership’s primary exposures were in the Australian SPI 200 Index, Hang Send, Nikkei Index and MSCI Emerging Market Index. The Partnership is primarily exposed to the risk of adverse price trends or static markets in the major North American, European and Asian indices. (Static markets would not cause major market changes but could make it difficult for the Partnership to avoid numerous small losses.)
Metals. The AHL Diversified Program used for the Partnership trades precious and base metals. As of December 31, 2020, the Partnership’s primary metals market exposures were in copper, aluminum, silver and zinc.
Agricultural. The Partnership’s primary commodities exposure is to agricultural price movements, which are often directly affected by severe or unexpected weather conditions. Soybeans, corn, sugar, cocoa and cotton accounted for the substantial bulk of the Partnership’s commodities exposure as of December 31, 2020.
Energy. The Partnership’s primary energy market exposure is to gas and oil price movements, often resulting from political developments in the Middle East and economic conditions worldwide. Energy prices are volatile and substantial profits and losses have been and are expected to continue to be experienced in this market. As of December 31, 2020, the main exposures were in crude oil and natural gas.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Partnership as of December 31, 2020.
Foreign Currency Balances. The Partnership’s primary foreign currency balance is in Euro. The Partnership controls the non-trading risk of these balances by regularly converting these balances back into U.S. dollars (no less frequently than twice a month).
Cash Positions. The Partnership’s only market exposure in instruments held other than for trading is in its cash portfolio. The Partnership holds only cash in U.S. Treasury Bills and interest-bearing bank accounts. This cash is placed with highly rated counterparties with a priority placed on preservation of capital and reputation (i.e., appropriate level of credit risk, market risk and reputation risk) and liquidity (i.e., appropriate level of liquidity risk) with durations no longer than 1 year.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
Risk management is an essential component of AHL’s investment management process. AHL has put in place a risk management framework which is designed to identify, monitor and mitigate the portfolio, operational and outsourcing risks relevant to its operations. AHL’s risk management framework is part of, and is supported by, the overarching risk management framework of its parent company, Man Group plc. Key principles of AHL’s risk management framework include the segregation of functions and duties where material conflicts of interest may arise and having an appropriate degree of independent and senior management oversight of business activities. As part of this independent oversight, AHL’s activities are subject to regular review by an internal audit function.
The AHL Diversified Program employs a systematic, statistically based investment strategy that is designed to identify and capitalize on trends and other inefficiencies in markets around the world. Trading signals are generated and executed via a finely tuned trading and implementation infrastructure. This process is quantitative, meaning that investment decisions are entirely driven by mathematical models based on quantitative analysis of historical relationships. It is underpinned by rigorous risk control, ongoing research, diversification and the constant quest for efficiency. Portfolio risk management consists primarily
of monitoring risk measures and ensuring the systems remain within prescribed limits. The major risk monitoring measures and focus areas include value-at-risk, stress testing, implied volatility, leverage, margin-to-equity ratios and net exposures to sectors and different currencies.
Diversification is also a key feature of AHL’s risk management, as well as its investment, process. As well as emphasizing sector and market diversification, the AHL Diversified Program has been constructed to achieve diversification by combining various investment strategies. The AHL Diversified Program trades approximately 250 markets and these markets may be accessed directly or indirectly and include, without limitation, stock indices, bonds, currencies, short-term interest rates, energies, credits, metals and agriculturals. Another important aspect of diversification is the fact that the models generate signals across different timeframes, ranging from two to three days to several months. In line with the principle of diversification, the approach to portfolio construction and asset allocation is premised on the importance of deploying investment capital across the full range of sectors and markets. Particular attention is paid to correlation of markets and sectors, expected returns, trading costs and market liquidity. Portfolios are regularly reviewed and, when necessary, adjusted to reflect changes in these factors. AHL also has a systematic process for adjusting its market risk exposure in real time to reflect changes in the volatility, a measure of risk, of individual markets.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
Financial statements meeting the requirements of Regulation S-X are listed following this report as Exhibit 13.1 and are incorporated by reference into this Item 8.
The following summarized quarterly financial information presents the results of operations for the periods ended March 31, June 30, September 30 and December 31, 2020 and 2019. This information has not been audited.
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Interest income*
22,556
27,339
129,456
331,640
Other Income*
-
4,845
-
-
Net Realized and Unrealized Gains (Losses)*
9,463,661
(1,054,387 )
(7,444,804 )
8,893,326
Expenses**
(1,089,827 )
(1,409,542 )
(1,103,293 )
(1,235,731 )
Net Income (Loss)
8,396,390
(2,278,754 )
(8,418,641 )
7,989,235
Net Income (Loss) Per Unit of Partnership Interest - Class A - Series 1
384.61
(98.84 )
(361.66 )
327.51
Net Income (Loss) Per Unit of Partnership Interest - Class A - Series 2
480.34
(103.97 )
(400.97 )
410.05
Net Income (Loss) Per Unit of Partnership Interest - Class B - Series 1
383.56
(100.67 )
(360.61 )
334.42
Net Income (Loss) Per Unit of Partnership Interest - Class B - Series 2
-
-
-
-
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Interest income*
389,035
505,995
485,296
475,696
Other Income*
-
102,311
-
-
Net Realized and Unrealized Gains (Losses)*
(1,652,230 )
6,155,538
7,658,953
1,046,254
Expenses**
(1,081,310 )
(1,268,291 )
(1,242,616 )
(1,266,754 )
Net Income (Loss)
(2,344,505 )
5,495,553
6,901,633
255,196
Net Income (Loss) Per Unit of Partnership Interest - Class A - Series 1
(96.01 )
218.92
259.83
8.98
Net Income (Loss) Per Unit of Partnership Interest - Class A - Series 2
(95.03 )
269.02
289.87
25.59
Net Income (Loss) Per Unit of Partnership Interest - Class B - Series 1
(97.73 )
224.04
259.59
4.84
Net Income (Loss) Per Unit of Partnership Interest - Class B - Series 2
-
-
-
-
* Allocated to the Partnership from its investment in the Trading Company. The Trading Company generates revenue from trading of futures, foreign exchange and forward currency contracts.
** Expenses include the Partnership’s allocation of expenses from its investment in the Trading Company in addition to direct expenses of the Partnership.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
The General Partner, with the participation of the General Partner’s Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures as of the end of the fiscal year for which this Annual Report on Form 10-K is being filed. Based on such evaluation, the General Partner’s Principal Executive Officer and Principal Financial Officer have concluded that the Partnership’s disclosure controls and procedures were effective as of the fiscal year ended December 31, 2020.
Changes in Internal Control over Financial Reporting
Section 404 of the Sarbanes-Oxley Act of 2002 requires the General Partner to evaluate annually the effectiveness of its internal controls over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of its internal control over financial reporting in all annual reports. There were no significant changes in the General Partner’s internal control over financial reporting during the three-month period ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
The General Partner is responsible for establishing and maintaining adequate internal control over the financial reporting of the Partnership. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the accounting principles generally accepted in the United States of America. The General Partner’s internal control over financial reporting includes those 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 transactions are recorded as necessary to permit preparation of financial statements of the Partnership in accordance with the 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 General Partner; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on its financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 the General Partner assessed the effectiveness of its internal control over financial reporting with respect to the Partnership as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on its assessment, management has concluded that, as of December 31, 2020, the General Partner’s internal control over financial reporting with respect to the Partnership is effective based on those criteria.
There were no significant changes in the General Partner’s internal controls with respect to the Partnership or in other factors applicable to the Partnership that could significantly affect these controls subsequent to the date of their evaluation.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
As of January 15, 2021, Eric Burl resigned as President of Man Investments (USA) Corp., the Partnership’s general partner. As of the same date, Michelle Robyn Grew was appointed as President of Man Investment (USA) Corp. As of March 25, 2021, Michelle Robyn Grew resigned as President of Man Investments (USA) Corp. As of the same date, Shanta Puchtler was appointed as President of Man Investments (USA) Corp. His biography is set forth under Item 10 hereof.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
(a, b) Identification of Directors and Executive Officers
(i) As a limited partnership, the Partnership itself has no directors or executive officers. The Partnership’s affairs are managed by the General Partner. Man Investments (USA) Corp., a Delaware corporation, is the general partner of the Partnership.
Mr. Shanta Puchtler is the president and principal executive officer of the General Partner, and Mr. Colin Bettison is principal financial officer of the General Partner for purposes of the management of the Partnership. Their biographies are set forth below.
Shanta Puchtler, born October 1965, is President of Man Group and a member of the Man Group Senior Executive Committee. He also leads Man Group’s Data Science group as well as the firm’s Quantitative Alpha Research Lab in Sofia, Bulgaria.
Previously, Shanta was CEO of Man Numeric and prior to that, co-CIO and Head of Research, directing research efforts focused on new alpha sources, product design and risk modelling. Prior to joining Man Numeric in 1999 as a research analyst, Shanta was an electronic commerce technology analyst at Forrester Research, a Cambridge, Massachusetts-based market research firm. He also co-founded an electronic commerce company, which focused on the analysis of on-line buying behavior. Shanta received a Bachelor of Arts degree in computer science from Dartmouth College, graduating summa cum laude, and is a CFA charterholder.
Colin Bettison, born October 1979, is currently Man Group’s Head of Operations for Man Americas, based in New York. Colin is responsible for the oversight of all operations areas for Man’s business lines in the Americas. Prior to his relocation to the US in April 2015, Colin was responsible for the Middle Office Accounting groups within Man for the Single Manager areas of the business, also overseeing the Risk and Portfolio Analysis, and Client and Performance Reporting teams. Prior to joining GLG (acquired by Man in 2010) in 2007, Colin worked for Merrill Lynch in their Credit Capital Markets area as a Product Accountant for the Credit Derivatives desk, and prior to that Colin trained as a Chartered Accountant with Tenon Group in London. Colin holds a BA (Hons) in Mathematical Sciences from the University of Oxford.
(c) Identification of Certain Significant Employees
None.
(d) Family Relationships
None.
(e) Business Experience
See Item 10 (a, b) above.
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
Not applicable.
(h) Code of Ethics
The Partnership has no employees, officers or directors and is controlled by the General Partner. The General Partner has adopted a Global Code of Ethics that applies to its principal executive officer and principal financial officer. A copy of this Global Code of Ethics may be obtained at no charge by written request to Man Investments (USA) Corp., 452 5th Ave., 27th Floor, New York, NY 10018 or by calling: (212) 649-6600 (ask for the Chief Legal Officer).
(i) Audit Committee Financial Expert
Because the Partnership has no employees or directors, the Partnership has no audit committee. The Partnership is managed by the General Partner. Mr. Colin Bettison, principal financial officer for the General Partner, serves as the Partnership’s “audit committee financial expert.” Mr. Bettison is not independent of the management of the General Partner. The General Partner is not required to have, and does not have, independent directors.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
The Partnership itself has no officers, directors or employees. None of the principals, officers or employees of the General Partner receive compensation from the Partnership. The General Partner invests all or substantially all of the Partnership’s assets in the Trading Company. The Trading Advisor makes all trading decisions for the Trading Company. The General Partner receives a monthly general partner administrative fee from the Partnership in an amount equal to 0.0833% of the month-end Net Asset Value of the Partnership (approximately a 1% annually). The Partnership pays the Trading Advisor, an affiliate of the General Partner, a monthly management fee in an amount equal to 0.1667% of the Partnership’s month-end Net Asset Value (approximately 2% annually) and 20% of any Net New Appreciation, described above under Item 1, achieved by the Partnership as of the end of each calendar month. The Trading Advisor may pay a portion of its management fees to the General Partner.
The officers and employees of the General Partner and Trading Advisor are compensated by the General Partner and Trading Advisor in their respective positions. These officers receive no other compensation from the Partnership. The Partnership has no compensation plans or arrangements relating to a change in control of either the Partnership, the General Partner or the Trading Advisor.

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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) Securities Authorized for Issuance under Equity Compensation Plans
None.
(b) Security Ownership of Certain Beneficial Owners
The General Partner knows of no persons who own beneficially more than 5% of the Partnership’s Units. All of the Partnership’s general partner interest is held by the General Partner.
(c) Security Ownership of Management
The Partnership has no officers or directors. Under the terms of the Limited Partnership Agreement, the Partnership’s affairs are managed by the General Partner. As of December 31, 2020, the General Partner’s interest in the Partnership was valued at $753,098 which constituted 0.89% of total partners’ capital.
As of December 31, 2020, no director, executive officer or member of the General Partner beneficially owned Units in the Partnership.
(d) Changes in Control
There are no arrangements known to the Partnership or General Partner the operation of which would result in a change in control of the Partnership; provided, however, that pursuant to the Limited Partnership Agreement, the General Partner may admit additional or substitute general partners and may withdraw as general partner of the Partnership.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The Partnership paid the General Partner and Trading Advisor aggregate administrative and management fees of $2,603,364 for the year ended December 31, 2020. The Partnership paid the Trading Advisor $0 in incentive fees for the year ended December 31, 2020. The Partnership paid Man Investments Inc., an affiliate of the General Partner and Trading Advisor that
serves as the lead placement agent for the Partnership, $871,180 in servicing fees for the year ended December 31, 2020. The General Partner’s interest in the Partnership earned net income of $49,905 for the year ended December 31, 2020.
The Partnership has not and does not make any loans to the General Partner, its affiliates, their respective officers, directors or employees or the immediate family members of any of the foregoing, or to any entity, trust or other estate in which any of the foregoing has any interest, or to any other person (provided that the purchase of U.S. government instruments and the deposit of Partnership assets with banks, futures brokers and foreign exchange counterparties in connection with the trading operations of the Partnership are not considered to be loans).
None of the General Partner, its affiliates, their respective officers, directors and employees or the immediate family members of any of the foregoing, or any entity trust or other estate in which any of the foregoing has any interest has, to date, sold any asset, directly or indirectly, to the Partnership.
The Partnership has no directors, officers or employees and is managed by the General Partner. The General Partner is managed by its principals, none of whom is independent of the General Partner.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
(1) Audit Fees
The aggregate fees for professional services provided by Ernst & Young Ltd., and other member firms of the global Ernst and Young organization, the Partnership’s independent registered public accounting firm, for the audit of the Partnership’s annual financial statements and review of financial statements included in the Partnership’s quarterly reports for the years ended December 31, 2020 and 2019 were approximately $266,000 and $266,000, respectively.
(2) Audit-Related Fees
There were no fees for assurance and related services rendered by Ernst & Young Ltd. and other member firms of the global Ernst and Young organization for the years ended December 31, 2020 and 2019.
(3) Tax Fees
The aggregate fees for services rendered by Ernst & Young Ltd. and other member firms of the global Ernst and Young organization for tax compliance, advice and planning services for the years ended December 31, 2020 and 2019 were approximately $221,000 and $209,000, respectively.
(4) All Other Fees
None.
(5) Pre-Approval Policies
Neither the Partnership nor the General Partner has an audit committee to pre-approve accountant and auditor fees and services. In lieu of an audit committee, the principals of the General Partner pre-approve all billings prior to the commencement of services.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(a)(1) Financial Statements
The financial statements required by this Item are included herewith as Exhibit 13.1.
(a)(2) Financial Statement Schedules
All Schedules are omitted for the reason that they are not required or are not applicable because equivalent information has been included in the financial statements or the notes thereto.
(a)(3) Exhibits as required by Item 601 of Regulation S-K
The following exhibits are included herewith.
Designation
Description
13.1
Report of Independent Registered Public Accounting Firm
31.1
Rule 13a-14(a)/15d-14(a) Certification of President, Principal Executive Officer
31.2
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32.1
Section 1350 Certification of President, Principal Executive Officer
32.2
Section 1350 Certification of Principal Financial Officer
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
The following exhibits are incorporated by reference herein from the exhibits of the same description and number filed on January 28, 2008 with the Partnership’s Registration Statement on Form 10 (Reg. No. 000-53043).
3.1
Certificate of Limited Partnership of Man-AHL Diversified I L.P.
10.3
Form of Selling Agreement between Man Investments (USA) Corp. and Man Investments Inc.
The following exhibit is incorporated by reference herein from the exhibit of the same description and number filed on August 13, 2014, for the quarterly period ended June 30, 2014, with the Partnership’s Quarterly Report on Form 10-Q.
10.1
Form of Trading Advisor Agreement between Man-AHL Diversified Trading Company L.P., Man Investments (USA) Corp. and AHL Partners LLP
The following exhibit is incorporated by reference herein from the exhibit of the same description and number filed on August 14, 2018, for the quarterly period ended June 30, 2018, with the Partnership’s Quarterly Report on Form 10-Q.
4.1
Seventh Amended Limited Partnership Agreement of Man-AHL Diversified I L.P.