Campbell Strategic Allocation Fund Earnings 2019-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2019

or

For the transition period from _________ to _________

Commission File number: 000-22260

CAMPBELL STRATEGIC ALLOCATION FUND, L.P.

(Exact name of Registrant as specified in charter)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Not applicable	Not applicable	Not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive data File required to be submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☑

The Registrant has no voting stock. As of June 30, 2019, there were 80,731.763 Units of General and Limited Partnership Interest issued and outstanding.

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CAMPBELL STRATEGIC ALLOCATION FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS

JUNE 30, 2019 (Unaudited)

 

See Accompanying Notes to Financial Statements.

CAMPBELL STRATEGIC ALLOCATION FUND, L.P.

CONDENSED SCHEDULE OF INVESTMENTS

JUNE 30, 2019 (Unaudited)

Description		Fair Value ($)				% of Net Asset Value
Money Market Funds
United States
Money Market Funds (cost $7,073)		$	7,073				0.00	%
Total Short Term Investments (cost $7,073)		$	7,073				0.00	%

Description		Fair Value ($)				% of Net Asset Value
Agriculture		$	(373,160	)			(0.20	)%
Energy			503,282				0.28	%
Metals			(328,123	)			(0.18	)%
Stock indices			1,358,601				0.74	%
Short-term interest rates			2,949,343				1.60	%
Long-term interest rates			2,654,952				1.44	%
Net unrealized gain (loss) on long futures contracts			6,764,895				3.68	%

Description		Fair Value ($)				% of Net Asset Value
Agriculture			(196,012	)			(0.11	)%
Energy			(100,765	)			(0.05	)%
Metals			(442,902	)			(0.24	)%
Stock indices			(53,246	)			(0.03	)%
Short-term interest rates			(30,473	)			(0.02	)%
Long-term interest rates			(183,203	)			(0.10	)%
Net unrealized gain (loss) on short futures contracts			(1,006,601	)			(0.55	)%
Net unrealized gain (loss) on open futures contracts		$	5,758,294				3.13	%

Description		Fair Value ($)				% of Net Asset Value
Various long forward currency contracts		$	8,161,940				4.43	%
Various short forward currency contracts			(9,649,928	)			(5.24	)%
Net unrealized gain (loss) on open forward currency contracts		$	(1,487,988	)			(0.81	)%

Description		Fair Value ($)				% of Net Asset Value
Money Market Funds
United States
Money Market Funds (cost $2,208)		$	2,208				0.00	%
Total Short Term Investments (cost $2,208)		$	2,208				0.00	%

Description		Fair Value ($)				% of Net Asset Value
Agriculture		$	124,980				0.07	%
Energy			(883,950	)			(0.47	)%
Metals			(1,694,502	)			(0.91	)%
Stock indices			(112,136	)			(0.06	)%
Short-term interest rates			1,084,485				0.58	%
Long-term interest rates			1,236,423				0.66	%
Net unrealized gain (loss) on long futures contracts			(244,700	)			(0.13	)%

Description		Fair Value ($)				% of Net Asset Value
Agriculture			1,771,406				0.94	%
Energy			559,274				0.30	%
Metals			2,435,221				1.30	%
Stock indices			107,927				0.06	%
Short-term interest rates			(5,783	)			0.00	%
Long-term interest rates			(1,201,282	)			(0.64	)%
Net unrealized gain (loss) on short futures contracts			3,666,763				1.96	%
Net unrealized gain (loss) on open futures contracts		$	3,422,063				1.83	%

Description		Fair Value ($)				% of Net Asset Value
Various long forward currency contracts		$	3,835,197				2.05	%
Various short forward currency contracts			841,205				0.45	%
Net unrealized gain (loss) on open forward currency contracts		$	4,676,402				2.50	%

See Accompanying Notes to Financial Statements.

CAMPBELL STRATEGIC ALLOCATION FUND, L.P.

STATEMENTS OF FINANCIAL CONDITION

JUNE 30, 2019 AND DECEMBER 31, 2018 (Unaudited)

 

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See Accompanying Notes to Financial Statements.

CAMPBELL STRATEGIC ALLOCATION FUND, L.P.

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (Unaudited)

 

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See Accompanying Notes to Financial Statements.

CAMPBELL STRATEGIC ALLOCATION FUND, L.P.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (Unaudited)

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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Statements of Financial Condition that sum to the total of the same such amounts shown in the Statements of Cash Flows.

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See Accompanying Notes to Financial Statements.

CAMPBELL STRATEGIC ALLOCATION FUND, L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE)

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (Unaudited)

		Partners’ Capital
		General Partner								Limited Partners								Total
		Units				Amount				Units				Amount				Units				Amount
Six Months Ended June 30, 2019
Balances at December 31, 2018			0.000			$	0				89,103.635			$	187,246,042				89,103.635			$	187,246,042
Net income (loss) for the three months ended March 31, 2019							0								6,210,990								6,210,990
Redemptions			0.000				0				(5,132.100	)			(10,837,698	)			(5,132.100	)			(10,837,698	)
Offering costs							0								(222,791	)							(222,791	)
Balances at March 31, 2019			0.000			$	0				83,971.535			$	182,396,543				83,971.535			$	182,396,543
Net income (loss) for the three months ended June 30, 2019							0								9,103,841								9,103,841
Redemptions			0.000				0				(3,239.772	)			(7,190,366	)			(3,239.772	)			(7,190,366	)
Offering costs							0								(215,876	)							(215,876	)
Balances at June 30, 2019			0.000			$	0				80,731.763			$	184,094,142				80,731.763			$	184,094,142
Six Months Ended June 30, 2018
Balances at December 31, 2017			0.000			$	0				113,775.724			$	270,904,104				113,775.724			$	270,904,104
Net income (loss) for the three months ended March 31, 2018							0								(11,967,450	)							(11,967,450	)
Redemptions			0.000				0				(6,038.577	)			(14,071,811	)			(6,038.577	)			(14,071,811	)
Offering costs							0								(212,402	)							(212,402	)
Balances at March 31, 2018			0.000			$	0				107,737.147			$	244,652,441				107,737.147			$	244,652,441
Net income (loss) for the three months ended June 30, 2018							0								(6,652,793	)							(6,652,793	)
Redemptions			0.000				0				(5,656.671	)			(12,452,579	)			(5,656.671	)			(12,452,579	)
Offering costs							0								(215,221	)							(215,221	)
Balances at June 30, 2018			0.000			$	0				102,080.476			$	225,331,848				102,080.476			$	225,331,848

 

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See Accompanying Notes to Financial Statements.

CAMPBELL STRATEGIC ALLOCATION FUND, L.P.

FINANCIAL HIGHLIGHTS

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (Unaudited)

The following information presents per unit operating performance data and other supplemental financial data for the three and six months ended June 30, 2019 and 2018. This information has been derived from information presented in the financial statements.

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Total returns are calculated based on the change in value of a unit during the period. An individual partner’s total returns and ratios may vary from the above total returns and ratios based on the timing of transfers and redemptions.

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See Accompanying Notes to Financial Statements.

A.  General Description of the Fund

Campbell Strategic Allocation Fund, L.P. (the “Fund”) is a Delaware limited partnership which operates as a commodity investment pool. The Fund engages in the speculative trading of futures contracts and forward currency contracts.

Effective January 6, 2012, Units in the Fund were no longer offered for sale. For existing investors in the Fund, business has been and will be conducted as usual. There was no change in trading, operations, or monthly statements, etc., and redemptions will continue to be offered on a monthly basis.

B.  Regulation

As a registrant with the Securities and Exchange Commission (the “SEC”), the Fund is subject to the regulatory requirements under the Securities Exchange Act of 1934. Prior to January 6, 2012, the Fund was also subject to the regulatory requirements under the Securities Act of 1933.  As a commodity investment pool, the Fund is subject to the regulations of the Commodity Futures Trading Commission, an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of the various commodity exchanges where the Fund executes transactions. Additionally, the Fund is subject to the requirements of futures commission merchants (the “futures brokers”) and interbank market makers through which the Fund trades.

C.  Method of Reporting

The Fund’s financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which may require the use of certain estimates made by the Fund’s management. Actual results may differ from these estimates.

These financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2018. All adjustments of a normal recurring nature considered necessary for a fair presentation have been included herein.

The Fund meets the definition of an investment company according to the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946-10, Financial Services – Investment Companies.

Investment transactions are accounted for on the trade date. Gains or losses are realized when contracts are liquidated. Unrealized gains and losses on open contracts (the difference between contract trade value and fair value) are reported in the Statements of Financial Condition as a net gain or loss, as there exists a right of offset of unrealized gains or losses in accordance with ASC 210-20, Offsetting - Balance Sheet. The fair value of futures (exchange-traded) contracts is based on various futures exchanges, and reflects the settlement price for each contract as of the close on the last business day of the reporting period. The fair value of forward currency (non-exchange traded) contracts was extrapolated on a forward basis from the spot prices quoted as of 3:00 P.M. (E.T.) on the last business day of the reporting period.

The fixed income investments are marked to market on the last business day of the reporting period using a third party vendor hierarchy of pricing providers who specialize in such markets. The prices furnished by the providers consider the yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Premiums and discounts on fixed income securities are amortized and accreted for financial reporting purposes.

The short term investments represent cash held at the custodian and invested overnight in a money market fund.

For purposes of both financial reporting and calculation of redemption value, Net Asset Value per unit is calculated by dividing Net Asset Value by the number of outstanding units.

D. Fair Value

The Fund follows the provisions of ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Fund has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The value of the Fund’s exchange-traded futures contracts and short term investments fall into this category.

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. This category includes forward currency contracts that the Fund values using models or other valuation methodologies derived from observable market data. This category also includes fixed income investments.

Level 3 inputs are unobservable inputs for an asset or liability (including the Fund’s own assumptions used in determining the fair value of investments). Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of June 30, 2019 and December 31, 2018, and for the periods ended June 30, 2019 and 2018, the Fund did not have any Level 3 assets or liabilities.

The following tables set forth by level within the fair value hierarchy the Fund’s investments accounted for at fair value on a recurring basis as of June 30, 2019 and December 31, 2018.

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The gross presentation of the fair value of the Fund’s derivatives by instrument type is shown in Note 9. See Condensed Schedules of Investments for additional detail categorization.

E.  Cash and Cash Equivalents

Cash and cash equivalents includes cash and overnight money market investments at financial institutions.

F.  Income Taxes

The Fund prepares calendar year U.S. federal and applicable state tax returns and reports to the partners their allocable shares of the Fund’s income, expenses and trading gains or losses. No provision for income taxes has been made in the accompanying financial statements as each partner is individually responsible for reporting income or loss based on such partner’s respective share of the Fund’s income and expenses as reported for income tax purposes.

Management has continued to evaluate the application of ASC 740, Income Taxes, to the Fund, and has determined that no reserves for uncertain tax positions were required. There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months. The Fund files federal and state tax returns. The 2015 through 2018 tax years generally remain subject to examination by the U.S. federal and most state tax authorities.

G.  Offering Costs

Campbell & Company, LP (“Campbell & Company”) has incurred all costs in connection with the initial and continuous offering of units of the Fund (“offering costs”). In addition, Campbell & Company continues to compensate wholesalers for services rendered to Limited Partners. The Fund’s liability for offering costs is limited to the maximum of total offering costs incurred by Campbell & Company, not to exceed 2.5% of the aggregate subscriptions accepted during the initial and continuous offerings. As of June 30, 2019 and December 31, 2018, the Fund has the potential remaining reimbursement amount of approximately $35.1 million and $35.6 million, respectively. If the Fund terminates prior to completion of payment of the calculated amounts to Campbell & Company, Campbell & Company will not be entitled to any additional payments, and the Fund will have no further obligation to Campbell & Company.

The Fund is only liable for payment of offering costs on a monthly basis as calculated based on the limitations stated above. At June 30, 2019 and December 31, 2018, the amount of unreimbursed offering costs incurred by Campbell & Company is $71,790 and $57,600, respectively. At June 30, 2019 and December 31, 2018, the Fund reflects a liability in the Statements of Financial Condition for offering costs payable to Campbell & Company of $71,790 and $57,600, respectively. The amount of monthly reimbursement due to Campbell & Company is charged directly to partners’ capital.

H.  Foreign Currency Transactions

The Fund’s functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the Statements of Financial Condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income.

I.  Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An affected entity is permitted to adopt the removed or modified disclosures upon the issuance of ASU 2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Campbell & Company has adopted the new guidance, and management has determined its adoption has no material impact on the Fund’s financial statement disclosures.

In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections – Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates. The primary focus of ASU 2019-07 is to clarify amendments made by the SEC with the intention of facilitating the disclosure of information to investors and simplifying compliance without significantly altering the total mix of information provided to investors. As a result of these amendments, an analysis of changes in equity is required for the current and comparative interim periods, with subtotals for each interim period. Campbell & Company has adopted the new guidance, and management has determined its adoption has no material impact on the Fund’s financial statement disclosures.

The general partner of the Fund is Campbell & Company, which conducts and manages the business of the Fund. Campbell & Company is also the commodity trading advisor of the Fund. The Amended Agreement of Limited Partnership provides that Campbell & Company may make withdrawals of its units, provided that such withdrawals do not reduce Campbell & Company’s aggregate percentage interest in the Fund to less than 1% of the net aggregate contributions.

Campbell & Company is required by the Amended Agreement of Limited Partnership to maintain a net worth equal to at least 5% of the capital contributed by all the limited partnerships for which it acts as general partner, including the Fund. The minimum net worth shall in no case be less than $50,000 nor shall net worth in excess of $1,000,000 be required.

The Fund pays a monthly brokerage fee equal to 1/12 of 7% (7% annualized) of month-end net assets to Campbell & Company and approximately $4 per round turn to the futures brokers for execution and clearing costs. From the 7% fee, a portion (4%) is used to compensate selling agents for ongoing services rendered and a portion (3%) is retained by Campbell & Company for trading and management services rendered. The amount paid to the futures brokers and interbank market makers for execution and clearing costs is limited to 1/12 of 1% (1% annualized) of month-end net assets.

Campbell & Company is also paid a quarterly performance fee of 20% of the Fund’s aggregate cumulative appreciation in the Net Asset Value per unit, exclusive of appreciation attributable to interest income. More specifically, the performance fee is paid on the cumulative increase, if any, in the Net Asset Value per Unit over the highest previous cumulative Net Asset Value per Unit (commonly referred to as a High Water Mark) adjusting for investment income. In determining the brokerage and performance fees (the “fees”), adjustments shall be made for capital additions and withdrawals and Net Assets shall not be reduced by the fees being calculated for such current period. The performance fee is not subject to any clawback provisions. The fees are typically paid in the month following the month in which they are earned. The fees are paid from the available cash at the Fund’s bank, futures brokers or cash management accounts.

Northern Trust Hedge Fund Services LLC serves as the Administrator of the Fund. The Administrator receives fees at rates agreed upon between the Fund and the Administrator and is entitled to reimbursement of certain actual out-of-pocket expenses incurred while performing its duties. The Administrator’s primary responsibilities are portfolio accounting and fund accounting services.

Effective January 1, 2019, NAV Consulting, Inc. serves as the Transfer Agent for the Fund. The Transfer Agent receives fees at rates agreed upon between the Fund and the Transfer Agent and is entitled to reimbursement of certain actual out-of-pocket expenses incurred while performing its duties.

PNC Capital Advisors, LLC serves as the cash manager under the Investment Advisory Agreement to manage and control the liquid assets of the Fund. PNC Capital Advisors, LLC is registered as an investment adviser with the SEC of the United States under the Investment Advisers Act of 1940.

The Fund opened a custodial account at the Northern Trust Company (the “custodian”) and has granted the cash manager authority to make certain investments on behalf of the Fund provided such investments are consistent with the investment guidelines created by the general partner. All securities purchased by the cash manager on behalf of the Fund will be held in the Fund’s custody account at the custodian. The cash manager will have no beneficial or other interest in the securities and cash in such custody account.

The Fund deposits assets with UBS Securities LLC and Goldman, Sachs & Co. subject to Commodity Futures Trading Commission regulations and various exchange and futures broker requirements. Margin requirements are satisfied by the deposit of U.S. Treasury Bills and cash with such futures brokers. The Fund typically earns interest income on its assets deposited with the futures brokers.

The Fund’s counterparties with regard to its forward currency transactions are NatWest Markets PLC (“NatWest”), formerly The Royal Bank of Scotland, and UBS AG (“UBS”). The Fund has entered into an International Swap and Derivatives Association, Inc. agreement (“ISDA Agreement”) with NatWest and UBS which governs these transactions. The credit ratings reported by the three major rating agencies for NatWest and UBS were considered investment grade as of June 30, 2019. Margin requirements are satisfied by the deposit of U.S. Treasury Bills and cash with NatWest and UBS. The Fund typically earns interest income on its assets deposited with NatWest and UBS.

Operating expenses of the Fund are limited by the Amended Agreement of Limited Partnership to 0.5% per year of the average month-end Net Asset Value of the Fund. Actual operating expenses were less than 0.5% (annualized) of average month-end Net Asset Value for the six months ended June 30, 2019 and 2018.

Investments in the Fund were made by subscription agreement, subject to acceptance by Campbell & Company.

The Fund is not required to make distributions, but may do so at the sole discretion of Campbell & Company. A limited partner may request and receive redemption of units owned, subject to restrictions in the Amended Agreement of Limited Partnership. Units are transferable, but no market exists for their sale and none is expected to develop. Monthly redemptions are permitted upon ten (10) business days advance written notice to Campbell & Company.

The Fund engages in the speculative trading of U.S. and foreign futures contracts and forward currency contracts (collectively, “derivatives”). Specifically, the Fund trades a portfolio focused on futures and forward contracts, which are instruments designed to hedge changes in interest rates, currency exchange rates, stock index values, metals, energy and agriculture values. The Fund is exposed to both market risk, the risk arising from changes in the fair value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract.

Market Risk

For derivatives, risks arise from changes in the fair value of the contracts. Market movements result in frequent changes in the fair value of the Fund’s open positions and, consequently, in its earnings and cash flow. The Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of exchange rates, interest rates, equity price levels, the fair value of financial instruments and contracts, the diversification effects among the Fund’s open positions and the liquidity of the markets in which it trades. Theoretically, the Fund is exposed to a market risk equal to the notional contract value of futures and forward currency contracts purchased and unlimited liability on such contracts sold short. See Note 1.C. for an explanation of how the Fund determines its valuation for derivatives as well as the netting of derivatives.

The Fund adopted the provisions of ASC 815, Derivatives and Hedging, (“ASC 815”). ASC 815 provides enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments are accounted for, and how derivative instruments affect an entity’s financial position, financial performance and cash flows.

The following tables summarize quantitative information required by ASC 815.  The fair value of the Fund’s derivatives by instrument type, as well as the location of those instruments on the Statements of Financial Condition, as of June 30, 2019 and December 31, 2018 is as follows:

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