Item 1. Business
(a) General development of business
Millburn Multi-Markets Fund L.P. (the “Partnership”) is a limited partnership organized September 8, 2008 under the Delaware Revised Uniform Limited Partnership Act. The Partnership commenced operations on August 1, 2009. The Partnership is required, pursuant to its Fourth Amended and Restated Limited Partnership Agreement (the “Limited Partnership Agreement”), to invest all of its assets in Millburn Multi-Markets Trading L.P. (the “Master Fund”), a Delaware limited partnership that began trading on October 20, 2004. The Partnership is one of a number of investors in the Master Fund. As of December 31, 2020, the Partnership’s partnership percentage in the Master Fund was approximately 25.08% of total partners’ capital of the Master Fund. The general partner and trading advisor of the Partnership and the Master Fund is Millburn Ridgefield Corporation, a Delaware corporation operating in New York, New York (the “General Partner”).
The Master Fund’s business is trading a diversified portfolio of futures, forward, swap, spot and option contracts on currencies, metals, interest rate instruments, stock indices, energy and agricultural commodities. The Master Fund may also, to a limited extent, invest in equities, equity baskets, instruments related to equities, exchange traded funds or notes. The General Partner invests globally pursuant to its proprietary quantitative and systematic trading methodology, based upon signals generated from an analysis of a range of quantitative data. Approximately 20%-30% of the Master Fund’s trading, measured by the General Partner’s assessment of risk, currently takes place in the currency markets.
The General Partner conducts and manages the business of the Partnership and the Master Fund. The Master Fund serves as a master fund for a non-U.S. investment vehicle managed by the General Partner and also permits direct investment by persons qualified to so invest, including qualified General Partner employees.
The General Partner was organized in May 1982 to manage discretionary accounts in futures and forward markets. It and its principals have been trading in the futures and forwards markets pursuant to systematic quantitative, trading and risk management methods since 1971. The General Partner has been registered with the Commodity Futures Trading Commission (the “CFTC”) as a commodity pool operator (“CPO”) since July 1, 1982, as a commodity trading advisor (“CTA”) since September 13, 1984 and has been a member of the National Futures Association (the “NFA”) since July 1, 1982. The General Partner has been an approved swaps firm with the NFA since December 26, 2012. The General Partner conducts all trading and investment activities through the Master Fund. The Millburn Corporation, a former affiliate of the General Partner, that, prior to January 1, 2019, performed research, trading, technology, operations, marketing, accounting, tax, legal, compliance, human resources, and other administrative functions for the Partnership and the Master Fund and other commodity pools and investment partnerships managed by the General Partner, merged with and into the General Partner on December 31, 2018, and the General Partner now performs the functions formerly performed by The Millburn Corporation.
As of December 31, 2020, the aggregate net asset value of the Partnership was $139,012,777 and the aggregate net asset value of the Master Fund was $554,247,918. The net asset value of a Series A Unit originally sold for $1,000.00 as of August 1, 2009 was $1,089.83 as of December 31, 2020. The net asset value of a Series B Unit originally sold for $1,000.00 as of August 1, 2009 was $1,299.02 as of December 31, 2020. The net asset value of a Series C Unit originally sold for $1,000.00 as of August 1, 2009 was $1,325.38 as of December 31, 2020. The net asset value of a Series D Unit originally sold for $1,331.20 as of November 1, 2017 was $1,251.08 as of December 31, 2020. In each case, these are based on the actual rate of return a limited partner’s investment in the Partnership would have recognized, net of the highest charges applicable to a limited partner, during each month in the calculation period from August 1, 2009 to December 31, 2020.
The Partnership’s and the Master Fund’s fiscal year ends on December 31 of each calendar year.
The Partnership will terminate upon the prior withdrawal, insolvency, bankruptcy or dissolution of the General Partner or occurrence of any event legally requiring termination.
The Partnership is not a registered investment company or mutual fund. Accordingly, investors in the Partnership do not have the protections afforded by the Investment Company Act of 1940, as amended.
(c) Description of business
The Partnership, through the Master Fund, engages in the speculative trading of futures, forward and spot contracts and may trade options thereon as well as swap contracts. The Master Fund’s sole trading advisor is the General Partner. The Master Fund trades in the agricultural, metals, energy, interest rate and stock indices futures markets and in the currency markets, trading primarily forward contracts in the interbank market. The Master Fund may also, to a limited extent, invest in equities, equity baskets, instruments related to equities, exchange traded funds or notes. The General Partner makes its systematically-based trading decisions pursuant to its investment and trading methodology, based on signals generated from an analysis of price, price derivatives, fundamental and other quantitative data, as well as incorporating money management principles, each of which may be revised from time to time. The objective of the General Partner’s investment and trading methods is to consider these multiple data inputs, or “factors,” in order to arrive at relatively near-term return forecasts for each traded instrument and take appropriate risk-managed positions. These factors include price data, but also a range of price derivative and non-price data. Trades generated by quantitative models may be profitable or unprofitable. Since the General Partner is well aware that many trades will ultimately lose money, its objective is to more-than cover those losses by generating more frequent and/or larger profitable trades than losing trades. During periods in which market behavior differs significantly from that analyzed to build the models, or periods where data inputs important to predicting price movements were not included in those analyzed to build the models, substantial losses are possible, and even likely.
The General Partner is engaged in an ongoing research effort to improve its investment and trading methods and to apply its quantitative analytic expertise to new financial products, markets and instruments.
Successful systematic trading depends on several elements. Two of the main factors are the development and selection of the trading systems used in each market and the allocation of portfolio risk among the markets available for trading.
Market environments change over time, and particular systems may perform well in one environment but poorly in another. Likewise, market sectors and individual markets go through periods where systematic trading is profitable and other periods where no system is able to generate any profits.
The goal of the General Partner’s research has been to develop and select a mix of systems in each market and to allocate risk across a wide array of markets, so as to contain overall portfolio risk within a targeted range, while allowing exposure to profitable opportunities.
Over more than 50 years, the General Partner and its predecessor entities have developed hundreds of trading systems. These trading systems generate buy or sell decisions in a particular market based on the analysis of a range of quantitative data, and the interactions of such data, in the particular market or in markets in general.
Of course, systems can be materially different - better in some periods and worse in others. Some of the main distinguishing characteristics include: the time frame over which systems work (e.g., intra-day to long-term); the granularity of data fed into them (e.g., tick data to daily, weekly or monthly frequencies) the amount of historical data used to learn the market structure; the statistical methods used to make forecasts; the type of data (e.g., price, price-derivative, fundamental and other quantitative data); and the source of data (e.g., cash, futures, forwards, option or equity markets-generated data or government-, and industry- or company-generated statistical information). No single system will work all the time. Therefore, the General Partner’s objective is to have several systems operating in conjunction with one another.
When arriving at the portfolio allocation, the General Partner generally seeks maximum diversification, subject to liquidity and sector concentration constraints and subject to the mandate of the strategy. Each market is traded using a diversified set of systems, which may be optimized for groups of markets, sectors or specific markets. The markets traded and allocations are reviewed at least monthly, although changes may occur more or less frequently. The following factors, among others, are considered in constructing a universe of markets to trade for the Master Fund: profitability, liquidity of markets, professional judgment, desired diversification, transaction costs, exchange regulations and depth of markets. The current allocation to any market in the Master Fund’s portfolio does not exceed 3.0% of total market exposure, measured by risk allocation.
Risk is a function of both price level and price volatility. For example, for any given level of volatility, a 100,000 barrel crude oil position is worth more and is, therefore, probably more risky with oil at $90 per barrel than with oil at $50 per barrel. Similarly, oil would be more risky if prices are moving in a 5% daily range than if prices are moving in a 1% daily range. The General Partner sizes the position in each market taking into account its measurement of risk based on price level and volatility in that market. Market exposure is then managed by the position-sizing models which measure the risk in the portfolio’s position in each market. In the event the model determines that the risk has changed beyond an acceptable threshold, it will signal a change in the position - a decrease in position size when risk increases and an increase in position size when risk decreases. The General Partner’s position-sizing models maintain overall portfolio risk and distribution of risk across markets within designated ranges. The position-sizing model manages the position traded in aggregate by the combination of the (directional) trading systems discussed above.
In addition, the General Partner’s risk management processes focus on money management principles applicable to the portfolio as a whole and also to individual markets. The first principle is portfolio diversification, which attempts to improve the quality of profits by reducing volatility.
Additional money management principles applicable to the portfolio as a whole include: (1) limiting the assets committed as margin or collateral, generally within a range of 5% to 35% of an account’s net assets, though the amount may at any time be substantially higher or lower and (2) prohibiting pyramiding - that is, using unrealized profits in a particular market as margin for additional positions solely in the same market.
Another important risk management function is the careful control of leverage or total portfolio exposure. Leverage levels are determined by simulating the entire portfolio - all markets, all systems, all risk control models, the exact weightings of the markets in the portfolio and the proposed level of leverage - over multiple years to determine the portfolio’s simulated risk and return characteristics as well as the simulated worst case drawdown experienced by the portfolio in the simulation period. The simulated worst case drawdown, or peak-to-trough drawdown, is measured from a daily high in portfolio assets to the subsequent daily low whether that occurs days, weeks or months after the daily high. If the General Partner considers the simulated drawdown too severe or the portfolio’s simulated volatility too high, it can set the leverage or level of the actual portfolio accordingly so as to reduce the total portfolio exposure. There are, however, no restrictions on the amount of leverage the Master Fund may use at any given time.
Decisions whether to trade a particular market require the exercise of judgment. The decision not to trade certain markets for certain periods, or to reduce the size of a position in a particular market, may result at times in missing significant profit opportunities.
The General Partner’s discretion and expertise in the execution of trades plays a role in timing of orders and, from time to time, the General Partner may adjust the size of a position, long or short, in any given market indicated by its systematic trading strategies. This exercise of discretion (other than in trade execution) has historically been very rare and would generally occur only in response to unusual market conditions that may not have been factored into the design of the trading systems. Such adjustments would be done with the intention of reducing risk exposures as opposed to seeking additional risk. Decisions to make such adjustments also require the exercise of judgment and may include consideration of the volatility of the particular market; the pattern of price movements, both inter-day and intra-day; open interest; volume of trading; changes in spread relationships between various forward contracts; and overall portfolio balance and risk exposure.
The Partnership’s units of limited partnership interest (“Units”) are issued in four series: Series A, Series B, Series C and Series D (each, a “Series”). The sole differences among the Series are the fees applicable to each Series, and the “series” designation is an administrative, not a legal, distinction. All Partnership fees and expenses, including those described below, are borne by the Partnership and are paid on behalf of, and allocated to, the Partnership at the Master Fund level. All such fees and expenses paid at the Master Fund level are borne indirectly by limited partners as investors in the Partnership, but only to the extent those fees and expenses are properly allocable to such limited partners, pro rata on a Series-by-Series basis, as described herein.
The Partnership bears all of its own direct expenses, including, but not limited to, any taxes to which the Partnership is subject, regulatory fees, and interest charges.
Series A, Series B, Series C and Series D Units are issued in order to account for different selling commissions and registered investment adviser (“RIA”) platform fees, if any, applicable to each Series. Other than with respect to such selling commissions, RIA platform fees and the Profit Share calculation (described below), the Series are subject to the same fees, expenses and other terms of the Partnership and share in the profits and losses of the Partnership on a pro rata basis.
Series A Units are subject to an ongoing compensation charge to be paid to selling agents selling Units (“Selling Agents”) equal to 1/12 of 2% based on the month-end net asset value of such Series’ investment in the Master Fund prior to reduction for any redemptions, distributions, Management Fees (as defined below), any accrued Profit Share (as defined below) and the amounts payable to the Selling Agents then being calculated (a 2% annual rate).
Series B and C Units are not subject to any fees or ongoing compensation to Selling Agents.
Series D Units are subject to an ongoing compensation charge to be paid to Selling Agents equal to 1/12 of 0.75% based on the month-end net asset value of such Series’ investment in the Master Fund prior to reduction for any redemptions, distributions, Management Fees, any accrued Profit Share and the amounts payable to the Selling Agents then being calculated (a 0.75% annual rate).
The General Partner receives from the Master Fund a monthly “Management Fee” in respect of each Series’ investment in the Master Fund, in an amount equal to 1/12 of 2% of the net asset value of such Series’ investment in the Master Fund as of each month-end prior to reduction for any redemptions, distributions, any amounts payable to Selling Agents, any accrued Profit Share or the Management Fee then being calculated (a 2% annual rate), prorated for partial months.
The General Partner’s “Profit Share” is calculated separately as of the end of a fiscal year, with respect to (i) Series A Units (the “Series A Profit Share”), (ii) Series B and Series C Units in the aggregate (the “Series B/C Profit Share”) and (iii) Series D Units (the “Series D Profit Share”). The Series A Profit Share and Series D Profit Share equal 20% of any increase in Series A trading profits and Series D trading profits, respectively, over the previous high point in trading profits as of a date on which a Profit Share was paid with respect to Series A or Series D, respectively (or $0 if no Profit Share has been paid with respect to such Units). The Series B/C Profit Share equals 20% of any increase in aggregate trading profits attributable to Series B and Series C over the previous high point in such trading profits as of a date on which a Profit Share was paid with respect to Series B and Series C (or $0 if no Profit Share has been paid with respect to such Units).
The General Partner’s Profit Share with respect to withdrawals made from the Master Fund as a result of redemptions of Units as of a month-end other than a fiscal year-end are computed and a corresponding allocation made to the General Partner as though the month-end were a fiscal year-end.
The Partnership bears its pro rata share of all of the Master Fund’s expenses, including, but not limited to, all expenses that the General Partner reasonably determines to be incurred in connection with the Master Fund’s investment activities, including brokerage commissions and electronic platform trading costs; any taxes to which the Master Fund is subject; regulatory fees; and interest charges.
A capital account will be established for each Unit and for the General Partner, and its initial balance is the amount of the initial price of such Unit and the initial capital contribution of the General Partner, respectively. The net assets of the Partnership are determined monthly, and any increase or decrease from the end of the preceding month is added to or subtracted from the accounts in the ratio that each account bears to all accounts.
In connection with the Master Fund’s futures trading, the Master Fund currently executes and clears transactions through Deutsche Bank Securities Inc. (“Deutsche Bank”), BofA Securities Inc. (“BofA”) and Goldman Sachs & Co. LLC (“GS&Co”), each a registered futures commission merchant, but may use other futures commission merchants or cease using any particular futures commission merchant at any time in the General Partner’s discretion. The Master Fund also currently engages in currency forward trading with Deutsche Bank AG and Bank of America, N.A., which serve as the Master Fund’s prime brokers for such transactions, but may utilize the services of additional prime brokers or engage in such trading with other banks and dealers as well. At this time, the Master Fund clears its currency forward trades with Deutsche Bank AG and Bank of America, N.A.
The General Partner estimates that 90% or more of the Master Fund’s assets, including the assets used to satisfy margin and collateral requirements, will be invested in U.S. government securities or securities issued by federal agencies (or, to a limited extent, foreign government securities in connection with trading on non-U.S. exchanges), other CFTC-authorized investments and certain other money market instruments (e.g., bankers acceptances and Eurodollar or other time deposits). All interest earned on such securities or other obligations purchased with Master Fund assets will accrue to the Master Fund. The balance of the Master Fund’s assets will be held in cash in commodity brokerage accounts, bank accounts or other accounts in the name of the Master Fund and will be used for trading which requires cash for margin and to avoid daily buying and selling of government securities. Neither the Partnership nor the Master Fund will make any loans; provided, however, that the Partnership and the Master Fund may purchase CFTC-authorized investments, including debt instruments, as described above. The General Partner will not commingle the property of the Partnership or the Master Fund with the property of any other person or entity (the deposit of Partnership or Master Fund assets with banks, brokers and dealers for margin, collateral or otherwise not being deemed a prohibited commingling).
The Partnership does not engage in lending (other than through permitted securities investments).
Regulation
Under the Commodity Exchange Act, as amended (the “CEA”), commodity exchanges and futures trading are subject to regulation by the CFTC. 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 CTAs, CPOs, “futures commission merchants,” “introducing brokers,” “swap dealers” and their respective associated persons and “floor brokers” and “floor traders.” The CEA requires CPOs and CTAs, such as the General Partner, and commodity brokers or futures commission merchants and swap dealers, such as Deutsche Bank, Deutsche Bank AG, BofA, Bank of America, N.A. and GS&Co to be registered and to comply with various reporting and record keeping requirements. The CFTC may suspend a CPO’s or CTA’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 General Partner as a CPO or a CTA were terminated or suspended, the General Partner would be unable to continue to manage the business of the Partnership. Should the General Partner’s registration 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 positions which any person may hold or control in certain futures contracts. Most exchanges also limit the changes in futures contract prices that may occur during a single trading day. The CFTC has also proposed, but not yet adopted, additional position limit rules covering energy, metals and agricultural derivative contracts. All accounts controlled by the General Partner are combined for speculative position limit purposes. The General Partner could be required to liquidate positions it holds on behalf of the Master Fund in order to comply with such limits. Any such liquidation or limited implementation could result in substantial costs to the Partnership. It is as yet unclear whether the rules will have an adverse effect on the Partnership.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) mandates that a substantial portion of over-the-counter (“OTC”) derivatives be executed in regulated markets and be submitted for clearing to regulated clearinghouses, subject to margin requirements. Associated dealer costs are generally passed through to market participants in the form of clearing account maintenance fees and less favorable dealer marks.
The Master Fund may also trade forward contracts in the inter-bank currency market. Such forward contracts are not currently traded on exchanges; rather, banks and dealers act as principals in these markets. As a result of the Reform Act, the CFTC regulates non-deliverable forwards (including many deliverable forwards where the parties do not take delivery), although currency forward contracts are generally not otherwise subject to regulation by any other U.S. government agency. Changes in the forward markets may entail increased costs and result in burdensome reporting requirements. There is currently no limitation on the daily price movements of forward contracts. Principals in the forward markets have no obligation to continue to make markets in the forward contracts traded. The imposition of credit controls by governmental authorities or the implementation of regulations pursuant to the Reform Act might limit such forward trading to less than that which the General Partner would otherwise recommend, to the possible detriment of the Master Fund.
1(i) through (v) - not applicable.
(2)(i) - not applicable.
(2)(ii) - the Partnership has no employees.
Item 1A.
Item 1A. Risk Factors
Not required.
Item 1B.
Item 1B. Unresolved Staff Comments
Not required.
Item 2.
Item 2. Properties
The Partnership does not own or use any physical properties in the conduct of its business. The General Partner performs administrative services for the Partnership from its offices.
Item 3.
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 the General Partner.
Item 4.
Item 4. Mine Safety Disclosures
Not required.
PART II
Item 5.
Item 5. Market for 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 15 days’ written notice at their net asset value as of the last day of any month, subject to certain early redemption charges.
(b) Holders
As of December 31, 2020, there were 599 holders of Series A Units, 89 holders of Series B Units, 21 holders of Series C Units and 101 holders of Series D Units.
(c) Dividends
The General Partner has sole discretion in determining what distributions, if any, the Partnership will make to the Partners. No distributions have been made on the Units, and none are contemplated.
(d) Securities Authorized for Issuance Under Equity Compensation Plans
None.
(e) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
Units are sold on a monthly basis through the General Partner and selling agents retained by the General Partner to act as its agents. Units were initially issued at $1,000.00 per Unit, except for Series D Units, which were issued at $1,331.20 and thereafter at net asset value. Between October 1, 2020 and December 31, 2020, the Partnership issued Units at monthly closings, as set forth in the following charts, to both new limited partners as well as to existing limited partners making additional investments. There were no Series B or Series C subscriptions during the fourth calendar quarter of 2020.
(f) Purchases of Equity Securities by the Issuer
Pursuant to the Limited Partnership Agreement, limited partners may redeem Units as of the end of each calendar month. The redemption of Units by limited partners has no impact on other limited partners.
The following table summarizes limited partner redemptions of Series A, Series B and Series C during the fourth calendar quarter of 2020. There were no Series D redemptions during the fourth calendar quarter of 2020.
Series A Units
Series B Units
Series C Units
Series D Units
Item 6.
Item 6. Selected Financial Data
Not required.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Units may be offered for sale as of the beginning, and may be redeemed as of the end, of each month.
The amount of capital raised for the Partnership should not have a significant impact on its operations, as the Partnership and the Master Fund have no significant capital expenditure or working capital requirements other than for monies to pay trading losses, brokerage commissions and charges. Within broad ranges of capitalization, the General Partner’s trading positions should increase or decrease in approximate proportion to the size of the Master Fund (in which the Partnership participates).
The Partnership raises additional capital only through the sale of Units and capital is increased through trading profits (if any). Neither the Partnership nor the Master Fund engages in borrowing.
The Master Fund trades futures and forward contracts, and may trade, among other instruments, swap, spot and options contracts, on interest rates, commodities, currencies, metals, energy and stock indices. Risk arises from changes in the value of these contracts (market risk) and the potential inability of counterparties or brokers to perform under the terms of their contracts (credit risk). Market risk is generally to be measured by the face amount of the futures positions acquired and the volatility of the markets traded. The credit risk from counterparty non-performance associated with these instruments is the net unrealized gain, if any, on these positions plus the value of the margin or collateral held by the counterparty. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with OTC transactions because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. In most OTC transactions, on the other hand, traders must rely (typically but not universally) solely on the credit of their respective individual counterparties. Margins which may be subject to loss in the event of a default are generally required in exchange trading and counterparties may require margin or collateral in the OTC markets.
The General Partner has procedures in place to control market risk, although there can be no assurance that they will, in fact, succeed in doing so. These procedures primarily focus on (1) real time monitoring of open positions; (2) diversifying positions among various markets; (3) limiting the assets committed as margin or collateral, generally within a range of 5% to 35% of an account’s net assets, though the amount may at any time be higher; and (4) prohibiting pyramiding - that is, using unrealized profits in a particular market as margin for additional positions in the same market. The Master Fund controls credit risk by dealing exclusively with large, well-capitalized financial institutions as brokers and counterparties.
The financial instruments traded by the Master Fund contain varying degrees of off-balance sheet risk whereby changes in the market values of the futures and forward contracts or the Master Fund’s satisfaction of the obligations may exceed the amount recognized in the Statements of Financial Condition of the Master Fund.
Due to the nature of the Master Fund’s business, substantially all its assets are represented by cash, cash equivalents and U.S. government obligations, while the Master Fund maintains its market exposure through open futures and forward contract positions.
The Master Fund’s futures contracts are settled by offset and are cleared by the exchange clearinghouse function. Open futures positions are marked-to-market each trading day and the Master Fund’s trading accounts are debited or credited accordingly. Options on futures contracts are settled either by offset or by exercise. If an option on a future is exercised, the Master Fund is assigned a position in the underlying future which is then settled by offset. The Master Fund’s spot and forward currency transactions conducted in the interbank market are settled by netting offsetting positions or payment obligations and by cash payments.
The value of the Master Fund’s cash and financial instruments is not materially affected by inflation. Changes in interest rates, which are often associated with inflation, could cause the value of certain of the Master Fund’s debt securities to decline, but only to a limited extent. More important, changes in interest rates could cause periods of strong up or down market price trends, during which the Master Fund’s profit potential generally increases. However, inflation can also give rise to markets which have numerous short price trends followed by rapid reversals, markets in which the Master Fund is likely to suffer losses.
The Master Fund’s assets are generally held as cash or cash equivalents, including U.S. government securities or securities issued by federal agencies, other CFTC-authorized investments or held in bank or certain other money market instruments (e.g., bankers acceptances and Eurodollar or other time deposits), which are used to margin the Master Fund’s futures and forward currency positions and withdrawn, as necessary, to pay redemptions and expenses. 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 Master Fund’s futures and forward trading, the Master Fund’s assets are highly liquid and are expected to remain so. During its operations through December 31, 2020, the Partnership, through its investment in the Master Fund, experienced no meaningful periods of illiquidity in any of the numerous markets traded by the General Partner.
Results of Operations
The Partnership’s success depends on the General Partner’s ability to recognize and capitalize on trends and other profit opportunities in different sectors of the global capital and commodity markets. The General Partner’s investment and trading methods are confidential, so that substantially the only information that can be furnished regarding the Partnership’s results of operations is its performance record. Unlike most operating businesses, general economic or seasonal conditions have no direct effect on the profit potential of the Partnership, while, at the same time, its past performance is not necessarily indicative of future results. Because of the speculative nature of the Master Fund’s trading, operational or economic trends have little relevance to the Partnership’s results. The General Partner believes, however, that there are certain market conditions - for example, markets with strong price trends - in which the Partnership has a better opportunity of being profitable than in others. 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 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, to mitigate the spread of any such illness, including travel restrictions and outright bans, mandatory business closures, quarantines, and work-from-home arrangements, 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, 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, the Partnership’s service providers or various markets themselves resulting in harm to the Partnership’s business and its operating results.
During 2020, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized losses of $22,228,084 from trading operations (including foreign exchange transactions and translations). Management fees of $3,148,410, brokerage commissions of $817,597, selling commissions and platform fees of $2,707,949, administrative and operating expenses of $562,898 and custody fees and other expenses of $28,172 were paid or accrued. Interest income of $1,450,954 (inclusive of $5,931 attributed to interest income earned by the Partnership) partially offset the Master Fund expenses allocated to the Partnership resulting in net loss after profit share to the General Partner of $28,042,156.
The Partnership was unprofitable in 2020 as losses from trading equity, interest rate and soft commodity futures outdistanced profits from trading currency forwards and energy, grain, metal and livestock futures.
Economic activity and financial and commodity markets, which had been underpinned early in the year by the U.S.-China trade deal, accommodative global monetary policy and the election in Great Britain, collapsed as COVID-19 became a global pandemic. Market participants came to the realization that the measures to contain the disease would not last weeks or months, but would last for at least several quarters. As the scope and duration of the damage to global demand became evident, the selling of financial and commodity investments cascaded towards the end of the first quarter.
In response, strong, coordinated and unprecedented monetary and fiscal measures were implemented by countries across the globe. For example, in the U.S., the Federal Reserve (the “Fed”), during two emergency meetings in March, cut interest rates by 1.5% to nearly zero. At its September meeting, the Fed shifted to an average inflation targeting regime that set a higher bar for rates to be raised. The Fed also expanded its Quantitative Easing (“QE”), swap lines and other lending facilities beyond that seen during the Global Financial Crisis of 2008. A U.S. fiscal stimulus package measured at about 10% of gross domestic product (“GDP”) was approved on March 25 and added to two smaller packages announced early in March. In December, Congress approved further fiscal stimulus worth $900 million or 4% of GDP. A steady stream of similar policy actions were announced by monetary and fiscal authorities worldwide beginning in March and throughout the final three quarters of 2020. In 2020, there were 207 central bank interest rate cuts according to CBRates.com. According to Morgan Stanley, G4 Central bank balance sheets expanded by $13 trillion (29% of GDP) to $29 trillion and G4+BRIC government deficits expanded to 13.3% of GDP from 5.2% in 2019.
During the last three quarters of 2020, market sentiment improved significantly, coinciding with improvements in economic activity as economies cautiously reopened, and sporadic but increasingly encouraging news concerning the rapid development of COVID-19 therapies and vaccines, which culminated with initial vaccinations in the U.S. and Europe in December. However, this overall attitude improvement was muted periodically by: outbreaks of new COVID-19 variants, hotspots and lockdowns (such as the U.K. in December), the continuing statistical reports on unemployment and travel and tourism, persistent tensions between the U.S. and other western countries with China, uncertainty around the U.S. presidential and congressional elections, and Brexit talks, as markets saw episodic decelerations in economic momentum and turbulence.
During the first quarter, broad-based losses were sustained on long positions in U.S., Canadian, European, British, Japanese, non-Japanese Asian and emerging markets equity index futures and on a short VIX trade. While equity futures gains were widespread over the final three quarters of the year, those gains fell short of the first quarter losses. Overall, trading of European, British, non-tech U.S., Japanese, Australian, Korean, Singaporean, Thai, Indian and VIX index futures were unprofitable. On the other hand, long Chinese, Taiwanese and NASDAQ index futures positions were profitable.
Entering 2020, interest rates had been firming on the basis of a modest improvement in the economic outlook. For example, the 10-year U.S. Treasury yield was near 1.90%. Then, as the pandemic struck, volatility soared and returns on government debt plunged erratically as market participants were buffeted by a variety of cross currents including: the pandemic’s actual and anticipated negative impact on global growth and inflation; increased demand for government debt; a rush for liquidity and U.S. dollars that at times led to a forced liquidation of government debt; central bank official rate cuts during March; and creation of numerous liquidity provision and QE programs designed to stabilize struggling financial markets globally. The U.S. 10-year yield fell to 0.54% on March 9, jumped to 1.19% nine days later, and closed at the end of March at 0.70%. Losses were sustained trading global note and bond interest rate futures. During the second quarter and the beginning of the third quarter, long interest rate futures positions were profitable as accommodative monetary policy, safe haven buying, declining inflation and shrinking economies kept downward pressure on interest rates. Then, after briefly dipping to a 2020 low just under 0.50% in early August, the U.S. 10-year yield moved higher in a saw-toothed manner through year-end, producing losses from trading interest rate futures. Concern about the ability of governments to trust fiscal deficits and debt, worries about the potential for future increases in inflation (underscored by the announcement of the Fed’s new average inflation targeting policy), and hope for a strong global economic rebound as vaccinations become widespread raised concerns about increasing inflation, rising long-term interest rates, and steepening yield curves. The U.S. 10-year yield closed 2020 at 0.93%. Overall for the year, trading of U.S., German, British, French, Australian and Canadian note and bond futures was unprofitable. On the other hand, long positions in short-term Eurodollar, U.K. sterling, Italian and Australian interest rate futures and in Italian bond futures produced profits partially offsetting losses, especially from early in 2020.
The U.S. dollar vacillated narrowly before spiking higher by 8-9% in mid-March corresponding to a pandemic-driven safe haven demand. Thereafter, from late March through year-end, the U.S. dollar fell about 13-15% in volatile trading, as market participants saw the pillars of U.S. dollar strength eroded. The interest rate differential that had previously favored the U.S. dollar collapsed and the Federal Reserve cut policy rates to nearly zero. Numerous other Fed programs, including expanded swap lines, reduced fears of a U.S. dollar shortage. The discussion and passage of a joint European fiscal program led to euro strength versus the U.S. dollar. Growth in China and throughout Asia led to gains for the renminbi and Asian currencies more generally. Uncertainty around the U.S. Presidential and Congressional elections also affected enthusiasm for the U.S. dollar. The Brexit agreement was a fillip for the pound. The November vaccine approvals and December start of vaccine distribution failed to stem the U.S. dollar decline. For the year, short U.S. dollar trades versus the euro, Singapore dollar, South African rand and a few other currencies were profitable. Long U.S. dollar positions against the Brazilian real and Turkish lira were profitable: both countries faced currency crises during the first half of 2020. Both long and short U.S. dollar positions relative to the Swiss franc, Russian ruble and British pound sterling were periodically profitable. A long euro/short Norway trade was profitable during the March collapse of oil. On the other hand, long U.S. dollar trades against the Japanese yen, Australian dollar, Canadian dollar, Norwegian kroner and Mexican peso registered partially offsetting losses, as did trading the U.S. dollar against the currencies of Poland, Sweden and Colombia.
Oil prices fell to their lowest levels in more than 20 years as demand collapsed as the pandemic spiked and supply surged in the face of the unrelenting price war between Saudi Arabia and Russia. The price of WTI crude oil, which had eased down from $61/barrel at the end of 2019 to about $54/barrel on February 20, plunged precipitously thereafter, dropping below $12/barrel near the end of April-after briefly falling below zero in mid-April. Consequently, short positions in Brent crude, WTI crude, RBOB gasoline, London gas oil, heating oil and natural gas were highly profitable, particularly in March. During the final three quarters of the year, trading of energy futures produced partially offsetting losses. Supply reductions from Organization of the Petroleum Exporting Countries (“OPEC+”) via agreement and from non-OPEC+ producers put a floor under the market and helped the price rise sharply to nearly $40/barrel in early June. From June through October, crude oil prices vacillated in the $36-43/barrel range as production control efforts and signs of economic reopening undergirded prices while the demand destruction partially caused by the COVID-19 pandemic restrained any upward impulse. However, during November and December, the development, approval and start of COVID-19 vaccinations globally, the passage of a relief package in the U.S., a final Brexit Trade agreement and U.S. election results drove prices toward $50/barrel, even as OPEC+ slightly loosened its production constraints. On balance, trading of Brent crude oil, WTI crude oil, RBOB gasoline, and London gas oil was profitable. Short natural gas positions were profitable early in 2020 as the pandemic reduced demand and again later in the year as warmer than normal weather impacted prices. Meanwhile, trading of heating oil posted partially offsetting losses.
Grain trading was profitable despite volatile prices influenced by the pandemic, the weakening U.S. dollar, inventory questions and drought worries late in year. Early in the year, a short soybean position was profitable as prices fell in response to sizable inventories and a pandemic-related China trade slowdown. During the fourth quarter, long soybean, soybean meal and soybean oil trades were profitable when revived Chinese demand, the falling U.S. dollar and weather concerns impacted grain prices. Meanwhile, short wheat trades produced partially offsetting losses, particularly late in the year when prices jumped higher on drought worries for Brazil, Argentina, the Black Sea region and parts of the U.S.
Trading of metal futures was fractionally profitable. A long gold trade was profitable during the January-April period due to safe haven demand and again at yearend in response to a weakening U.S. dollar. Long London zinc and copper trades during the fourth quarter were also somewhat profitable. On the other hand, trading of silver and a short New York copper position during the April-August time frame produced partially offsetting losses.
Finally, the profit from trading live cattle largely offset the small losses sustained from a short sugar position and trading coffee.
During 2019, the Partnership, through its investment in the Master Fund, achieved net realized and unrealized gains of $17,856,601 from trading operations (including foreign exchange transactions and translations). Management fees of $3,415,443, brokerage commissions of $917,967, selling commissions and platform fees of $3,083,970, administrative and operating expenses of $578,293 and custody fees of $29,669 were paid or accrued. The Master Fund allocated $2,664,064 in Profit Share to the General Partner in respect of the Partnership. Interest income of $3,798,503 partially offset the Master Fund expenses allocated to the Partnership resulting in net income after profit share to the General Partner of $10,965,698.
For the year ended December 31, 2019, the Master Fund achieved net realized and unrealized gains of $57,860,084 from trading operations (including foreign exchange transactions and translations). Management fees of $8,522,450, brokerage commissions of $3,054,092, selling commissions and platform fees of $3,095,156, administrative and operating expenses of $1,135,541 and custody fees of $98,119 were paid or accrued. The Master Fund allocated $9,214,564 in Profit Share to the General Partner. Interest income of $12,584,791 partially offset the Master Fund expenses resulting in net income after profit share to the General Partner of $45,324,953.
An analysis of the Master Fund’s trading gain (loss) by sector for the year ended December 31, 2019 is as follows:
The Partnership was profitable during 2019 as gains from trading equity futures, interest rate futures and, to a lesser extent, grain futures far outdistanced losses from trading energy futures and foreign exchange forwards. Trading of metal and soft commodity futures was also slightly unprofitable.
Financial and commodity market participants rode a risk roller coaster during the year. Risk appetites receded in the face of an escalation of the U.S.-China trade war, evidence of slowing global growth and trade, rising Brexit uncertainty, mounting political confrontation in the U.S., and increasing geopolitical tension-e.g. in Hong Kong, Japan, Korea, India, Iran, Saudi Arabia, Iraq, Russia, and across South America and Continental Europe. On the other hand, whenever these factors calmed or whenever global central banks, led by the Federal Reserve and European Central Bank (“ECB”), would ease their policy stances, risk appetites would expand.
During the first eight months of 2019 indications of slowing growth globally, slackening inflation pressures in Europe, China and the U.S. and persistent uncertainties around Brexit and U.S.-China trade negotiations led to a dovish policy pivot by global central banks-especially the Federal Reserve and ECB. Indeed, in 2019 there were 130 official rate cuts versus just 21 rate increases. The Partnership saw an increased demand for government notes and bonds, declining yields, and profits from long interest rate futures positions, even though during August some model-driven countertrend trades generated sizable losses. The U.S. 10-year government bond yield fell from 2.69% on 12/31/2018 to 1.47% on 9/3/2019. Subsequently, however, as the trade war between the U.S. and China calmed and a phase one deal was reached; as Boris Johnson led a Conservative landslide victory in the U.K. and the fear of a “no deal” Brexit receded; and as the world growth outlook steadied, global interest rates recovered in a saw-toothed manner from the lows reached late in the summer, closing the year at 1.92%. Ultimately, short interest rate futures positions were profitable. Overall, trading of German, French, Italian, British, and, to a lesser extent, Japanese and Australian interest rate futures were profitable.
Trading of equity futures was profitable in 2019 even though equity markets were buffeted by opposing forces during the year. On the one hand, there was the persistent positive influence from more accommodative global monetary policy and, late in the year, from supportive fiscal policy initiatives, particularly out of Asia. On the other hand, there were negative influences periodically from global growth worries, trade tensions, Brexit uncertainty and geopolitical unrest, although these negative influences did abate in the fourth quarter. Overall, long positions in U.S., U.K., European, Japanese, Australian, Taiwanese, Singaporean and Korean stock index futures were profitable, particularly later in the year. A short vix trade was also quite profitable. Meanwhile, long positions in Hong Kong and Chinese futures and trading of the U.S. Russell and mid-cap indices posted losses.
Ample supplies, trade disputes, and African swine fever reduced the demand for feed grains and weighed on grain prices for much of 2019. Short corn and soybean positions were profitable, especially in July and August. Corn and soybean prices were lifted for a time in May and June and long soybean and corn positions were profitable in those months. Meanwhile, a short wheat trade and a long soybean meal position each registered small losses.
The U.S. dollar traded fitfully in a 3 ½% range during 2019, and performance was mixed but overall unprofitable. At times, the dollar was supported by solid U.S. growth, safe haven demand, high relative interest rates, and global political uncertainties. At other times, however, worries that growth was slowing, declines in U.S. market interest rates, Federal Reserve cuts to official interest rates, and a favorable resolution of the aforementioned political difficulties would weigh on the U.S. currency. The stabilization of the global economic outlook during the last four months of 2019 coincided with a reduced demand for the U.S. dollar, which fell from its 2019 high reached in September. On balance, trading the dollar versus the currencies of Australia, Great Britain, Brazil, Canada, Japan, Korea, Mexico, New Zealand, Norway, South Africa and the euro were unprofitable. Conversely, dollar trading against the Chilean, Indian, Swiss, Swedish, Turkish and Singaporean currencies was profitable.
Energy prices, as represented by WTI crude oil, were quite volatile throughout 2019. WTI crude, which had closed 2018 near $45/barrel, rebounded over the first four months of 2019 to about $66/barrel on April 23. Prices were underpinned by news that the U.S. would end waivers on Iranian crude oil exports, by the continued OPEC+ effort to curtail production, and by the impact of the Libyan crisis on oil production. However, as the economic outlook deteriorated and as U.S. shale production pushed U.S. crude inventories to 2 year highs, the WTI price fell over 20% to a 5-month low near $51/barrel in mid-June. Thereafter, WTI experienced numerous sharp swings in a $51-61/barrel range. Heightened U.S.-Iran tensions pushed prices sharply higher at the start of the summer; then in August, prices depressed among increased U.S.-China trade tensions and global growth worries; they soared again in mid-September following an apparently devastating attack on Saudi production and export facilities; and collapsed later that month when after-attack reports showed the actual damage to be easily managed. Finally during the fourth quarter, crude prices rose once more among improved U.S.-China prospects. Consequently, trading of WTI crude, Brent crude, London gas oil, and heating oil were unprofitable. On the other hand, a short natural gas position was slightly profitable-largely in Nov-as ample supplies, evidenced by an 8-year high in European inventories, depressed prices even as we entered the winter heating season.
Trading of metal futures was slightly unprofitable as small losses from trading copper, gold and nickel outweighed small gains from trading aluminum, palladium, zinc and platinum. Trading of soft commodity futures was also marginally unprofitable with small losses from trading coffee, sugar and cotton.
Critical Accounting Estimates
The Master Fund records its transactions in futures, forward and spot contracts, 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 Master Fund on the day with respect to which net assets are being determined. Open spot contracts are recorded at fair value based on current market prices (“spot prices”). Open forward currency contracts are recorded at fair value, based on pricing models that consider the current spot prices plus the time value of money (“forward points”) and contractual prices of the underlying financial instruments. The spot prices and forward points for open forward currency contracts are generally based on the 3:00 P.M. New York time prices provided by widely used quotation service providers on the day with respect to which net assets are being determined. The forward points from the quotation service providers are generally in periods of one month, two months, three months and six months forward while the contractual forward delivery dates for the foreign currency contracts traded by the Partnership may be in between these periods.
The General Partner’s policy is to calculate the forward points for each contract being valued by determining the number of days from the date the forward currency contract is being valued to its maturity date and then using straight-line interpolation to calculate the valuation of forward points for the applicable forward currency contract. The General Partner will also compare the calculated price to the forward currency prices provided by dealers to determine whether the calculated price is fair and reasonable.
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) 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 of 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 these estimates. The estimates used 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 currently used would likely result in materially different amounts from those reported.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required.
Item 8.
Item 8. Financial Statements and Supplementary Data
The report of Deloitte & Touche LLP for the fiscal years ended December 31, 2020 and 2019, as required by this item, is included as Exhibit 13.1 to this report. Supplementary data is not required.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Item 9A. Controls and Procedures
The General Partner, with the participation of the General Partner’s principal executive officers and principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership as of the end of the fiscal year covered by this Annual Report, and, based on its evaluation, has concluded that these disclosure controls and procedures are effective. 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.
Management’s Annual Report on Internal Control over Financial Reporting
The General Partner is responsible for establishing and maintaining adequate internal control over the Partnership’s financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended (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 U.S. GAAP. 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 Partnership’s assets;
●provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Partnership’s financial statements in accordance with U.S. GAAP, and that the Partnership’s receipts and expenditures are being made only in accordance with authorizations of the General Partner’s management and directors; 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 the Partnership’s 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 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 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.
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 changes in the Partnership’s internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
(a, b) Identification of Directors and Executive Officers
The Partnership has no directors or executive officers. The Partnership is controlled and managed by the General Partner.
The General Partner is a Delaware corporation operating in New York, New York, organized in May 1982 to manage discretionary accounts primarily in futures, forward and spot markets. It is the corporate successor to a futures trading and advisory organization which has been continuously managing assets in the currency and futures markets using quantitative, systematic techniques since 1971.
The principals and senior officers of the General Partner as of December 31, 2020 are as follows:
Harvey Beker, age 67. Mr. Beker is Chairman of the General Partner, and serves as a member of the General Partner’s Investment Committee. He received a Bachelor of Arts degree in economics from New York University (“NYU”) in 1974 and a Master of Business Administration degree in finance from NYU in 1975. From June 1975 to July 1977, Mr. Beker was employed by the investment bank Loeb Rhoades, Inc. where he developed and traded silver arbitrage strategies. From July 1977 to June 1978, Mr. Beker was a futures trader at the commodities and securities brokerage firm of Clayton Brokerage Co. of St. Louis. Mr. Beker joined The Millburn Corporation in June 1978. He initially served as the Director of Operations for its affiliate, Millburn Partners, and most recently thereafter served as Co-Chief Executive Officer of the General Partner and Chairman and Chief Executive Officer of The Millburn Corporation until November 1, 2015. During his tenure at the General Partner (including its former affiliates, The Millburn Corporation, Millburn Partners and CommInVest), he has been instrumental in the development of the research, trading and operations areas. Mr. Beker became a principal of the firm in June 1982, and a partner in the predecessor to ShareInVest in April 1982. Mr. Beker became registered as an Associated Person and a Swap Associated Person of the General Partner effective November 25, 1986 and March 8, 2013, respectively. He was also listed as a Principal and registered as an Associated Person of ShareInVest effective February 20, 1986 until February 25, 2007. Since March 20, 2020, Mr. Beker has also served as Chairman of Millburn Asia, LLC and Millburn International, LLC (collectively, “Millburn International Group”) and prior to that date served as Co-Chairman of each such entity since its inception.
Gregg R. Buckbinder, age 62. Mr. Buckbinder is President and Chief Operating Officer of the General Partner. He joined the General Partner and The Millburn Corporation in January 1998 from Odyssey Partners, L.P., an investment management firm, where he was responsible for the operation, administration and accounting of the firm’s merchant banking and managed account businesses from July 1990 through December 1997. Mr. Buckbinder was employed by Tucker Anthony, a securities broker and dealer, from June 1985 to July 1990 where he was First Vice President and Controller, and from August 1983 to June 1984 where he designed and implemented various operations and accounting systems. He was with the public accounting firm of Ernst & Whinney from June 1984 to June 1985 as a manager in the tax department and from September 1980 to August 1983 as a senior auditor, with an emphasis on clients in the financial services business. Mr. Buckbinder graduated cum laude from Pace University (“Pace”) in 1980 with a B.B.A. in accounting and received an M.S. in taxation from Pace in 1988. He is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. Mr. Buckbinder served as Senior Vice-President of the General Partner and The Millburn Corporation until November 1, 2015, the Chief Financial Officer of the General Partner until February 1, 2020, and has since served as the President and Chief Operating Officer of both entities with his affiliation with The Millburn Corporation ceasing on December 31, 2018 upon The Millburn Corporation’s merger into the General Partner. Mr. Buckbinder has also served as Senior Vice President, Chief Operating Officer and a Director of each entity in Millburn International Group since inception. Mr. Buckbinder became listed as a Principal of the General Partner effective February 5, 1999. He became listed as a Principal of The Millburn Corporation, effective March 23, 1998, until January 17, 2019 following The Millburn Corporation’s merger into the General Partner. Mr. Buckbinder became a partner in ShareInVest in January 2000. He was also listed as a Principal of ShareInVest, effective February 28, 2001 until February 25, 2007.
Michael W. Carter, age 51. Mr. Carter is a Vice President, Director of Operations and Principal Accounting Officer of the General Partner. He is responsible for overseeing operations and accounting for the firm’s commodity pools. Mr. Carter has served as Principal Accounting Officer of the General Partner since May 2014, and prior to the merger of The Millburn Corporation into the General Partner on December 31, 2018, also served as Vice President and Director of Operations of The Millburn Corporation since January 2011, maintaining responsibility for the entity’s operations. Mr. Carter previously held the positions of Fund Controller (February 2001 until February 2011) and Senior Accountant (March 2000 until February 2001) with The Millburn Corporation. He graduated from Rutgers, The State University of New Jersey - Newark in May 1997 with a B.S. in Accounting. Prior to joining the General Partner and its affiliates in March 2000, he was employed with the accounting firm Rothstein Kass & Company, P.C., as a fund accountant from March 1997 until September 1997 and as a staff auditor from September 1997 until June 1999, and then an equity analyst covering restaurants with the brokerage firm of Sidoti & Company, LLC, which conducts independent small-cap equity research for institutional investors, from June 1999 until February 2000. He is a Certified Public Accountant. Mr. Carter became listed as Principal of the General Partner effective April 22, 2014. Mr. Carter’s affiliation with The Millburn Corporation ceased on December 31, 2018 upon its merger into the General Partner.
Steven M. Felsenthal, age 51. Mr. Felsenthal is General Counsel and Chief Compliance Officer of the General Partner. Prior to joining the General Partner and its affiliates (including its former affiliate The Millburn Corporation) in January 2004, Mr. Felsenthal was a senior associate in the investment management group at the law firm of Schulte Roth & Zabel LLP (September 1999 to January 2004), where he represented and advised hedge funds, registered investment companies, investment advisers, broker-dealers and banks in connection with all facets of their asset management businesses, and a member of the tax department of the law firm of Kramer, Levin, Naftalis & Frankel LLP (October 1996 to September 1999). He graduated cum laude from Yeshiva University in 1991 with a B.A. in political science, and order of the coif from Fordham University School of Law in 1996, where he also served as an editor of the Fordham Environmental Law Journal. Mr. Felsenthal received an LL.M. degree in taxation from NYU School of Law in 2001 and has written and been quoted in numerous published articles, and frequently speaks at conferences, on various topics related to investment management. Mr. Felsenthal is a member of the New York State Bar (since August 1997), a member of NFA’s Compliance and Risk Committee (since May 2014), a member of MFA’s CTA, CPO and Futures Committee, serving as a Chair (since April 2018) and Vice Chair (February 2017 to April 2018), a former member of the Steering Committee of MFA’s Chief Compliance Officer Forum (June 2014 to December 2015), former Chairman of MFA’s CPO/CTA Advisory Committee (November 2006 to June 2010) and former Co-Chairman of the Steering Committee of MFA’s CPO/CTA Forum (June 2010 to January 2013), is currently a member of the Editorial Boards of the Journal of Securities Operations & Custody (formerly known as the Journal of Securities Law, Regulation and Compliance) (since February 2007) and the Journal of Financial Compliance (since August 2017) and a regular lecturer for the Regulatory Compliance Association’s Chief Compliance Officer University (since May 2009). Mr. Felsenthal has also served as General Counsel, Chief Compliance Officer and Secretary of each entity in Millburn International Group since inception. Mr. Felsenthal became listed as a Principal of the General Partner effective June 24, 2004. Mr. Felsenthal also served as General Counsel and Chief Compliance Officer of ShareInVest. Mr. Felsenthal’s affiliation with The Millburn Corporation ceased on December 31, 2018 upon its merger into the General Partner.
Mark B. Fitzsimmons, age 73. Mr. Fitzsimmons is a Senior Vice President of the General Partner. His responsibilities mainly involve business development. He joined the General Partner and its affiliates (including its former affiliate The Millburn Corporation) in January 1990 from the brokerage firm of Morgan Stanley & Co. Incorporated, a global financial services firm, where he was a Principal and Manager of institutional foreign exchange sales and was involved in strategic trading for the firm from October 1987 until January 1990. From September 1977 to October 1987, he was with the financial institution Chemical Bank New York Corporation (“Chemical”), first as a Senior Economist in Chemical’s Foreign Exchange Advisory Service and later as a Vice President and Manager of Chemical’s Corporate Trading Group. While at Chemical, he also traded both foreign exchange and fixed income products. From September 1973 to September 1977, Mr. Fitzsimmons was employed by the Federal Reserve Bank of New York, dividing his time between the International Research Department and the Foreign Exchange Department. He graduated summa cum laude from the University of Bridgeport, Connecticut in 1970 with a B.S. degree in economics. His graduate work was done at the University of Virginia, where he received a certificate of candidacy for a Ph.D. in economics in 1973. Mr. Fitzsimmons became listed as a Principal and registered as an Associated Person and a Swap Associated Person of the General Partner, effective July 2, 1993, April 15, 2009 and March 8, 2013, respectively. Mr. Fitzsimmons was a partner in ShareInVest beginning in January 2000. He was also a listed Principal of ShareInVest effective May 19, 1999 until February 25, 2007. Mr. Fitzsimmons also served as a Senior Vice President of The Millburn Corporation until December 31, 2011 with his main responsibilities including business development and investment strategy.
Barry Goodman, age 63. Mr. Goodman is Co-Chief Executive Officer and Executive Director of Trading of the General Partner, and serves as a member of the General Partner’s Investment Committee. Mr. Goodman plays an integral role in business and product development, and in the strategic direction of the firm as a whole. Mr. Goodman joined the General Partner (including its former affiliate The Millburn Corporation) and Millburn Partners in November 1982 as Assistant Director of Trading and most recently thereafter served as Executive Vice President of the General Partner and The Millburn Corporation until November 1, 2015. Mr. Goodman has since served as Co-Chief Executive Officer and Executive Director of Trading of both entities with his affiliation with The Millburn Corporation ceasing on December 31, 2018 upon the merger of The Millburn Corporation into the General Partner. His responsibilities include overseeing the firm’s trading operations and managing its trading relationships, as well as the design and implementation of trading systems. From September 1980 through October 1982, he was a commodity trader at the brokerage firm of E.F. Hutton & Co., Inc. (“E.F. Hutton”). At E.F. Hutton, he also designed and maintained various technical indicators and coordinated research projects pertaining to the futures markets. Mr. Goodman graduated magna cum laude from Harpur College of the State University of New York in 1979 with a B.A. in economics. Mr. Goodman has also served as President and a Director of each entity in Millburn International Group since inception. Mr. Goodman became listed as a Principal and registered as an Associated Person and a Swap Associated Person of the General Partner effective December 19, 1991, May 23, 1989 and January 14, 2013, respectively. He became a partner in ShareInVest in January 1994. Mr. Goodman was a listed Principal of ShareInVest, effective May 19, 1999 until February 25, 2007.
Grant N. Smith, age 69. Mr. Smith is Co-Chief Executive Officer and Chief Investment Officer of the General Partner, and serves as a member of the General Partner’s Investment Committee. He is responsible for the design, testing and implementation of quantitative trading strategies, as well as for planning and overseeing the computerized decision-support systems of the firm. He received a B.S. degree from the Massachusetts Institute of Technology (“MIT”) in 1974 and an M.S. degree from MIT in 1975. While at MIT, he held several teaching and research positions in the computer science field and participated in various projects relating to database management. He joined the predecessor entity to The Millburn Corporation in June 1975, and has been continuously associated with the General Partner and its affiliates since that time. Mr. Smith served as the Executive Vice President of the General Partner and The Millburn Corporation until November 1, 2015 and as the Director of Research of both such entities until May 31, 2016. He has since served as the Co-Chief Executive Officer and Chief Investment Officer of both entities with his affiliation with The Millburn Corporation ceasing on December 31, 2018 upon the merger of The Millburn Corporation into the General Partner. He has also served as a Director of each entity in Millburn International Group since inception, where he, along with the other Directors of each of those entities, is responsible for its overall management. Mr. Smith became listed as a Principal and registered as an Associated Person and a Swap Associated Person of the General Partner, effective December 19, 1991, April 15, 2009, and March 8, 2013, respectively. Mr. Smith also became a partner in ShareInVest in January 1994. He also was listed as a Principal of ShareInVest, effective May 19, 1999 until February 25, 2007.
Ilon Wu, age 44. Ms. Wu is a Vice President and Chief Financial Officer of Millburn. Her areas of responsibility include overseeing the accounting and finance for Millburn Ridgefield Corporation and accounting and administration of many of the investment vehicles managed by Millburn. Ms. Wu has served as Chief Financial Officer of Millburn since January 2020, before which she served as Controller of The Millburn Corporation (since January 2011), a position she held prior to the merger of The Millburn Corporation into Millburn on December 31, 2018, and then in the same capacity at Millburn. Ms. Wu previously held the positions of Assistant Controller (August 2005 until December 2010) and Senior Financial Accountant (June 2000 until August 2006) with The Millburn Corporation. She graduated from Baruch College, The City University of New York in May 1998 with a B.B.A. in Accounting. Prior to joining Millburn and its affiliates in June 2000, she was employed with the accounting firm Grant Thornton LLP, as a staff accountant from October 1998 to June 2000. She is a Certified Public Accountant. Ms. Wu became listed as principal of Millburn effective March 9, 2020. Ms. Wu’s affiliation with The Millburn Corporation ceased on December 31, 2018 upon its merger into Millburn.
None of the individuals listed above currently serves as a director of a public company.
(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) Code of Ethics
The Partnership has no employees, officers or directors and is managed by the General Partner. The General Partner has adopted an Executive Code of Ethics that applies to its principal executive officers, principal financial officer and principal accounting officer. A copy of this Executive Code of Ethics may be obtained at no charge by written request to Millburn Ridgefield Corporation, 55 West 46th Street, 31st Floor, New York, New York 10036 or by calling 212-332-7300 (ask for Client Services).
(h) Audit Committee Financial Expert
Because the Partnership has no employees, officers or directors, the Partnership has no audit committee. The Partnership is managed by the General Partner. Gregg Buckbinder serves as the General Partner’s “audit committee financial expert.” Mr. Buckbinder is not independent of the management of the General Partner. The General Partner is a privately owned corporation managed by its shareholders. It has no independent directors.
Item 11.
Item 11. Executive Compensation
The Partnership has no directors, officers or employees. None of the directors, officers or employees of the General Partner receive compensation from the Partnership. The Partnership invests all of its assets in the Master Fund. The General Partner makes all investment decisions on behalf of the Master Fund. The General Partner receives monthly management fees of 0.0833 of 2% of the Master Fund’s net assets and an annual profit share of 20% of any new trading profit.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
(a) Security Ownership of Certain Beneficial Owners
All of the Partnership’s general partner interest is held by the General Partner.
(b) Security Ownership of Management
The Partnership has no officers or directors. Under the terms of the Limited Partnership Agreement, the Partnership is required to invest all its assets in the Master Fund. The General Partner has discretionary authority over the Master Fund’s trading. As of December 31, 2020, the General Partner’s interest was valued at $2,803,226, which constituted 2.02% of the Partnership’s capital as of December 31, 2020.
As of December 31, 2020, no directors or executive officers of the General Partner beneficially owned Units in the Partnership.
(c) Changes in Control
None.
(d) Securities Authorized for Issuance Under Equity Compensation Plans
None.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
See “Item 11. Executive Compensation” and “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” The Partnership, through its investment in the Master Fund, paid $3,148,410 in management fees to the General Partner for the year ended December 31, 2020. The General Partner’s capital interest was allocated a net loss of $319,369 for the year ended December 31, 2020. The Partnership, through its investment in the Master Fund, paid to the General Partner $3,415,443 in management fees, and $2,664,064 in Profit Share for the year ended December 31, 2019. The General Partner’s capital interest was allocated net income of $333,682 for the year ended December 31, 2019.
Item 14.
Item 14. Principal Accountant Fees and Services
(1) Audit Fees
The aggregate fees for professional services rendered by Deloitte & Touche LLP in connection with their audit of the Partnership’s financial statements in connection with the statutory and regulatory filings for the years ended December 31, 2020 and 2019 were approximately $120,000 and $110,000, respectively.
(2) Tax Fees
The Partnership did not engage Deloitte & Touche LLP for professional services for tax compliance, advice or planning services.
(3) All Other Fees
There were no other fees for the years ended December 31, 2020 and 2019.
(4) Pre-Approval Policies
The board of directors of the General Partner pre-approves the engagement of the Partnership’s auditor for all services to be provided by the auditor.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements
The following are included with the 2020 Annual Report to Security Holders, a copy of which is filed herewith as Exhibit 13.1.
With respect to the Partnership:
Affirmation of Millburn Ridgefield Corporation
Report of Independent Registered Public Accounting Firm
Statements of Financial Condition
Statements of Operations
Statements of Changes in Partners’ Capital
Statements of Financial Highlights
Notes to Financial Statements
With respect to the Master Fund:
Affirmation of Millburn Ridgefield Corporation
Report of Independent Registered Public Accounting Firm
Statements of Financial Condition
Condensed Schedules of Investments
Statements of Operations
Statements of Changes in Partners’ Capital
Statements of Financial Highlights
Notes to Financial Statements
(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.
The following exhibits were filed by the Partnership as a part of its Registration Statement on Form 10 (Reg. No. 000-54028) on June 30, 2010 and are incorporated herein by reference.
The following exhibit was filed by the Partnership on Form 8-K (Reg. No. 000-54028) on August 28, 2019 and is incorporated herein by reference.
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 30th day of March, 2021.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the General Partner of the Registrant and in the capacities and on the date indicated.
Title with
Signature
General Partner
Date
/s/ Harvey Beker
Chairman
March 30, 2021
Harvey Beker
(Director)
/s/ Barry Goodman
Co-Chief Executive Officer
March 30, 2021
Barry Goodman
(Principal Executive Officer)
/s/ Grant N. Smith
Co-Chief Executive Officer
March 30, 2021
Grant N. Smith
(Principal Executive Officer)
/s/ Gregg Buckbinder
President and Chief Operating Officer
March 30, 2021
Gregg Buckbinder
(Principal Executive Officer)
/s/ Michael W. Carter
Vice President
March 30, 2021
Michael W. Carter
(Principal Accounting Officer)
/s/ Ilon Wu
Chief Financial Officer
March 30, 2021
Ilon Wu
(Principal Financial Officer)
(Being the principal executive officers, the principal financial officer and principal accounting officer, and a majority of the directors of Millburn Ridgefield Corporation)
EXHIBIT INDEX
The following exhibits are included herewith.
The following exhibits were filed by the Partnership as a part of its Registration Statement on Form 10 (Reg. No. 000-54028) on June 30, 2010 and are incorporated herein by reference.
The following exhibit was filed by the Partnership on Form 8-K (Reg. No. 000-54028) on August 28, 2019 and is incorporated herein by reference.