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Cavendish Futures Fund LLC – ‘10-Q’ for 3/31/20

On:  Friday, 5/15/20, at 12:12pm ET   ·   For:  3/31/20   ·   Accession #:  1104659-20-62309   ·   File #:  0-55213

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 5/15/20  Cavendish Futures Fund LLC        10-Q        3/31/20   40:4.6M                                   Toppan Merrill/FA

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2020

OR

For the transition period from           to          .

Commission File Number 000-55213

CAVENDISH FUTURES FUND LLC

(Exact name of registrant as specified in its charter)

c/o UBS Alternatives LLC

1285 Avenue of the Americas, 20th Floor

New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 713-3234

(Registrant’s telephone number, including area code)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x 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. (Check one):

If an emerging growth company, indicate by checkmark 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 Exchange Act.

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

As of April 30, 2020, 79,186.974 Limited Liability Company Redeemable Units were outstanding.

CAVENDISH FUTURES FUND LLC

Form 10-Q

Index

PART I

Item 1. Financial Statements

Cavendish Futures Fund LLC

Statements of Financial Condition

See accompanying notes to financial statements and attached financial statements of Sydling WNT Master Fund LLC.

Cavendish Futures Fund LLC

Statements of Operations and Changes in Members’ Capital

(Unaudited)

See accompanying notes to financial statements and attached financial statements of Sydling WNT Master Fund LLC.

* Represents the changes in Members' Capital per unit

Cavendish Futures Fund LLC

Notes to Financial Statements

March 31, 2020

(Unaudited)

1. General

Cavendish Futures Fund LLC (the “Fund”) is a Delaware limited liability company formed on August 7, 2012. Trading operations of the Fund commenced on February 19, 2013. The Fund’s investment objective is to achieve capital appreciation through speculative trading in U.S. and international futures, options on futures and forward markets. The Fund may also engage in swap and other derivative transactions upon approval of Sydling Futures Management LLC ("Sydling"). The Fund privately and continuously offers redeemable units of limited liability company interest in the Fund (“Redeemable Units”) to qualified investors and subscriptions are generally accepted monthly. There is no maximum number of Redeemable Units that may be sold by the Fund. The Fund invests substantially all of its assets in the Sydling WNT Master Fund LLC (“Master Fund”), also a Delaware limited liability company, which has the same investment objective as the Fund. The Master Fund’s Statements of Financial Condition, including Condensed Schedules of Investments and Statements of Operations and Changes in Member’s Capital are included herein. The percentage of the Master Fund’s capital owned by the Fund at March 31, 2020 and December 31, 2019 was 100%. The performance of the Fund is directly affected by the performance of the Master Fund.

The Fund is member managed for purposes of Delaware law. Pursuant to the Fund’s limited liability company agreement, as may be amended from time to time (the “LLC Agreement”), the members of the Fund (each, a “Member” and collectively, the “Members”) have appointed Sydling to act as the Fund’s commodity pool operator and trading manager. Sydling is registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator and a commodity trading advisor and is a member of the National Futures Association (“NFA”) effective August 10, 2011. Sydling, a wholly owned subsidiary of UBS Alternatives LLC, was formed on August 4, 2011. UBS Alternatives LLC is a wholly owned subsidiary of UBS Americas Inc.

In the normal course of business, the Fund may enter into contracts that contain a variety of representations that provide indemnification for certain liabilities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had any prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

Sydling, on behalf of the Fund, has entered into a selling agreement appointing UBS Financial Services Inc. ("UBS Financial Services") as selling agent to the Fund.

The Master Fund has entered into a customer agreement appointing UBS Securities LLC ("UBS Securities") as commodity broker to the Master Fund.

The Fund pays (or causes the Master Fund to pay on its behalf) an ongoing selling agent fee to UBS Financial Services equal to 3.5% per year of the adjusted month-end net assets of the Fund.

BNY Mellon Investment Servicing (US) Inc. serves as administrator of the Fund (the "Administrator").

Winton Capital Management Limited (the “Advisor”) serves as the trading advisor to the Fund and the Master Fund.

Sydling and each Member share in the profits and losses of the Fund in proportion to the amount of limited liability company interest owned by each except that no Member shall be liable for obligations of the Fund in excess of such member's capital contribution and profits, if any, net of distributions and losses, if any.

Management has evaluated relevant conditions and events, which are known and reasonably knowable, and has determined that there are no conditions and events that raise substantial doubt about the Fund's ability to continue as a going concern.

The accompanying financial statements and notes are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. These financial statements should be read in conjunction with the financial statements and notes included in the Fund’s Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (the “SEC”).

The preparation of financial statements and accompanying notes in conformity with U.S. GAAP requires Sydling to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.

Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.

The Master Fund’s Statements of Financial Condition and Condensed Schedules of Investments as of March 31, 2020 and December 31, 2019 and Statements of Operations and Changes in Member’s Capital for the three months ended March 31, 2020 and 2019 are presented below:

Sydling WNT Master Fund LLC

Statements of Financial Condition

Sydling WNT Master Fund LLC

Condensed Schedule of Investments

March 31, 2020

(Unaudited)

Percentages shown represent a percentage of member’s capital as of March 31, 2020.

Sydling WNT Master Fund LLC

Condensed Schedule of Investments

December 31, 2019

Percentages shown represent a percentage of member’s capital as of December 31, 2019.

Sydling WNT Master Fund LLC

Statements of Operations and Changes in Member’s Capital

(Unaudited)

Changes in the net asset value per Redeemable Unit for the three months ended March 31, 2020 and 2019 are as follows:

Financial Highlights of the Fund:

Total return and the ratios to average Member’s capital are calculated for investor’s capital taken as a whole. An individual investor’s capital may vary from these ratios and total return based on the timing of capital transactions.

Financial Highlights of the Master Fund:

Total return and the ratios to average Member’s capital are calculated for investor’s capital taken as a whole. An individual investor’s capital may vary from these ratios and total return based on the timing of capital transactions.

The Fund was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The Fund invests substantially all of its assets through a “master/feeder” structure. The Fund’s pro rata share of the results of the Master Fund’s trading activities is shown in the Fund’s Statements of Operations and Changes in Members’ Capital.

The customer agreement between the Master Fund and UBS Securities gives the Master Fund the legal right to net unrealized gains and losses on open futures contracts. Futures contracts are executed on exchanges and are typically liquidated by entering into offsetting contracts. The Master Fund nets, for financial reporting purposes, the unrealized gains and losses on open futures contracts on the Master Fund’s Statements of Financial Condition.

All of the commodity interests owned by the Master Fund are held for trading purposes. The average number of futures contracts traded for the three months ended March 31, 2020 and 2019, based on a monthly calculation, was 4,238 and 3,804, respectively.

The following tables indicate the gross fair values of derivative instruments of the Master Fund's futures contracts as separate assets and liabilities as of March 31, 2020 and December 31, 2019.

* These amounts are presented as Net unrealized appreciation or (depreciation) on open futures contracts on the Master Fund’s Statements of Financial Condition.

The following table indicates the trading gains and losses, by market sector, on the Master Fund's derivative instruments for the three months ended March 31, 2020 and 2019.

** These amounts are presented as “Net Realized and Change in Unrealized Gain/(Loss) from Derivative Instruments and Securities” on the Master Fund’s Statements of Operations and Changes in Member’s Capital.

Fund’s Investments. The Fund values its investment in the Master Fund at fair value and is represented by the Fund’s proportionate interest in the member’s capital of the Master Fund.

Fund’s and Master Fund’s Fair Value Measurements. FASB Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” (“ASC 820”), defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. Fair value is 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. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Valuation techniques, as specified by ASC 820, are used to measure fair value.

All financial instruments at fair value are categorized into one of three fair value hierarchy levels, based upon the lowest level input that is significant to the financial instrument’s fair value measurement in its entirety:

Level 1—Quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Valuation techniques for which all significant inputs are market observable, either directly or indirectly.

Level 3—Valuation techniques which include significant inputs that are not based on observable market data.

U.S. GAAP provides guidance in determining whether there has been a significant decrease in the volume and level of activity for an asset or liability when compared with normal market activity for such asset or liability (or similar assets or liabilities). U.S. GAAP also provides guidance on identifying circumstances that indicate a transaction with regards to such an asset or liability is not orderly. In its consideration, the Master Fund must consider inputs and valuation techniques used for each class of assets and liabilities. Judgment is used to determine the appropriate classes of assets and liabilities for which disclosures about fair value measurements are provided.

Fair value measurement disclosure for each class of assets and liabilities requires greater disaggregation than the Master Fund’s line items in the Statement of Financial Condition. The Master Fund determines the appropriate classes for those disclosures on the basis of the nature and risks of the assets and liabilities and their classification in the fair value hierarchy (i.e., Level 1, Level 2, and Level 3).

For assets and liabilities measured at fair value on a recurring basis during the period, the Master Fund provides quantitative disclosures about the fair value measurements separately for each class of assets and liabilities, as well as a reconciliation of beginning and ending balances of Level 3 assets and liabilities broken down by class.

The Master Fund considers prices for exchange-traded commodity futures, forwards and options contracts to be based on unadjusted quoted prices in active markets for identical assets (Level 1). The values of U.S. Treasury bills, non-exchange-traded forward, swap and certain options contracts for which market quotations are not readily available are priced by broker-dealers who derive fair values for those assets from observable inputs (Level 2) and for those contracts that are priced using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3). As of and for the periods ended March 31, 2020 and December 31, 2019, the Master Fund did not hold any derivative instruments for which market quotations are not readily available and which are priced by broker-dealers who derive fair values for these assets from observable inputs (Level 2) or that are priced at fair value using unobservable inputs through the application of management’s assumptions and internal valuation pricing models (Level 3).

The following is a summary of the Master Fund’s investments at fair value. The inputs or methodology used for valuing derivative instruments are not necessarily an indication of the risk associated with investing in those derivative instruments.

ASSET TABLE (Unaudited)

LIABILITIES TABLE (Unaudited)

ASSET TABLE

LIABILITIES TABLE

In the normal course of business, the Master Fund is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include futures, forwards and options on futures whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange, a swap execution facility ("SEF"), or over-the-counter (“OTC”). Exchange-traded instruments are standardized and include futures and certain forward and options contracts. OTC contracts are negotiated between contracting parties and include certain forward, option and swap contracts. Certain swap contracts may also be traded on a SEF. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer, or seller, of an option has unlimited risk. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded or SEF traded instruments because of the greater risk of default by the counterparty to an OTC contract. For the three months ended March 31, 2020 and 2019 the Master Fund traded futures contracts and U.S. Treasury bills.

The risk to the Members that have purchased interests in the Master Fund is limited to the amount of their capital contributions to the Master Fund and their share of the Master Fund’s assets and undistributed profits. This limited liability is a consequence of the organization of the Master Fund as a limited liability company under applicable law.

Market risk is the potential for changes in the value of the financial instruments traded by the Master Fund due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Master Fund is exposed to a market risk equal to the value of U.S. Treasury bills and futures contracts purchased and unlimited liability on such contracts sold short.

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Master Fund’s risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and not represented by the contract or notional amounts of the instruments. The Master Fund has credit risk and concentration risk because the sole counterparty or broker with respect to the Master Fund’s assets is UBS Securities or a UBS affiliate. Credit risk with respect to exchange-traded instruments is reduced to the extent that through UBS Securities, the Master Fund’s counterparty is an exchange or clearing organization. Futures contracts are conducted through regulated exchanges which have margin requirements, and are settled in cash on a daily basis, thereby minimizing credit risk. The Fund posted securities as collateral with a fair value of $6,392,710 in connection with margin requirements as of March 31, 2020.

The Fund’s and the Master Fund’s accounting policies are the same and are consistent with the accounting policies in the Fund’s financial statements on Form 10-K for the year ended December 31, 2019.

The Fund and the Master Fund have determined their status as investment companies and as such, follow the accounting and reporting requirements of Accounting Standards Codification (“ASC”) 946, Financial Services – Investment Companies.

Statement of Cash Flows. The Fund is not required to provide a Statement of Cash Flows in accordance with ASC 230 – Statement of Cash Flows.

Investment in Master Fund. The Fund records its investment in the Master Fund at fair value and is represented by the Fund’s proportionate interest in the capital of the Master Fund at March 31, 2020 and December 31, 2019. Valuation of securities held by the Master Fund is discussed in the Notes to the Master Fund’s financial statements on Form 10-K for the year ended December 31, 2019. The Fund records its pro rata share of the Master Fund’s income, expenses and realized and unrealized gains and losses. The performance of the Fund is directly attributable to the performance of the Master Fund. The Fund records its subscription and withdrawal of the capital account related to its investment in the Master Fund on the transaction date. The Master Fund will adjust the capital account of the Fund. Brokerage, clearing and transaction fees are incurred by the Master Fund and are reflected in the pro rata allocation received by the Fund from the Master Fund.

Subscriptions Received in Advance. Subscriptions received in advance represent amounts paid by the non-managing Members for a percentage ownership into the Fund which have not yet been added as Members’ capital as of March 31, 2020 and December 31, 2019. The amount paid is held as cash in the Fund’s escrow account and represents the majority of the cash on the Fund’s Statements of Financial Condition.

Redemptions Payable. Pursuant to ASC Topic 480, Distinguishing Liabilities from Equity, capital withdrawals effective March 31, 2020 and December 31, 2019 have been reflected as redemptions payable in the Statements of Financial Condition.

Income Taxes. The Fund is classified as a partnership for U.S. federal income tax purposes, and the Fund will not pay U.S. federal income tax. As a result, no income tax liability or expense has been recorded in the financial statements. Each member will be subject to taxation on its share of the Fund’s ordinary income, capital gains and losses.

U.S. GAAP provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements and requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Master Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority.

Tax positions with respect to tax at the Master Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. Sydling has analyzed the Master Fund’s tax positions for the open tax period and has concluded that no provision is required in the Master Fund’s financial statements. The Master Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in its Statements of Operations and Changes in Member’s Capital. For the periods ended March 31, 2020 and December 31, 2019, the Master Fund did not incur any interest or penalties.

The Master Fund earns interest income on 100% of the average daily equity in the Master Fund's brokerage account at a rate equal to the monthly average 30-day U.S. Treasury bill rate. Beginning June 1, 2019, the Master Fund placed the majority of its cash in U.S. Treasury bills. The Master Fund receives 100% of the interest earned on U.S. Treasury bills.

Sydling has evaluated the impact of all subsequent events on the Fund through the date of the filing. Subsequent to March 31, 2020, additional subscriptions were received from the non-managing Members totaling $450,000. Subsequent to March 31, 2020, redemptions of $6,012,276 will be paid to the non-managing Members. Sydling has determined that there were no additional subsequent events requiring recognition or disclosure in the financial statements.

On January 30, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak a global health emergency.   On March 11, 2020, the WHO announced that COVID-19 is a pandemic.  As a result of the coronavirus, many countries have required companies to limit or suspend business operations and have implemented travel restrictions. These actions have disrupted supply chains and curtailed operations of many companies around the world, including but not limited to companies in the tourism, hospitality, transportation, retail, entertainment, gaming and manufacturing sectors.  In addition, many U.S. states and municipalities have instituted restrictions or recommendations regarding interpersonal activities, such as encouraging social distancing, that have materially changed commercial activity in large parts of the U.S.  Market activity in many sectors and in many instruments is quite volatile.  The Fund’s returns may be adversely affected if these developments continue for an extended period of time.

Liquidity and Capital Resources

The Fund does not engage in sales of goods or services. Its only assets are its investment in the Master Fund, cash and receivables from the Master Fund. The Master Fund does not engage in the sale of goods or services. The Master Fund’s only assets are its equity in its trading accounts, consisting of cash, net unrealized appreciation/(depreciation) on open futures contracts, interest receivable and U.S. Treasury bills. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Fund, through its investment in the Master Fund. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the first quarter of 2020.

For the three months ended March 31, 2020 and 2019, the Master Fund’s average margin to equity ratio was 10.39% and 7.63%, respectively.

The Fund’s capital consists of the capital contributions of the Members as increased or decreased by income/(loss) from its investment in the Master Fund and by expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

For the three months ended March 31, 2020, the Fund’s capital decreased 17.31% from $99,746,345 to $82,484,513. This decrease was attributable to a net loss from operations of $11,569,245 coupled with redemptions of Redeemable Units resulting in an outflow of $6,269,017, which was partially offset by subscriptions for Redeemable Units totaling $576,430. Future redemptions from the Fund could impact the amount of funds available for investment in the Master Fund in subsequent periods.

The Master Fund’s capital consists of the capital contributions of the investors of the Master Fund as increased or decreased by realized and/or unrealized gains or losses on trading and by expenses, interest income, withdrawals of interest from the Master Fund and distributions of profits, if any.

For the three months ended March 31, 2020, the Master Fund’s capital decreased 17.31% from $99,746,345 to $82,484,513. This decrease was attributable to a loss from operations of $11,028,413 coupled with the withdrawal of interest in the Master Fund resulting in an outflow of $6,809,849, which was partially offset by subscriptions for interest in the Master Fund totaling $576,430. Future withdrawals from the Master Fund can impact the amount of funds available for investments in commodity contract positions in subsequent periods.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. GAAP requires Sydling to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Sydling believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Fund’s significant accounting policies are described in detail in Note 6. “Significant Accounting Policies.”

The Fund records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains/(losses) and change in net unrealized gains/(losses) in the Statements of Operations and Changes in Members’ Capital.

Results of Operations

During the Fund’s first quarter of 2020, the net asset value per Redeemable Unit decreased 11.78% from $1,100.03 to $970.42. The Fund, for its own account, through its investment in the Master Fund, experienced a net trading loss before brokerage fees and related fees in the first quarter of 2020 of $10,536,272. Losses were primarily attributable to the Master Fund’s trading of commodity futures in indices, currencies, energy, softs and non-U.S. interest rates and were partially offset by gains in U.S. interest rates, metals, livestock and grains.

The Fund was positioned long several global equity Indices coming into the quarter. These included S&P 500, Dow Jones Industrial Average, CAC 40, DAX and major Asian indices. In January 2020, as COVID-19 started to threaten global growth, global equities started to fall. The Fund continued to be long global equity indices in January and February although risk gradually declined. In March, the Fund was initially long global equity indices but reversed to short positions in Asian, European and U.S. indices. These long positions in global equity indices during most of the quarter contributed to losses as global equities fell sharply. The Fund was short Russell 2000 in the quarter which generated gains to offset some of the losses.

In currencies, U.S. dollar performance was mixed against notable currencies during the quarter. As fears of COVID-19 spreading into the U.S. rose in February 2020, the U.S. dollar moved meaningfully against several developed, as well as, emerging market currencies. In mid-March 2020, as Federal Reserve announced that it is lowering interest rates to near zero in response to deteriorating economy, the U.S. dollar rebounded. The Fund experienced most of the losses in currencies in March 2020. Long positions in Mexican Peso and British Pound were the main drivers of losses. The Fund was short Australian Dollar which was profitable and offset some of the losses.

Interest Rates broadly generated gains during the quarter. Within the asset class, U.S. interest rate exposures were profitable while non-U.S. rates detracted. Main drivers of gains in U.S. interest rates were long exposures in U.S. Ultra bond, 30 year and 10 year treasuries. As U.S. treasury yields across the curve broadly declined during the course of the quarter, these exposures generated gains. The Fund was short U.S. 2 year and 5 year treasuries that generated losses as their yields fell. Overseas, the Fund had losses driven mostly from long Euribor exposure.

Grains, including softs, generated losses in the quarter. Losses were driven by long coffee and short sugar exposures as their trends reversed in the quarter. Cotton and corn prices declined in the quarter and the generated gains on the Fund's short positions. Livestock was a contributor in the quarter. The Fund was short live cattle and lean hogs. As COVID-19 spread in the U.S. triggering lockdowns, demand for meats fell as consumers stayed away from restaurants. As a result, livestock prices declined.

Metals generated gains in the quarter. Several base metal prices declined as global economies ground to a near halt due to COVID-19. The Fund was short aluminum and zinc that generated gains. It was long copper that generated modest losses. Within precious metals the Fund was long gold that generated gains but had small losses from its short silver positions.

Energy was a detractor in the quarter. Coming into the quarter, the Fund was generally positioned long Brent crude and unleaded RBOB. As global economies slowed, demand for energy started to decline rapidly and the Fund experienced losses from those positions. During the quarter, the Fund reversed those positions and ultimately shorted them and recovered some of the losses. At the same time, the Fund was short natural gas and WTI which generated gains as their prices declined.

During the Fund’s first quarter of 2019, the net asset value per Redeemable Unit decreased 0.40% from $1,126.62 to $1,122.14. The Fund, for its own account, through its investment in the Master Fund, experienced a net trading gain before brokerage fees and related fees in the first quarter of 2019 of $134,007. Gains were primarily attributable to the Master Fund’s trading of commodity futures in non-U.S. interest rates, grains, indices and softs and were partially offset by losses in energy, currencies, metals, livestock, U.S. interest rates and lumber.

Crude and petroleum product prices sharply rose as the U.S. Energy Information Administration reported a decline in shale output in March. The number of oil rigs in the U.S. continued to decline for the sixth week in a row. Apart from the decline in U.S. production, there were outages in Venezuela, Iran and coordinated cuts from the Organization of the Petroleum Exporting Countries ("OPEC") nations and Russia. The Fund had come into the new year with high conviction short positions in crude and petroleum markets and rotated them to longs mostly by March. U.S. natural gas, in which the fund held longs, drifted lower as gas injection to storage was higher than the historical average.

European and Japanese government bonds futures ranked among the top contributors this quarter. In fact, most developed market bonds were positive, which can be attributed to the U.S. Federal Reserve's (the "Fed") plan to put rate hikes 'on hold' this year. The Fed also pledged to slow down its balance sheet reduction and stop it completely by September. The European Central Bank announced a new series of easing to preserve bank lending conditions, while maintaining its benchmark rate. Other major central banks were also dovish in their respective policy meetings in March, which supported local bond and interest rate futures.

Longs in the S&P 500 were the best performers for the quarter. U.S. equities essentially emerged from a difficult fourth quarter of 2018, as a dovish turn in the Fed's direction and increased hopes of a U.S.-China trade deal provided strength. Having come into this period with few long positions, the Fund more than doubled its exposures in the equity index sector.

Shorts in corn, coffee, wheat and soybeans ranked among the top contributors as good weather, a strong dollar and high levels of inventories weighed on prices. Trading in sugar and cotton, on the other hand, generated some losses.

Palladium, Nickel and Zinc were among the largest movers within metals sector during the quarter and those were among the top contributors for the fund. The rally in Palladium was spurred by shortages of the metal used in vehicle pollution-control devices as car manufacturers sought to meet stricter emissions standards.

Commodity futures markets are highly volatile. Broad and rapid price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility for profit or loss. The profitability of the Fund (and the Master Fund) depends on the existence of major price trends and the ability of the Advisor to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Fund (and the Master Fund) expects to increase capital through operations.

Interest income on 100% of the average daily equity maintained in cash in the Master Fund’s brokerage account with UBS Securities was earned at a 30-day U.S. Treasury bill rate. Beginning June 1, 2019, the Master Fund put the majority of its cash in U.S. Treasury bills. The Master Fund receives 100% of the interest earned on U.S. Treasury bills.

Interest income for the three months ended March 31, 2020 decreased by $556,443, as compared to the corresponding period in 2019. The decrease in interest income was primarily due to lower assets under management during the three months ended March 31, 2020 as compared to the corresponding period in 2019.

Clearing and transaction fees are based on the number of round turns made in the Master Fund's account. Clearing and transaction fees of the Master Fund for the three months ended March 31, 2020 and 2019 were $33,801 and $34,004. The decrease in clearing and transaction fees for the three months ended March 31, 2020 as compared to the corresponding period in 2019 is a result of a decrease in the number of futures contracts traded in the three months ended March 31, 2020 as compared to the corresponding period in 2019.

Ongoing selling agent fees are calculated as a percentage of the Fund's capital account balance at the Master Fund as of the end of each month and are affected by trading performance, subscriptions and redemptions.

Ongoing selling agent fees of the Fund for the three months ended March 31, 2020 and 2019 were $813,554 and $1,321,026, respectively. The decrease in selling agent fees in the three months ended March 31, 2020 as compared to the corresponding period in 2019 is due to a decrease in the Fund's average capital account balance at the Master Fund.

Advisory fees are calculated as a percentage of the Fund’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions.

Advisory fees of the Fund for the three months ended March 31, 2020 and 2019 were $347,552 and $564,405, respectively. The calculation of advisory fees for the three months ended March 31, 2020 and 2019 was based on a monthly average net asset value of $92,680,642 and $150,507,929, respectively. The decrease in advisory fees for the three months ended March 31, 2020 as compared to the corresponding period in 2019 is due to a decrease in the average net assets.

Administrative fees are paid to Sydling for administering the business and affairs of the Fund. Sydling pays a portion of the administrative fee to the Administrator. These fees are calculated as a percentage of the Fund’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions.

Administrative fees of the Fund for the three months ended March 31, 2020 and 2019 were $115,851 and $188,135, respectively. The calculation of administrative fees for the three months ended March 31, 2020 and 2019 was based on a monthly average net asset value of $92,680,642 and $150,507,929, respectively. The decrease in administrative fees for the three months ended March 31, 2020 as compared to the corresponding period in 2019 is due to a decrease in the average net assets.

Incentive fees to the Advisor are based on the new trading profits generated by the Advisor, paid at the end of each quarter, as defined in the Trading Advisory Agreement among the Master Fund, the Fund, Sydling and the Advisor. There were no incentive fees earned during the three months ended March 31, 2020 or 2019.

In allocating substantially all of the assets of the Fund to the Master Fund, Sydling considers the Advisor’s past performance, trading style, volatility of markets traded and fee requirements. Sydling may modify or terminate the allocation of assets to the Advisor at any time.

All of the Fund’s assets are subject to the risk of trading loss through its investment in the Master Fund.

The Master Fund is a speculative commodity pool. The market sensitive instruments held by the Master Fund are acquired for speculative trading purposes, and all or substantially all of the Fund’s capital is subject to the risk of trading loss through its investment in the Master Fund. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Master Fund’s and the Fund’s main line of business.

The risk to the Members that have purchased Redeemable Units is limited to the amount of their capital contributions to the Fund and their share of Fund assets and undistributed profits. This limited liability is a consequence of the organization of the Fund as a limited liability company under Delaware law.

Market movements result in frequent changes in the fair value of the Master Fund’s open positions and, consequently, in its earnings and cash balances. The Master Fund’s and the Fund’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Master Fund’s open contracts and the liquidity of the markets in which the Master Fund trades.

The Master Fund rapidly acquires and liquidates both long and short positions in a range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Master Fund’s past performance is not necessarily indicative of its future results.

Quantifying the Fund’s Trading Value at Risk

The following quantitative disclosures regarding the Master Fund’s and the Fund’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor except for statements of historical fact (such as the terms of particular contracts and the number of market risk sensitive instruments held during or at the end of the reporting period).

“Value at Risk” is a measure of the maximum amount which the Master Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Master Fund’s speculative trading and the recurrence in the markets traded by the Master Fund of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Master Fund’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Master Fund’s losses in any market sector will be limited to Value at Risk or by the Master Fund’s attempts to manage its market risk.

Exchange maintenance margin requirements have been used by the Master Fund as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day interval. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to Value at Risk.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. The following tables indicate the trading Value at Risk associated with the Master Fund’s open positions by market category as of March 31, 2020 and December 31, 2019, and the highest, lowest and average value during the three months ended March 31, 2020 and the twelve months ended December 31, 2019. All open position trading risk exposures of the Master Fund have been included in calculating the figures set forth below. There has been no material change in the trading Value at Risk information previously disclosed in the Fund’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

As of March 31, 2020, the Master Fund’s total capitalization was $82,484,513, and the Fund owned 100% of the Master Fund. The Fund invests substantially all of its assets in the Master Fund. The Master Fund’s Value at Risk as of March 31, 2020 was as follows:

*Average daily Value at Risk.

** Due to rounding

As of December 31, 2019, the Master Fund’s total capitalization was $99,746,345 and the Fund owned 100% of the Master Fund. The Fund invests substantially all of its assets in the Master Fund. The Master Fund’s Value at Risk as of December 31, 2019 was as follows:

December 31, 2019

(unaudited)

*Average daily Value at Risk.

** Due to rounding

The Fund’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Fund on the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Fund in the reports it files is accumulated and communicated to Sydling, including the President and Chief Financial Officer (“CFO”) of Sydling, to allow for timely decisions regarding required disclosure and appropriate SEC filings.

Sydling is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Fund’s external disclosures.

Sydling’s President and CFO have evaluated the effectiveness of the Fund’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2020 and, based on that evaluation, Sydling’s President and CFO have concluded that, at that date, the Fund’s disclosure controls and procedures were effective.

The Fund’s internal control over financial reporting is a process under the supervision of Sydling’s President and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. These controls include policies and procedures that:

There were no changes in the Fund’s internal control over financial reporting process during the fiscal quarter ended March 31, 2020 that materially affected, or are reasonably likely to materially affect, the Fund’s internal control over financial reporting.

PART II. OTHER INFORMATION

There are no material changes to the discussion set forth under Item 3. “Legal Proceedings” in the Fund’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. There are no material legal proceedings pending against the Fund and Sydling.

There have been no material changes to the risk factors set forth under Part 1, Item 1A. “Risk Factors” in the Fund’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

For the three months ended March 31, 2020, there were additional subscriptions of 528.887 Redeemable Units totaling $576,430. The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act and Section 506 of Regulation D promulgated thereunder. These Redeemable Units were purchased by accredited investors as defined in Regulation D. In determining the applicability of the exemption, Sydling relied on the fact that the Redeemable Units were purchased by accredited investors in a private offering.

Proceeds of net offering were used for the trading of commodity interests, including futures and option contracts.

The following chart sets forth the purchases of Redeemable Units by the Fund.

* Generally, Members are permitted to redeem their Redeemable Units as of the end of each month on five business days’ notice to Sydling. Under certain circumstances, Sydling can compel redemption, although to date, it has not exercised this right. Purchases of Redeemable Units by the Fund reflected in the chart above were made in the ordinary course of the Fund’s business in connection with effecting redemptions for Members.

** Redemptions of Redeemable Units are effected as of the end of each month at the net asset value per Redeemable Unit as of that day.

SIGNATURES

Pursuant to the requirements 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.

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing		Date		Other Filings
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		12/31/19		10-K
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