Item 1. Business.
General development of business
The Campbell Fund Trust (the "Registrant" or the “Trust”) is a business trust organized on January 2, 1996 under the Delaware Business Trust Act, which was replaced by the Delaware Statutory Trust Act as of September 1, 2002. The Trust is a successor to the Campbell Fund Limited Partnership (formerly known as the Commodity Trend Fund) and began trading operations in January 1972. The Trust currently trades in the U.S. and international futures and forward markets under the sole direction of Campbell & Company, Inc. (“Campbell & Company” or the “managing operator”). Specifically, the Trust trades in a diverse array of global assets, including global interest rates, stock indices, currencies and commodities. The Trust is an actively managed account with speculative trading profits as its objective.
As a registrant with the Securities and Exchange Commission (the "SEC"), the Trust is subject to the regulatory requirements under the Securities Act of 1934. As a commodity investment pool, the Trust is subject to the provisions of the Commodity Exchange Act, regulations of the Commodity Futures Trading Commission (the "CFTC"), an agency of the United States government which regulates most aspects of the commodity futures industry; rules of the National Futures Association (the "NFA"), an industry self-regulatory organization; and the requirements of the various commodity exchanges where the Trust executes transactions. Additionally, the Trust is subject to the requirements of futures commission merchants and interbank market makers through which the Trust trades.
U.S. Bank National Association, a national banking corporation, (the “Trustee”), is the sole trustee of the Trust. The Trustee is unaffiliated with the managing operator and the Trust’s selling agents, and its duties and liabilities with respect to the offering of the Units of Beneficial Interest (the “Units”) are limited to its express obligations under the Declaration of Trust and Trust Agreement.
Under the Amended and Restated Declaration of Trust and Trust Agreement, the Trustee has delegated the exclusive management of all aspects of the business and administration of the Trust to Campbell & Company, a Maryland corporation organized in April 1978 as a successor to a partnership originally organized in January 1974. Campbell & Company is registered with the CFTC as a commodity pool operator and a commodity trading advisor, and is a member of the NFA in such capacities. In addition to managing all aspects of business and administration, Campbell & Company makes all trading decisions for the Trust. Campbell & Company uses a systematic trading approach combined with quantitative portfolio management analysis and seeks to identify and profit from price movements in the futures and forward markets. Multiple trading models are utilized across most markets traded. Each model analyzes market movements and internal market and price configurations in order to generate signals to be executed through a variety of execution platforms.
The Trust’s funds are traded pursuant to Campbell & Company’s Global Diversified Large Portfolio. Prior to June 1997, Campbell & Company had one Global Diversified Portfolio. In June 1997, the Global Diversified Portfolio was split into two separate portfolios, the Global Diversified Large Portfolio (which generally is used for accounts greater than $10 million) and the Global Diversified Small Portfolio (which is generally used for accounts less than $10 million). From inception through June 1997, the Trust’s account was traded pursuant to Campbell & Company’s Global Diversified Portfolio. Between June 1997 and August 1999, the Trust’s account was traded pursuant to the Global Diversified Small Portfolio, and since August 1, 1999, has been traded pursuant to the Global Diversified Large Portfolio.
The Registrant will be terminated and dissolved promptly thereafter upon the happening of the earlier of: (a) the expiration of the Trust’s stated term on December 3l, 2025; (b) an election to terminate the Trust at any time by Unitholders owning more than 50% of the Units then outstanding; (c) the trading in commodity futures is terminated, suspended or for any reason becomes impossible or economically unfeasible in the sole judgment of the managing operator; or (d) the date upon which the Trust is dissolved by operation of law or judicial decree.
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Effective August 31, 2008, the Trust began offering Series A, Series B, and Series W Units. The units in the Trust prior to that date became Series B Units. Series B Units are only available for additional investment by existing holders of Series B Units.
As of December 31, 2011, the aggregate capitalization of the Trust was $374,632,413 with Series A, Series B and Series W comprising $140,986,636, $215,781,891and $17,863,886, respectively, of the total. The Net Asset Value per Unit was $2,461.73 for Series A, $2,513.99 for Series B, and $2,560.99 for Series W.
Financial information about segments
The Trust’s business constitutes only one segment for financial reporting purposes, i.e., a speculative “commodity pool.” The Trust does not engage in the sale of goods or services.
Narrative description of business
The purpose of the Trust is to engage in the speculative trading, buying, selling, or otherwise acquiring, holding or disposing of commodities, including futures contracts, forward contracts and any other rights pertaining thereto, and for such other purposes as may be incidental or related thereto. The Fund has no employees.
The Trust trades speculatively in the U.S. and international futures and forward markets. Specifically, the Trust trades in a diverse array of global assets, including global interest rates, stock indices, currencies and commodities. The Trust has entered into an advisory agreement with Campbell & Company whereby it trades the Trust’s assets pursuant to Campbell & Company’s Global Diversified Large Portfolio. The Global Diversified Large Portfolio seeks exposure to these markets by following signals generated by a series of systematic computer models. The Global Diversified Large Portfolio employs a broad spectrum of models including traditional and factor-based trend following models, as well as a number of macroeconomic-based models. The average sector allocation for each sector as of the previous six month ends, through December 31, 2011, is as follows: 31% to interest rates, 28% to commodities, 28% to currencies, and 13% to stock indices. Sector allocation for each sector is calculated using the dollar value of margin posted to support trading in all sectors.
Use of Proceeds and Cash Management Income
Subscription Proceeds and Available Assets
The entire offering proceeds, without deductions, will be credited to the Trust‘s bank, brokerage and/or cash management accounts to engage in trading activities and as reserves for that trading. The Trust meets its margin requirements by depositing U.S. government securities with the futures broker and the over-the-counter counterparty. In this way, substantially all (i.e., 95% or more) of the Trust‘s assets, whether used as margin for trading purposes or as reserves for such trading, may be invested in U.S. government securities and time deposits with U.S. banks. Investors should note that maintenance of the Trust‘s assets in U.S. government securities and banks does not reduce the risk of loss from trading futures and forward contracts. The Trust receives all interest earned on its assets. No other person shall receive any interest or other economic benefits from the deposit of Trust assets.
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Approximately 10% to 30% of the Trust‘s assets normally are committed as required margin for futures contracts and held by the futures broker, although the amount committed may vary significantly. Such assets are maintained in the form of cash or U.S. Treasury bills in segregated accounts with the futures broker pursuant to the Commodity Exchange Act and regulations thereunder. Approximately 10% to 30% of the Trust‘s assets are deposited with the over-the-counter counterparty in order to initiate and maintain currency forward contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is registered as a futures commission merchant. These assets are held either in cash, U.S. government securities or short-term time deposits with U.S. regulated bank affiliates of the over-the-counter counterparty. The remaining 40% to 80% of the Trust‘s assets will be invested in cash, cash equivalents or other liquid positions in its cash management program over and above that needed to post as collateral for trading.
The Trust‘s assets are not and will not be, directly or indirectly, commingled with the property of any other person in violation of law or invested with or loaned to Campbell & Company or any affiliated entities.
In the event net asset value per unit as of the end of any business day declines by 50% or more from either the prior year-end or the prior month-end unit value, Campbell & Company will suspend trading activities, notify all unitholders of the relevant facts within seven business days and declare a special redemption period.
Cash Manager and Custodian
The Trust appointed Horizon Cash Management LLC as cash manager (the “Cash Manager”) under the Investment Advisory Agreement dated December 22, 2010 to manage and control the liquid assets of the Trust. The Cash Manager is registered as an investment adviser with the SEC of the United States under the Investment Advisers Act of 1940. The Cash Manager specializes in investments which are predominately short-term in maturity and high grade, high quality in nature with particular emphasis on U.S. Treasury securities and U.S. Government Agencies’ issues.
The Trust opened a custodial account at The Northern Trust Company (the “Custodian”), and has granted the Cash Manager a limited power of attorney over such accounts. Such power of attorney gives the Cash Manager authority to make certain investments on behalf of the Trust provided such investments are consistent with the investment guidelines created by the managing operator to the Trust. Such investments include, but are not limited to, U.S. Treasury securities, securities issued by U.S. Government Agencies, high quality money-market securities and repurchase agreements. All securities purchased by the Cash Manager on behalf of the Trust or other liquid funds of the Trust will be held in its custody account at the custodian. The Cash Manager will have no beneficial or other interest in the securities and cash in such custody account.