MAN AHL DIVERSIFIED I LP - Quarter Report: 2023 March (Form 10-Q)

 

 

 

 

 

 

 

 

 

 

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

 

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 to such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a 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 of the Exchange Act.

 

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

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

 

 

 

Financial Statements

 

 

 

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The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Diversified I L.P.’s (a Delaware Limited Partnership) (the “Partnership”) financial condition at March 31, 2023, and the results of its operations for the three month periods ended March 31, 2023 and 2022. These financial statements present the results of interim periods. These financial statements should be read in conjunction with the audited financial statements and notes included in the Partnership’s annual report on Form filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2022. The December 31, 2022 information has been derived from the audited financial statements as of December 31, 2022.

Diversified I L.P. (a Delaware Limited Partnership) (the “Partnership”) was organized in September 1997 under the Delaware Revised Uniform Limited Partnership Act, and commenced operations on April 3, 1998, for the purpose of engaging in the speculative trading of futures and forward contracts and related instruments. The Partnership is a “feeder” fund in a “master-feeder” structure, whereby the Partnership invests substantially all of its assets in Diversified Trading Company L.P. (the “Trading Company”). Man Investments (USA) Corp. (the “General Partner”), a Delaware corporation, serves as the Partnership’s General Partner. The General Partner is a subsidiary of Man Group plc, a Jersey public limited company that is listed on the London Stock Exchange. The General Partner oversees the operations and management of the Partnership.

AHL Partners LLP (the “Advisor”), a limited liability partnership established in England and Wales, acts as trading advisor to the Partnership. The Advisor is an affiliate of the General Partner and a subsidiary of Man Group plc. The Advisor is registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity trading adviser and commodity pool operator and is a member of the National Futures Association (“NFA”) in such capacities, in addition to registration with the Financial Conduct Authority in the United Kingdom.

Man Investments Limited, a United Kingdom private limited company that is part of Man Group plc, is the managing member of the Advisor, and Man Investments Holdings Inc., a Delaware corporation that is part of Man Group plc, is the sole shareholder of the General Partner.

The Partnership’s units are distributed through the Partnership or other selling agents, including Man Investments Inc. (“MII”), an affiliate of the Advisor and General Partner. MII is a registered broker-dealer and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

The Partnership filed a registration statement under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which became effective in March 2008. The Partnership’s units are not, however, registered for sale through a public offering, and the General Partner does not intend to cause them to be so registered.

The Partnership offers two classes of units of limited partnership interests; Class A units are generally offered and Class B units are offered to employee benefit plans, IRAs and other retirement plans and accounts. The two classes of units are identical to each other except that Class B units may be purchased, transferred, held and redeemed in a minimum amount of $10,000. Within Class A and Class B, units are issued in two separate series. They are Class A Series 1, Class A Series 2, Class B Series 1 and Class B Series 2. Except as described in Note 2 below in respect of fees, the series of units are identical.

The Bank of New York Mellon serves as the administrator to the Partnership.

The Partnership prepares its financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The General Partner has evaluated the structure, objectives and activities of the Partnership and the Trading Company and determined that the Partnership and the Trading Company meet the characteristics of an investment company. As such, these financial statements have applied the guidance as set forth in

 

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Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.

The preparation of financial statements in conformity with U.S. GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those .

The Partnership’s investment in the Trading Company is valued at the fair value of the Partnership’s proportionate interest in the partners’ capital of the Trading Company. The fair value of the Partnership’s investment in the Trading Company approximates the carrying amounts presented in the statements of financial condition. The Partnership records its proportionate share of the Trading Company’s income, expenses, and realized and unrealized gains and losses. Investment transactions are recorded on a trade-date basis. In addition, the Partnership accrues its own expenses. The performance of the Partnership is directly affected by the performance of the Trading Company. Attached are the financial statements of the Trading Company, including the condensed schedules of investments, which are an integral part of these financial statements. Valuation of investments held by the Trading Company is discussed in the Trading Company’s notes to financial statements.

As at March 31, 2023 and December 31, 2022, the Partnership owned 3,528.96 and 3,571.81 units, respectively, of the Trading Company. The Partnership’s aggregate ownership percentage of the Trading Company at March 31, 2023 and December 31, 2022 was 50.01% and 51.38%, respectively.

The Partnership is able to redeem its investment from the Trading Company on a monthly basis. As of March 31, 2023 and December 31, 2022, the Partnership could redeem its investment without restriction at the net asset value of the Trading Company.

The amounts Due from Diversified Trading Company L.P. represent redemption requests made by the Partnership relating to its investment in the Trading Company. The requests have been received and recorded by the Trading Company but the proceeds have not been received by the Partnership. These amounts are ultimately due to limited partners of the as redemptions payable.

The Advisor earns a monthly management fee in an amount equal to 0.1667% (2% annually) of the Partnership’s Net Asset Value, as defined in the Limited Partnership Agreement (the “Agreement”). In addition, the General Partner earns a monthly general partner fee in an amount equal to 0.0833% (1% annually) of the Net Asset Value of Class A Series 1 and Class B Series 1 units. The general partner fee is included in management fees in the statements of operations.

The Advisor also earns a monthly incentive fee equal to 20% of any Net New Appreciation, as defined in the Agreement, achieved by the Partnership, with new appreciation generally tracked on a basis. The incentive fee is retained by the Advisor even if subsequent losses are incurred; however, no subsequent incentive fees will be paid to the Advisor until any such trading losses are recouped by the Partnership. Because the incentive fees are paid on the Net New Appreciation of the Partnership as a whole, it is possible that certain Limited Partners may experience increases in the Net Asset Value of their units while paying no incentive fees on such increases in the Net Asset Value of such units as a result of the timing of the purchase of units. During the three month periods ended March 31, 2023 and 2022, no incentive fees were earned by the Advisor.

The Partnership pays a monthly servicing fee to MII in an amount equal to 0.0833% (1.00% annually) of the Net Asset Value of Class A Series 1 and Class B Series 1 units and to 0.0625% (0.75% annually) of the Net Asset Value of Class A Series 2 and Class B Series 2 . MII serves as the placement agent for all classes of units of the Partnership.

Income and expense are recognized on an accrual basis in the period in which they are incurred.

— The Partnership’s operating activities involve trading, indirectly through its investment in the Trading Company, in derivative contracts that involve varying degrees of market and credit risk. With respect to the Partnership’s investment in the Trading Company, the Partnership has limited liability, and, therefore, its maximum exposure to either market or credit loss is limited to the carrying value of its in the Trading Company, as set forth in the statements of financial condition.

 

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Net income (loss) per unit of Class A Series 1, Class A Series 2, Class B Series 1, or Class B Series 2 partnership interest is equal to the net income (loss) per class divided by the weighted average number of units outstanding per class. Weighted average number of units outstanding is the average of the units outstanding for each day during the period ended March 31, 2023 and 2022.

The Partnership is not subject to federal, state, or local income tax. Such taxes are the liabilities of the individual partners and the amounts thereof will vary depending on the individual situation of each partner. Accordingly, there is no provision for income taxes in the accompanying financial statements. ASC 740, defines how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements and is applied to all open tax years. The Partnership has evaluated tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are to be sustained by the applicable tax authority. Based on this analysis of all tax jurisdictions and all open tax years subject to examination, there were no material tax positions not deemed to meet a Therefore, no tax expense, including interest or penalties, was recorded for the three month periods ended March 31, 2023 and 2022. To the extent that the Partnership records interest and penalties, they would be included in interest expense and other expenses, respectively, on the statements of operations. The following is the major tax jurisdiction for the Trading Company and the earliest tax year subject to examination: United States – 2019.

— Other income included in the statements of operations includes the proceeds received by the Trading Company relating to a class action award.

The General Partner and each limited partner share in the profits and losses of the Partnership in proportion to the amount of capital held by each partner. However, no limited partner is liable for obligations of the Partnership in excess of its capital subscription and net profits or losses, if any.

The Partnership’s units are continuously offered as of the first business day of each month at Net Asset Value, as defined in the Agreement. Limited partners may redeem any or all of their units as of the end of any month at Net Asset Value per unit on 10 days prior written notice to the General Partner. The Partnership will be dissolved on December 31, 2037, or upon the occurrence of certain events, as specified in the Agreement.

The General Partner is required to make and maintain a general partner investment in the Partnership in an aggregate amount equal to the lesser of 1.01% of the net aggregate capital subscriptions of all partners, or $500,000.

Distributions (other than redemptions of units), if any, are made on a basis at the sole discretion of the General Partner. No distributions were declared or paid during the three month periods ended March 31, 2023 and 2022.

Under the terms of the Agreement, the Partnership is liable for all costs associated with executing its business strategy. These costs include, but are not limited to, expenses associated with operations of the Partnership, such as management and incentive fees and other operating expenses, such as legal, audit, and tax return preparation fees.

The Partnership enters into administrative and other professional service contracts that contain a variety of indemnifications. The Partnership’s maximum exposure under these arrangements is not known; however, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

 

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		For the three months ended March 31, 2023												For the three months ended March 31, 2022
		Class A Series 1				Class A Series 2				Class B Series 1				Class A Series 1				Class A Series 2				Class B Series 1
Per unit operating performance:
Beginning net asset value		$	5,046.95			$	5,996.48			$	5,046.72			$	4,402.83			$	5,166.02			$	4,402.64
Income (loss) from investment operations:
Net investment income (loss)			(8.01	)			9.12				(8.03	)			(56.08	)			(48.86	)			(56.11	)
Net realized and unrealized gains (losses) on trading activities			(274.37	)			(326.85	)			(274.32	)			598.03				702.96				598.03
Total income (loss) from investment operations			(282.38	)			(317.73	)			(282.35	)			541.95				654.10				541.92
Ending net asset value		$	4,764.57			$	5,678.75			$	4,764.37			$	4,944.78			$	5,820.12			$	4,944.56
Ratios to average partners’ capital 1 :
Expenses other than incentive fees			4.95	%			3.70	%			4.96	%			5.11	%			3.84	%			5.11	%
Total expenses			4.95	%			3.70	%			4.96	%			5.11	%			3.84	%			5.11	%
Net investment income (loss)			(0.64	)%			0.61	%			(0.64	)%			(4.91	)%			(3.64	)%			(4.92	)%
Total return 2 :
Total return before incentive fees			(5.60	)%			(5.30	)%			(5.59	)%			12.31	%			12.66	%			12.31	%
Total return after incentive fees			(5.60	)%			(5.30	)%			(5.59	)%			12.31	%			12.66	%			12.31	%

1	Includes amounts allocated from the Trading Company. Ratios have been annualized.

2	Total return is for the period indicated and has not been annualized.

The General Partner has evaluated the impact of subsequent events on the Partnership through May 1, 2023, the date the financial statements were issued, and noted no subsequent events that require adjustment to or disclosure in these financial statements, except as noted above.

 

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DIVERSIFIED TRADING COMPANY L.P.

(A Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Man-AHL

Man-AHL

10-K

1. ORGANIZATION OF THE TRADING COMPANY

Man-AHL

Man-AHL

Man-AHL

2. SIGNIFICANT ACCOUNTING POLICIES

nanci

estimates

due

included

2022