ITEM 1A.
RISK FACTORS
Grant Park’s performance, trading activities, operating results, financial condition and net asset value could be negatively impacted by a number of risks and uncertainties, including, but not limited to those outlined below, which the general partner considers the most significant risks that may affect the value of an investment in Grant Park. Investors should also refer to the other information included in this Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Grant Park’s consolidated financial statements and related notes for the year ended December 31, 2025, as well as information incorporated by reference herein, for further information regarding Grant Park.
Summary Risk Factors
An investment in Grant Park is highly speculative and involves a high degree of risk. Some of the risks investors may face as an investor in Grant Park are summarized below. A more comprehensive discussion of those risks which we consider the most significant risks that may affect the value of an investment in Grant Park follows this summary.
Prices of commodity interest contracts are highly volatile and subject to rapid and substantial fluctuations. Investors could therefore lose all or substantially all of their investment if Grant Park’s trading positions are or become unprofitable. Movements in price are often the result of factors outside of Grant Park’s, the trading advisors’ or reference traders’ control and may not be anticipated by Grant Park’s trading advisors.
Because Grant Park’s trading positions are typically secured by the deposit of margin funds that represent only a small percentage of a contract’s face value, such positions are effectively highly leveraged. As a result of this leverage, relatively small movements in the price of a contract can cause significant losses.
Grant Park’s use of multiple third-party trading advisors and reference traders may result in Grant Park taking offsetting positions on the same commodity interest contract, thereby possibly incurring additional expenses but without any net change in Grant Park’s holdings. In addition, trading programs used by each trading advisor and reference trader may bear some similarities to trading programs used by other trading
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advisors and reference traders, which could potentially reduce or negate the intended benefits of having multiple trading advisors and reference traders.
Past performance of Grant Park is not necessarily indicative of future results, and investors should not rely on the performance record to date of Grant Park and/or the trading advisors and reference traders in deciding whether to invest in Grant Park. The general partner increased Grant Park’s fee and expense structure in certain respects to accommodate the previous public offering of units, and such increase adversely impacts Grant Park’s net performance.
The regulation of swaps and certain other derivative instruments has changed significantly since Grant Park began operating, which changes may increase Grant Park’s operational or compliance costs or result in lost profit opportunities for Grant Park.
A substantial portion of Grant Park’s trades takes place on markets and exchanges outside the United States. Some non-U.S. markets present additional risks because they are not subject to the same degree of regulation as their U.S. counterparts. In some of these non-U.S. markets, the performance on a contract is the responsibility of the counterparty and the contract is not backed by or novated to a centralized clearing house, which exposes Grant Park to credit risk in the form of counterparty default or payment risk. Trading in non-U.S. markets also leaves Grant Park susceptible to swings in the value of the local currency against the U.S. dollar.
Grant Park pays substantial fees and expenses that are incurred regardless of whether Grant Park is profitable. In addition, Grant Park pays each of its trading advisors an incentive fee that is based only on that trading advisor’s trading profits, which means that Grant Park could pay incentive fees to one or more trading advisors even if Grant Park as a whole is not profitable. Incentive fees embedded in swap transactions are not directly paid by Grant Park but impact swap valuation.
Investors have no rights to participate in the management or trading decisions of Grant Park and must rely on the judgment of the general partner to manage Grant Park and on the trading decisions and activity by trading advisors or reference traders selected by the general partner.
The structure and operation of Grant Park involves several conflicts of interest. For example, DCM Brokers, LLC, an affiliate of Grant Park’s general partner, serves as Grant Park’s lead selling agent. Also, certain principals of Grant Park’s general partner own a minority interest in EMC Capital Advisors, LLC, one of Grant Park’s trading advisors.
The commodity interest markets are the subject of continuing regulatory scrutiny, from both a national and international perspective, and implementation of certain proposed laws or regulations could adversely impact Grant Park’s ability to trade speculatively and implement its trading strategies.
Market Risks
The commodity interest markets in which Grant Park trades are highly volatile, which could cause substantial losses to Grant Park and may cause investors to lose their entire investment.
Commodity interest markets and contracts are highly volatile and are subject to rapid and substantial fluctuations that may frequently occur. Consequently, investors could lose all or substantially all of their investment in Grant Park if Grant Park’s trading positions are or become unprofitable. The profitability of Grant Park depends primarily on the ability of Grant Park’s trading advisors or reference traders to forecast these fluctuations accurately. Price movements for commodity interests are influenced by, among other things:
changes in interest rates;
governmental, agricultural, trade, fiscal, monetary and exchange control programs and policies, including trade barriers such as tariffs and other forms of trade controls;
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disruptions and uncertainty in connection with global events including Russia’s invasion of the Ukraine, the Israel-Hamas war, threatened and ongoing hostilities and military action between the U.S. and Iran and potential destabilization in the Middle East as a result, and large-scale diseases or illnesses;
weather and climate conditions;
changes in supply and demand, including the global supply chain;
money supply policies, liquidity and access to capital;
global or regional price inflation, including within supply chains, and governmental efforts to curb inflation;
changes in balances of payments and trade, including the effects of tariffs and other similar efforts and the results and reactions thereto;
U.S. and international rates of inflation or deflation;
exchange rates, currency valuations, devaluations and revaluations;
U.S. and international political and economic events and uncertainty; and
changes in investor expectations and emotions of market participants.
The trading advisors’ and reference traders’ trading methods (regardless of the nature of the method) may not take into account each of these factors except if or to the extent they may be reflected in the technical data analyzed by the trading advisors or reference traders.
In addition, governments from time to time intervene, directly and by regulation, in certain markets, often with the objective to influence prices. The effects of governmental intervention, including trade barriers such as tariffs and other forms of trade controls, may be particularly significant at certain times in the financial and currency markets, and this intervention may cause these markets to move rapidly.
For a more detailed discussion of the quantitative and qualitative market risks to which Grant Park is exposed, investors should read the section entitled, “Quantitative and Qualitative Disclosures About Market Risk.”
Past performance is not necessarily indicative of future results.
Investors should not rely for investment or predictive purposes on the past performance history of either Grant Park, the general partner or any of the trading advisors or reference traders. Likewise, investors should not assume that any trading advisor’s or reference trader’s future trading decisions will be profitable, avoid substantial losses or result in performance comparable to that trading advisor’s or reference trader’s past performance. Trading advisors or reference traders may alter their strategies from time to time, and their performance results in the future may materially differ from their prior trading experience. Moreover, technical analysis employed by the trading advisors or reference traders may not take into account the effect of economic or market forces or events that may cause losses to Grant Park. Furthermore, the general partner, in its discretion, may terminate any trading advisors or swap arrangements incorporating new reference traders, add new trading advisors or change the allocation of assets among trading advisors or reference traders, any one of which could cause a substantial change in Grant Park’s future performance relative to past results.
Options are volatile and inherently leveraged, and sharp movements in prices could cause Grant Park to incur large losses.
Grant Park may use options on commodity interests to generate premium income or speculative gains. Options involve risks similar to other commodity interests, in that options are subject to sudden price movements and are highly leveraged, since payment of a relatively small purchase price, called a premium, gives the buyer the right to acquire an
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underlying commodity interest that may have a face value greater than the premium paid. The buyer of an option risks losing the entire purchase price of the option. The writer, or seller, of an option risks losing the difference between the purchase price received for the option and the price of the commodity interest underlying the option that the writer must purchase or deliver upon exercise of the option. There is no limit on potential loss to the seller of an option. Future market movements of the commodity interests underlying options also cannot be predicted.
OTC transactions may be subject to the risk of counterparty default, which could cause substantial losses.
Grant Park faces non-performance risk by counterparties to OTC derivatives contracts. Unlike transactions in futures contracts, a counterparty to an OTC derivatives contract is generally a single bank or other financial institution, rather than a centralized clearing house. As a result, there is potential counterparty credit risk in these transactions. This credit risk may take the form of a payment default by a counterparty or the filing of bankruptcy, insolvency, an assignment for the benefit of creditors or other action by a counterparty. Counterparty risk has intensified in the recent past. The risk of counterparty default is potentially substantial and could cause significant losses to Grant Park in the event that such a default were to occur.
Historically, the only OTC derivatives in which Grant Park has invested are in the forward, option and spot foreign currency markets. Grant Park’s investment in these transactions has ranged from approximately 0% to 20% of its assets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Off-Balance Sheet Risk” and “Quantitative and Qualitative Disclosures About Market Risk.”
Exchanges-of-physicals are subject to risks, which could adversely affect the performance of Grant Park.
Grant Park, through its trading advisors, may engage in exchanges of futures for physicals, known as EFPs. An EFP is a transaction permitted under the rules of many futures exchanges in which two parties holding futures positions may close out their positions without making an open, competitive trade on the exchange. Generally, the holder of a short futures position buys the physical commodity, while the holder of a long futures position sells the physical commodity. The prices at which these transactions are executed are negotiated privately between the parties, and thus may not be consistent with quoted market prices. Regulatory changes, such as limitations on price or types of underlying interests subject to an EFP, may in the future limit or prevent EFPs, which could adversely affect the performance of Grant Park.
Trading forex contracts is subject to substantial and unique risks, and the risk of loss is significant.
The prices of forex contracts can be highly volatile and the risk of loss in forex trading can be significant. Forex transactions are not traded on an exchange and the funds deposited with the counterparty in a forex transaction will not receive the same protections as funds used to margin or guarantee exchange-traded derivatives. If a counterparty becomes insolvent, and Grant Park has a claim for amounts deposited or profits earned on transactions with the counterparty, Grant Park’s claim may not receive priority. Without priority, Grant Park would be a general creditor and Grant Park’s claim would be paid, along with the claims of other general creditors, if at all from any monies still available after priority claims are paid. Even customer funds that a counterparty keeps from its own operating funds may not be insulated or protected from the claims of other general and priority claims. Also, the high degree of leverage that is often obtainable in forex trading can work against Grant Park as well as for it. The use of leverage can lead to large losses as well as , including in excess of the amount invested. Because forex transactions do not occur on an exchange and forex contracts may be , it may be or to execute a transaction, and the prices of forex contracts may be more as a result.
Certain of Grant Park’s investments are or could be illiquid, which may increase the risk of loss.
Grant Park may not always be able to liquidate its commodity interest positions at the desired price, particularly with respect to OTC derivatives. In particular, it may be difficult to execute a trade at a specific price when there are relatively few buy and sell orders in a market. A market disruption or a foreign government’s political actions that disrupt the cash market in its currency or in a major export item, can also make it difficult or costly to liquidate a position. Additionally, limits imposed by futures exchanges or other regulatory organizations, such as speculative position limits and daily price fluctuation limits, may contribute to illiquidity with respect to some commodity interests.
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Moreover, in the OTC derivatives markets, liquidation may only occur upon contract maturation or when the contract is assigned to another party, which is likely to present additional costs.
Unexpected market illiquidity may cause substantial losses to investors at any time or from time to time. The large face value of the positions that trading advisors or reference traders acquire for Grant Park increases the risk of illiquidity by both making Grant Park’s positions more difficult to liquidate at favorable prices and increasing losses incurred while trying to do so. See “Quantitative and Qualitative Disclosures About Market Risk.”
Cash flow needs may cause positions to be closed which may cause substantial losses.
Due to factors including differences in margin treatment between futures and options, there may be periods of time in which positions involving both kinds of instruments must be closed down prematurely due to short term cash flow needs. If this occurs during an adverse move in a spread or straddle trade, for example, then a substantial loss could occur.
An investment in Grant Park may not diversify an overall portfolio.
Historically, managed futures have generally been non-correlated to the performance of other asset classes such as stocks or bonds. Non-correlation means that there is no statistically significant relationship between the performance of futures and other commodity interest transactions, on the one hand, and stocks or bonds, on the other hand. Non-correlation should not be confused with negative correlation, where the performance of two asset classes would be opposite of each other. Because of this non-correlation, Grant Park should not necessarily be expected to be profitable during unfavorable periods for the stock market, or vice versa. Grant Park may incur major losses while stock and bond prices rise substantially in a prospering economy. If, however, during a particular period of time Grant Park’s performance moves in the same general direction as the general financial markets or Grant Park does not perform successfully, investors will obtain little or no diversification benefits during that period from investing in Grant Park. In such a case, Grant Park may have no gains to offset investor from other investments, and investors may on their investment in Grant Park at the same time as on their other investments are increasing. This was the case, for example, during the first quarter of 2020, when Grant Park experienced a of approximately 15.78% while the Standard & ’s 500 Index approximately 19.60%. Investors should not consider Grant Park to be a hedge in their stock and bond portfolios.
Trading in international markets exposes Grant Park to additional credit and regulatory risk.
A substantial portion of Grant Park’s trades have in the past and are expected in the future to take place on markets or exchanges outside of the United States. There is no limit to the amount of assets that Grant Park may commit to trading on non-U.S. markets, and historically, as much as approximately 30% to 60% of Grant Park’s overall market exposure has involved positions taken on non-U.S. markets. The risk of loss in trading non-U.S. commodity interests contracts can be significant. Participation in non-U.S. commodity interests involves the execution and clearing of trades on, or subject to the rules of, a foreign board of trade. Some of these non-U.S. markets, in contrast to U.S. markets, are so-called principals’ markets in which performance is the responsibility only of the individual counterparty with whom Grant Park has entered into a commodity interest transaction, not of the exchange or clearing house. In these kinds of markets, Grant Park will be subject to the risk of bankruptcy, insolvency, government intervention, payment failure or other failures or non-performance by the counterparty.
Moreover, many of these non-U.S. markets are unregulated, which means that Grant Park may have no or only limited recourse in the event of counterparty failures or non-performance. None of the CFTC, NFA or any domestic exchange regulates activities of any foreign boards of trade or exchanges outside of the United States, including execution, delivery and clearing of transactions, nor does any U.S. regulatory authority have the power to compel enforcement of the rules of a foreign board of trade or exchange or of any applicable non-U.S. laws.
Additionally, trading on non-U.S. exchanges is subject to risks presented by exchange controls, expropriation, increased tax burdens and exposure to local economic declines and political instability. An adverse development in any of these variables could reduce the profit or increase the loss resulting from trades in the affected international markets.
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Grant Park’s international trading may expose it to losses resulting from non-U.S. exchanges that are less developed or less reliable than U.S. exchanges.
Some non-U.S. exchanges also may be in a more developmental stage, so that prior price histories may not be indicative of current price dynamics. In addition, Grant Park may not have the same access to information or positions on foreign trading exchanges as do local traders, and the historical market data on which the trading advisors or reference traders rely on formulating and executing their strategies may not be as reliable or accessible as it is in the United States.
Grant Park’s international trading activities subject it to foreign exchange risk.
The price of any non-U.S. commodity contracts and, therefore, the potential profit and loss on such contracts, may be affected by variances in the foreign exchange rate between the time an order is placed and the time it is executed, or the time between when a position is opened and when it is liquidated, offset or exercised. As a result, changes in the value of the local currency relative to the U.S. dollar may cause losses to Grant Park even if a contract traded is profitable as measured in the local currency.
Grant Park’s international trading activities are subject to global risks and market disruption .
Trading on international markets increases the risk that events or circumstances that disrupt such markets may have a materially adverse effect on Grant Park’s business or operations or the value of positions held by Grant Park. Such events or circumstances may include, but are not limited to, inflation or deflation, currency devaluation, interest rate changes, exchange rate fluctuations, changes in government policies, including trade barriers such as tariffs and other forms of trade controls, natural disasters, pandemics or other extraordinary events, armed conflicts, global or regional supply chain interruptions, political or social instability or other unforeseen developments that cannot be quantified.
Market disruptions and government intervention in response thereto could have a material impact on Grant Park’s ability to implement trading strategies.
World financial markets have from time to time experienced widespread and systemic disruptions, which have produced and may produce government reaction and intervention. Such intervention has in certain instances occurred on an “emergency” basis without giving market participants an opportunity to adapt their trading strategies or undertake risk management over their existing positions.
Given the breadth of impact and the speed or frequency with which such government action has sometimes occurred, these interventions have also tended to increase uncertainty in various markets and, although perhaps unintentionally, contributed to overall market instability. This situation can be compounded by the sometimes apparent inconsistency with which government action has been formulated and applied. Such inconsistency has tended in the past to and may tend in the future to have a further destabilizing effect on world financial markets and, as a result, reduce liquidity in many of these markets.
Several countries have limited or prohibited selected types of trading strategies, making such trading either increasingly difficult or impossible to implement. Any regulatory limitations on selected trading strategies could have a materially adverse impact on Grant Park’s ability to implement certain trading methods or allocate to trading advisors or engage reference traders who employ such methods. It is impossible to predict what impact such disruptions and interventions, if they occur, might have on Grant Park’s performance.
Grant Park may be subject to increased or changing regulation.
Regulators in the past several years have amended and increased scrutiny, reporting requirements, restrictions, and regulations in various areas concerning funds, sometimes without coordinating such actions between or among regulators. Such regulations may limit Grant Park’s strategy and increase compliance risks to Grant Park. Additionally, certain regulatory agencies have conducted discussions with market participants, registrants and investors to ascertain investor protection implications of the growth of investment funds, and proposals have been made with regard to best business practices and additional regulation of such funds, their operators and advisors, and certain of their activities, including proposed restrictions on certain types of trading and proposals for increased public and private disclosure of
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financial, trading, and risk management information. The regulation of futures, forward, and options transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action. In addition, various national governments have expressed concern regarding the disruptive effects of speculative trading in the currency markets and the need to regulate the “derivatives” markets in general. Any regulations that restrict the ability of Grant Park to employ various types of trading methods or trading instruments in connection with Grant Park’s trading, or otherwise limit or modify Grant Park’s trading activities, require Grant Park to disclose proprietary information, or subject Grant Park to additional regulation, could adversely impact Grant Park’s profit potential or its ability to conduct business.
Grant Park may be affected by global health events.
Epidemics, pandemics and other widespread public health problems, including outbreaks of infectious diseases such as SARS, H1N1/09 flu, avian flu, Ebola, RSV, COVID‐19, and Monkeypox, have in the past resulted in market volatility and disruption on a regional and global scale. In addition, such outbreaks have in the past resulted and may in the future result in restrictions on travel and public transport and prolonged closures of workplaces, which has had and may have a material adverse effect on the regional or national economies which have imposed or may impose such restrictions and which, in turn, may have a wider impact on the global economy. Accordingly, a significant outbreak of an epidemic or contagious disease could result in a widespread health crisis and restrict the level of business activity in affected areas, which may in turn give rise to significant costs to Grant Park and adversely affect Grant Park’s business and financial results. Any other global public health event could also have a significant adverse impact and result in significant to Grant Park. The impact that any such epidemic or contagious disease or other public health event would have on the performance of Grant Park is uncertain, and it will depend to a large extent on future developments and governmental responses, including actions taken by authorities and other entities to contain such health event or treat its impact, on a national, regional and global level, all of which are beyond the general partner’s control.
Russian-Ukraine War, Israel-Hamas War and Other International Conflicts.
In February 2022, Russia mobilized and commenced military operations in Ukraine resulting in a large-scale conflict within the country and the surrounding border regions. The war is ongoing. The effects, scale, and impact of this conflict on Ukraine, Russia and other countries continues to be highly uncertain and cannot be predicted. The United States and other global leaders have imposed economic sanctions against Russia, and it is unclear whether further sanctions and/or additional military responses will be implemented. Effects on the global economy and trading markets resulting from the military operations and economic sanctions connected to the Russia-Ukraine conflict continue, and remains uncertain and impossible to predict. Although Grant Park does not currently and does not intend to invest in properties or securities located in Russia, Ukraine, or surrounding regions, these events could negatively affect the value and liquidity of Grant Park’s investments due to the interconnected nature of the global economy and capital markets.
In October 2023, attacks by the terrorist organization Hamas occurred throughout Israel. The effects, scale, and impact of Israel’s response to those attacks, declaration of war, and the ensuing conflict has been intense, and remain uncertain. Although Grant Park does not currently and does not intend to invest in properties or securities located in Israel or surrounding regions, these events could negatively affect the value and liquidity of Grant Park’s investments due to the interconnected nature of the global economy and capital markets.
Further, there is no assurance that similar events could not happen in the future in the same or other countries or geographic regions. The effects, scale, and impact of similar conflicts would similarly be highly uncertain and could not be predicted, and similar conflicts could have material effects on the global and local economy and trading markets and may be more or less pronounced than in the current Russia-Ukraine or Israel-Hamas conflicts. While such impacts are impossible to predict, such events could negatively affect the value and liquidity of Grant Park’s investments due to the interconnected nature of the global economy and capital markets and could have a more pronounced effect on Grant Park if such conflict involved the geographic region in which it has made investments, or its portfolio companies have significant operations or customers.
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Grant Park may be subject to U.S. fiscal cliff risks.
Within the past few years, the U.S. government has on more than one occasion reached debt levels close to its maximum permitted debt ceiling under law. To the extent the U.S. budget is not adjusted appropriately, the debt ceiling could reach its maximum and there is no objective way to estimate the probabilities that the U.S. Congress could reach an agreement to mitigate a failure of the U.S. government to meet its debt obligations, which, if such a failure occurred, could, among other things, push the U.S. into an economic recession and cause a reallocation of capital into asset class that could negatively impact Grant Park's investments. Government shutdowns may, and have resulted, from reaching maximum permitted debt ceilings, which may cause, among many other things: significant economic shocks to the U.S. and global economy (including adverse consequences to corporate and consumer spending and liquidity of capital markets); material concerns for companies contracting with the government (including, but not limited to, the government not being able to honor contracts, especially if the debt ceiling is not raised, or companies being to perform on contracts even if the government cannot timely play); and of the U.S. credit rating by Moody's and Fitch or other similar agencies. Actual as well as potential and government affect companies that are not directly dependent on government contracts through on regulatory filings and approvals, general of the economy, and broad uncertainty on the global banking system from a of the U.S. government's credit rating.
Grant Park may be affected by inflation.
Inflation could potentially affect Grant Park’s performance in a number of ways. High rates of inflation and rapid increases in the rate of inflation generally have a negative impact on financial markets and the broader economy. In an attempt to stabilize prices, governments may impose wage and price controls or otherwise intervene. Governmental efforts to curb inflation, including by increasing interest rates or reducing fiscal or monetary stimuli, often have negative effects on the level of economic activity. Certain countries, including the United States, have recently seen increased levels of inflation, and persistently high levels of inflation could have a material impact on Grant Park’s investments and returns.
Grant Park may be affected by trade controls .
The U.S. government recently established and increased tariffs on the importation of certain goods originating from a number of countries around the world. The economic impact of these tariffs, and potential future tariff and other trade-related actions, is still unknown. The imposition of tariffs, and judicial decisions, including an opinion from the U.S. Supreme Court on February 20, 2026 that certain tariffs are not authorized by law, may result in uncertainty, market volatility, supply chain disruption, and increased costs. Such factors may negatively impact Grant Park’s performance. Accordingly, there can be no assurances that any tariffs or other trade controls or barriers imposed or abated will not have an adverse effect on Grant Park.
Grant Park may be affected by the cessation of USD LIBOR and use of alternative rates .
As of September 30, 2024, all remaining settings of the US Dollar (USD) LIBOR ceased to be published. This cessation followed an extended global transition period and constituted the final step in moving away from USD LIBOR to alternative rates such as the Secured Overnight Financing Rate (SOFR). Unlike USD LIBOR, SOFR is based on actual transactions in the overnight US Treasury repurchase market. The UK Financial Conduct Authority has said it has no intention of compelling ICE Benchmark Administration Limited to continue to publish the USD LIBOR settings after September 30, 2024.
The cessation of USD LIBOR potentially impacts any remaining contracts still referencing USD LIBOR after September 30, 2024. Many contracts have fallback provisions, which typically dictate how interest rates will be calculated in the absence of LIBOR; however, these provisions are not usually intended for long-term use. In most cases, the cessation of USD LIBOR will require documentation to be amended or replaced to switch to SOFR or another alternative rate. There may be challenges for Grant Park to enter into hedging transactions against instruments based on SOFR or another alternative rate until or unless a market for such hedging transactions develops. Any of the above factors, and uncertainty relating to the use and calculation of SOFR and other alternative reference rates and their potential or actual discontinuance, may potentially adversely affect Grant Park’s performance or net asset value.
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Trading Risks
Grant Park is highly leveraged, which means that sharp changes in prices could lead to large losses.
Because the amount of margin funds necessary to be deposited with a clearing broker to enter into a futures or forward contract position is typically about 2% to 10% of the total value of the contract, the general partner can hold positions in Grant Park’s account with face values equal to several times Grant Park’s net assets. The ratio of margin to equity is typically 8% to 15% but can range from approximately 5% to 33%. As a result of this leveraging, even a small movement in the price of a contract can cause major losses. Any purchase or sale of a futures or forward contract may result in losses that substantially exceed the amount invested in the contract. For example, if $2,200 in margin is required to hold one U.S. Treasury bond futures contract with a face value of $100,000, a $2,200 decrease in the value of that contract could, if the contract is then closed out, result in a complete loss of the margin deposit, not even taking into account fees and/or commissions. Severe short-term price declines could, therefore, force the liquidation of open positions with large .
Trend following and pattern recognition trading may not be profitable without significant and sustained price moves in some of the markets traded or in markets in which a potential price trend may start to develop but reverses before an actual trend is realized.
Grant Park is a multiple-manager fund which allocates its assets among several trading advisors and reference traders employing technical analysis including proprietary, systematic trend-following and pattern recognition systems in various forms. Grant Park’s trading advisors and reference traders attempt to exploit through the use of their proprietary systematic trading systems the tendency of markets to either trend or exhibit repeated patterns over time. Since trend-following is a reactive trading strategy rather than a predictive one, positions are entered into or exited from in reaction to price movement; there is no prediction of future price. Such trend-following strategies may not take into account a pending political or economic event since the trading strategy would continue to maintain positions indicated by its strategy even though such positions would incur major losses if the event proved to be adverse.
Pattern recognition looks to predict price movement based on historic repeatable price patterns. If the trend or patterns are not confirmed, the position will be exited. However, if the trend or patterns are confirmed, positions may be increased depending on the momentum of the trend. Trends or patterns are not generally discovered until they are well established and not exited from until they are over. Because Grant Park does not know which markets will trend or when a trend will begin or whether patterns will reoccur, there is a risk that a trend will reverse or fail to continue or a pattern will not reoccur after a trade is entered.
The profitability of any technical, trend-following trading strategy depends upon the occurrence in the future of significant, sustained price moves in some of the markets traded. A danger for trend-following traders is whip-saw markets, that is, markets in which a potential price trend may start to develop but reverses before an actual trend is realized. A pattern of false starts may generate repeated entry and exit signals in technical systems, resulting in unprofitable transactions. In the past, there have been prolonged periods without sustained price moves. Presumably these periods will continue to occur. Periods without sustained price moves may produce substantial losses for trend-following trading strategies. Further, any factor that may lessen the prospect of these types of moves in the future, such as increased governmental control of, or participation in, the relevant markets, may reduce the prospect that any trend-following trading strategy will be profitable.
The risk management techniques of one or all of the trading advisors or reference traders may not be effective.
The techniques employed by each trading advisor and reference trader to monitor and manage risks associated with its trading activities on behalf of Grant Park may not successfully mitigate all risks. For example, even if a trading advisor or reference trader utilizes predetermined stop-loss levels for a position as part of its risk management, such stop-loss orders may not necessarily limit losses, since they become market orders once triggered. As a result, the order may not be executed at the stop-loss price, resulting in a loss in excess of the loss that would have been incurred if the order had been executed at the stop-loss price. Even if a trading advisor’s or reference trader’s risk management is fully effective, it cannot anticipate all risks that the trading advisor or reference trader may face. To the extent one or more of
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the trading advisors or reference traders fails to identify and adequately monitor and manage all of the risks associated with its trading activities, Grant Park may suffer losses.
Increased competition from other systematic and technical trading systems could reduce the trading advisors’ or reference traders’ profitability.
There has been a dramatic increase over the past 40 years in the amount of assets managed by systematic and technical trading systems like that of the trading advisors and reference traders. Assets in managed futures, for example, have grown from approximately $300 million in 1980 to over $356 billion in September 2025 according to BarclayHedge . This results in increased trading competition among a larger number of market participants for transactions at favorable prices, which could operate to the detriment of Grant Park by preventing Grant Park from affecting transactions at desired prices. It may become more difficult for Grant Park to implement its trading strategies if other commodity trading advisors or reference traders using technical systems are, at the same time, also attempting to initiate or liquidate commodity interest positions.
Speculative position limits and daily price fluctuation limits may alter trading decisions for Grant Park.
The CFTC and U.S. exchanges have established speculative position limits on the maximum net long or net short positions that any person may hold or control in certain exchange-traded derivatives. On November 12, 2020, the CFTC approved a final rule adopting new and amended spot month position limits for derivatives contracts associated with 25 physical commodities and amended single-month and all-months-combined limits for most of the agricultural contracts subject to position limits on that date. Under the final rule, non-spot month position limits were not extended. Additionally, the CFTC adopted new and amended definitions for use throughout the position limits regulations, including a revised definition of “bona fide hedging transaction or position” that includes an expanded list of enumerated bona fide hedges and a new definition of “economically equivalent swaps.” The Commission also amended rules governing exchange-set position limit levels and related exchange exemptions and established a new process for non-enumerated bona fide hedging recognitions for purposes of position limits.
The final rule became effective on March 15, 2021. The final rule’s compliance date for speculative position limits on 16 non-legacy core futures contracts and on certain exchange-set speculative position limits was January 1, 2022. The compliance date for economically equivalent swaps as defined under the final rule and for eliminating certain previous risk management exemptions to position limits was January 1, 2023. On July 18, 2025, the CFTC extended prior relief from certain position aggregation requirements under the final rule and CFTC Reg. 150.4 until the later of the applicable effective date or compliance date of a rulemaking approved by the CFTC addressing the aggregation and notice filing obligations.
Subject to the final rule, exchanges can also impose their own position limits and/or position accountability levels for the contracts they list. Certain swaps listed for trading on exempt commercial markets are also subject to position limits imposed by those markets, but that is also an area where requirements may be changing. All accounts controlled by a particular trading advisor are combined for speculative position limit purposes. If positions in those accounts were to approach the level of the particular speculative position limit, or if prices were to approach the level of the daily limit, these limits could cause a modification of the particular trading advisor’s trading decisions or force liquidation of certain futures or options on futures positions. If one or more of Grant Park’s trading advisors must take either of these actions, Grant Park may be required to forego profitable trades or strategies.
Increases in assets under management of any of the trading advisors or reference traders may affect trading decisions, which could have a detrimental effect on Grant Park.
In general, none of the trading advisors or reference traders intends to limit the amount of additional assets of Grant Park that it may manage, and each will continue to seek new accounts. The more equity a trading advisor or reference trader manages, the more difficult it may be for it to trade profitably because of the difficulty of trading larger positions without adversely affecting prices and performance and of managing risk associated with larger positions. Moreover, in the future certain trading advisors or reference traders may limit the amount of additional assets that they manage. Accordingly, future increases in assets under management may require a trading advisor or reference trader to
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modify its trading decisions for Grant Park or may cause the general partner to add additional trading advisors or reference traders, either of which could have a materially adverse effect on Grant Park’s performance or results.
The use of multiple trading advisors may result in offsetting or opposing trading positions and may also require one trading advisor to fund the margin requirements of another trading advisor.
The use of multiple trading advisors may result in developments or positions that adversely affect Grant Park’s performance or results. For example, because trading advisors act independently, Grant Park could buy and sell the same futures contract, thereby incurring additional expenses but with no net change in its holdings and offsetting any potential for profit from these positions. Trading advisors also may compete from time to time for the same trades or other transactions, increasing the cost to Grant Park of making trades or transactions or causing some of them to be foregone altogether. Moreover, even though each trading advisor’s margin requirements ordinarily will be met from that trading advisor’s allocated net assets, one trading advisor may incur losses of such magnitude that Grant Park is unable to meet margin calls from the allocated net assets of that trading advisor. In this event, Grant Park’s clearing brokers may require liquidations and contributions from the allocated net assets of another trading advisor.
The trading advisors’ and reference traders’ trading programs bear some similarities and, therefore, may lessen the benefits of having multiple trading advisors.
Certain trading advisors and reference traders initially obtained their trading experience under the guidance of the same individual. However, each trading advisor or reference trader has, over time, developed and modified the program it uses for Grant Park. Nevertheless, the trading advisors’ and reference traders’ trading programs have similarities. These similarities may mitigate the positive effect of having multiple trading advisors or reference traders. For example, in periods where one trading advisor or reference trader experiences a draw-down, it is possible that these similarities will cause the other trading advisors or reference traders to also experience a draw-down.
Each trading advisor may advise other clients and may achieve more favorable results for its other accounts.
Each trading advisor may manage other accounts, including its own accounts. A trading advisor may vary the trading strategies applicable to Grant Park from those used for its other managed accounts, or its other managed accounts may impose a different cost structure than that of the classes of Grant Park’s units for which it trades. Consequently, the results any trading advisor achieves for Grant Park may not be similar to those achieved for other accounts managed by the trading advisor or its affiliates at the same time. Moreover, it is possible that other accounts managed by the trading advisor or its affiliates may compete with Grant Park for the same or similar positions in the commodity interest markets and that those other accounts may make trades at better prices than Grant Park.
A trading advisor may also have a financial incentive to favor other accounts because the compensation received from those other accounts exceeds, or may in the future exceed, the compensation that it receives from Grant Park. Because records for other accounts are not accessible to investors in Grant Park, investors will not be able to determine if any trading advisor is favoring other accounts.
Portfolio turnover may be frequent, which could result in higher brokerage commissions and transaction fees and expenses.
Each trading advisor will make certain trading decisions on the basis of short-term market considerations. The portfolio turnover rate may be substantial at times, either due to such decisions or to “whip-saw” market conditions, and could result in Grant Park incurring substantial brokerage commissions and other transaction fees and expenses.
Exchange-traded funds and mutual funds have indirect fees and additional risks.
Certain of Grant Park’s investments, including exchange-traded funds and mutual funds, are subject to investment advisory and other expenses, which will be indirectly paid by Grant Park. The cost of investing in Grant Park is higher than the cost of investing directly in mutual funds and exchange-traded funds. Investors in Grant Park will indirectly incur fees and expenses charged by the exchange-traded funds or mutual funds in which Grant Park invests in addition to Grant Park’s direct fees and expenses. Any exchange-traded fund or mutual fund that Grant Park invests in
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operates independently from Grant Park and is subject to investment advisory and other expenses which will be indirectly paid by Grant Park.
Exchange-traded funds are listed on various national stock exchanges. Exchange-traded fund shares may trade at a discount to or a premium above net asset value if there is a limited market in such shares. Exchange-traded funds are also subject to brokerage and other trading costs, which could result in greater expenses to Grant Park. Because the value of exchange-traded fund shares depends on the demand in the market at any given time, Grant Park may not be able to liquidate its holdings in such funds at the most optimal time, adversely affecting performance.
Exchange-traded funds and mutual funds are subject to certain specific risks depending on the nature of the fund. These risks could include, but are not limited to, liquidity risk, sector risk and foreign currency risk, as well as risks associated with fixed income securities, commodities or other derivatives.
Grant Park’s positions may be concentrated from time to time, which may render Grant Park susceptible to larger losses than if Grant Park were more diversified.
One or more of the trading advisors may from time-to-time cause Grant Park to hold a few, relatively large positions in relation to its assets. Consequently, a loss in any such position could result in a proportionately greater loss to Grant Park than if Grant Park’s assets had been spread among a wider number of instruments.
Non-U.S. investors may face exchange rate risk.
Non-U.S. investors should note that units are denominated in U.S. dollars and that changes in the rates of exchange between currencies may cause the value of their investment to decrease.
Operating Risks
Grant Park pays substantial fees and expenses regardless of profitability.
Grant Park pays brokerage charges, organization and offering expenses, ongoing operating expenses and OTC dealer spreads, in all cases regardless of whether Grant Park’s activities are profitable. In addition, Grant Park pays its trading advisors an incentive fee based on a percentage of Grant Park’s trading profits earned on Grant Park’s net assets allocated to that trading advisor. It is possible that Grant Park could pay substantial incentive fees to one or more trading advisors during a period in which Grant Park has no net trading profits or in which it actually loses money. Accordingly, Grant Park must earn trading gains sufficient to compensate for these fees and expenses before it can earn any profit.
The units are subject to restrictions on redemption and transfer, which may prevent investors from redeeming or transferring their units when they want to do so and may increase their risk of loss.
There is no, and there is not likely to be a, secondary market for the units. While the units have redemption rights, there are restrictions.
Additionally, redemptions can occur only monthly and require written notice to the general partner at least 10 days in advance of the requested redemption date, or earlier as required by a selling agent. The net asset value per unit may change materially between the date on which an investor requests a redemption and the month-end redemption date. Transfers of units are permitted only with the prior written consent of the general partner, provided that certain conditions specified in the limited partnership agreement are satisfied. Such restrictions may prevent investors from redeeming or transferring their units when they want to do so. In the event that Grant Park is subject to rapid and substantial losses, the inability to immediately redeem or transfer units may increase investors’ risk of loss.
Grant Park may incur higher fees and expenses upon renewing existing or entering into new contractual relationships.
The clearing arrangements between the clearing brokers and Grant Park generally are terminable by the clearing brokers once the clearing broker has given Grant Park notice. Upon termination, the general partner may be required to renegotiate or make other arrangements for obtaining similar services if Grant Park intends to continue trading in
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commodity interests at its present level of capacity. The services of Grant Park’s current clearing brokers or an additional or substitute clearing broker may not be available, or even if available, these services may not be available on terms as favorable as those of the expired or terminated clearing arrangements.
Likewise, upon termination of the advisory contract entered into between Grant Park and any of the trading advisors, the general partner may be required to renegotiate the contracts or make other arrangements for obtaining commodity trading advisory services. The services of the particular trading advisor may not be available, or these services may not be available on terms as favorable as those contained in the expired or terminated advisory contract. There is significant competition for the services of qualified commodity trading advisors, and the general partner may not be able to retain replacement or additional trading advisors on acceptable terms. This could result in losses to Grant Park and/or the inability of Grant Park to achieve its investment objectives. Moreover, if an advisory contract is renegotiated or additional or substitute trading advisors are retained by the general partner on behalf of Grant Park, the fee structures of the new or additional arrangements may not be as favorable to Grant Park as are those previously in place.
The incentive fees could motivate the trading advisors to make riskier investments.
Each trading advisor employs a speculative strategy for Grant Park, and certain trading advisors receive incentive fees based on the trading profits earned by it for Grant Park. Accordingly, these trading advisors have a financial incentive to make investments that are riskier than might be made if Grant Park’s assets were managed by a trading advisor that did not receive performance-based compensation.
Investors have no right to participate in the management of Grant Park.
The general partner manages the affairs of Grant Park. As a limited partner in the Fund, investors only have limited voting rights regarding Grant Park’s affairs, which rights do not permit investors to participate in the management or control of Grant Park or the conduct of its business. Investors must therefore rely upon the responsibility and judgment of the general partner to manage Grant Park’s affairs in the best interests of the limited partners.
An unanticipated number of redemption requests during a short period of time could have an adverse effect on the net asset value of Grant Park.
If a substantial number of requests for redemption are received by Grant Park during a relatively short period of time, Grant Park may be unable to satisfy such requests from assets not committed to trading. As a consequence, Grant Park could be forced to liquidate trading positions or swap arrangements before the time that a trading advisor’s or reference trader’s trading strategies would dictate liquidation. If this were to occur, it could affect adversely the net asset value per unit of each class, not only for limited partners redeeming units but also for non-redeeming limited partners. Illiquidity in the markets could make it difficult to liquidate positions on favorable terms, which could result in additional losses.
Conflicts of interest exist and may potentially exist in the structure and operation of Grant Park.
Entities owned in part by Mr. Kavanagh, who indirectly controls and is president of Dearborn Capital Management, L.L.C., the general partner of Grant Park, Mr. Abdullah Mohammed Al Rayes, who is a principal of the general partner, Mr. Patrick Meehan, the chief operating officer of the general partner and Mr. Fernando Benitez, executive vice president, product management of the general partner, hold a minority ownership interest in EMC Capital Advisors, LLC (“EMC”). Effective as of October 1, 2013, EMC Capital Management, Inc., one of Grant Park’s commodity trading advisors from January 1989 until September 2013, assigned its obligations, rights and interests to EMC, including the trading agreement under which it had previously traded on behalf of Grant Park and, accordingly, EMC became one of Grant Park’s commodity trading advisors.
As a result, Mr. Kavanagh, Mr. Al Rayes, Mr. Meehan and Mr. Benitez each indirectly own a minority interest in EMC, one of Grant Park’s commodity trading advisors. The relationship between the principals of the general partner and the principals of EMC may create a conflict of interest in that Mr. Kavanagh, Mr. Al Rayes, Mr. Meehan and Mr. Benitez may indirectly receive compensation based on the trading services EMC provides to Grant Park, and the general partner may therefore have a disincentive to terminate or replace EMC, even if termination or replacement is or may be
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in the best interest of Grant Park. The general partner limits the amount of consulting fees paid to EMC to no more than the aggregate dollar amount of consulting fees paid to EMC in 2014, which was $500,300. The consulting fee cap was based on a 10% allocation and EMC will not be paid more than $500,300 per year in consulting fees.
The general partner, the trading advisors and their respective principals, all of which are engaged in other investment activities, are not required to devote substantially all of their time to Grant Park’s business, which also presents a potential for numerous conflicts of interest with Grant Park. In the case of the trading advisors or reference traders, for example, it is possible that other accounts managed by a trading advisor or reference trader or their respective affiliates may compete with Grant Park for the same or similar trading positions, which may cause Grant Park to obtain prices that are less favorable than those obtained for such other accounts. The trading advisors may also take positions in their proprietary accounts that are opposite to or ahead of Grant Park’s account. Possible trading ahead presents a potential conflict of interest because the trade executed first may receive a more favorable price than the later trade.
As a result of these and other relationships, parties involved with Grant Park may have a financial incentive to act in a manner other than in the best interests of Grant Park and its limited partners. The general partner has not established, and has no plans to establish, any formal procedures to resolve these and other actual or potential conflicts of interest. Consequently, there is no independent control over how the general partner will resolve these conflicts on which investors can rely in ensuring that Grant Park is treated equitably, except that the general partner will resolve each conflict in light of its fiduciary responsibility for the safekeeping and use of all funds and assets of Grant Park.
Certain of Grant Park’s investments may have no readily available market value, and there is a risk that the value attributed to such investments will not be realized upon disposition.
The general partner will determine the fair market value of Grant Park’s investments if a readily available market value does not exist. The value determined by the general partner may not necessarily reflect the liquidation value of such investments. Accordingly, if Grant Park is required to liquidate any such investment in order to meet redemption requests or margin calls, no assurance can be given that the fair market value, as determined by the general partner, or any other value attributed to the investment, will be realized upon disposition. Thus, if a limited partner redeems its units at a time when Grant Park holds such investments, redemption proceeds a limited partner receives will depend on the value of Grant Park’s investments as determined by the general partner. In valuing Grant Park’s assets, the general partner may rely on valuations and other reports received from third parties, including advisors to Grant Park. In no event will the general partner be liable for any determination made, or other action taken or omitted, in good faith. All determinations of values by the general partner will be final and conclusive as to all limited partners.
The failure or bankruptcy of one of Grant Park’s clearing brokers could result in a substantial loss of Grant Park’s assets.
Under CFTC regulations, a clearing broker is required to maintain customers’ assets held for trading on U.S. exchanges in one or more segregated accounts. Customers’ assets held for trading on non-U.S. exchanges are maintained in one or more secured accounts held by or for the benefit of Grant Park’s clearing brokers, which accounts are subject to different and generally less extensive treatment under the Commodity Exchange Act and CFTC regulations than applies to customer segregated accounts. If a clearing broker fails to do so, or is unable to satisfy a substantial deficit in a customer account, its other customers may be subject to risk of loss of their funds in the event of that clearing broker’s bankruptcy. In that event, the clearing broker’s customers, such as Grant Park, are entitled to recover, even in respect of property specifically traceable to them, only a proportional share of all property available for distribution to all of that clearing broker’s customers. There can be no assurances that a well-capitalized, major institution will not become bankrupt. Events in the past have demonstrated that even major financial institutions can and do . Grant Park also may be subject to the risk of the of, or in performance by, any exchanges and markets and their clearing organizations, if any, on which commodity interest contracts are traded.
From time to time, the clearing brokers may be subject to legal or regulatory proceedings in the course of their business. A clearing broker’s involvement in costly or time-consuming legal proceedings may divert financial resources or personnel away from the clearing broker’s trading operations, which could impair the clearing broker’s ability to successfully execute and clear Grant Park’s trades.
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Investors are only able to review Grant Park’s holdings on a monthly basis, which makes Grant Park less transparent than certain other investments.
Although Grant Park calculates net asset value daily and will, upon request, provide such information to limited partners, investors in Grant Park are only able to review Grant Park’s holdings on a monthly basis. While the trading advisors receive daily trade confirmations from the clearing brokers of each transaction entered into by Grant Park, Grant Park’s trading results are only reported to investors monthly in summary fashion. Accordingly, an investment in Grant Park does not provide investors the same transparency that a personal trading account offers.
Grant Park has multiple classes which present a possible contagion risk between them.
Although Grant Park has several classes that allocate assets differently among trading advisors or swap arrangements, Grant Park is a single legal entity. Limited partners invested in one or more classes may be compelled to bear the liabilities resulting from another class which such limited partners do not themselves own if there are insufficient assets in that other class to satisfy such liabilities. Accordingly, there is a risk that liabilities of one class may not be limited to that particular class and may be required to be satisfied from one or more other classes. Moreover, in a bankruptcy or insolvency proceeding, Grant Park’s assets may be aggregated without regard to class. In addition, third parties who provide services to one or more classes, and/or other creditors of one or more classes, may have valid claims against the class to which they have provided services, or against the Fund as a whole without regard to class.
Grant Park’s brokers, futures commission merchants, and trading advisors may cause or be subject to trading errors, which could adversely affect Grant Park’s performance.
While trading advisors are required to correct trading errors as soon as they are discovered, none of Grant Park, the general partner, the trading advisors or their service providers will be responsible for poor executions or trading errors committed by brokers, futures commission merchants or the trading advisors themselves. Such trading errors could adversely affect Grant Park’s performance.
Grant Park may terminate before investors achieve their investment objective.
Grant Park may terminate, regardless of whether Grant Park has incurred losses, before its stated termination date of December 31, 2027. In particular, Grant Park will terminate if the general partner withdraws and the limited partners fail to elect a substitute general partner, if the general partner is subject to bankruptcy, or upon the occurrence of certain other events as described in the limited partnership agreement. However, no amount of losses will require the general partner to terminate Grant Park. Grant Park’s termination would cause the liquidation and potential loss of an investment in Grant Park and could adversely impact the overall maturity and timing of an investor’s investment portfolio.
Grant Park is not a registered investment company.
Grant Park is not a registered investment company subject to the Investment Company Act of 1940. Accordingly, investors do not have the protections afforded by that statute which, for example, requires registered investment companies to have a majority of disinterested directors and regulates the relationship between the investment company and its investment manager.
Litigation could result in substantial additional expenses.
Grant Park could be named as a defendant in a lawsuit or regulatory action arising out of the activities of the general partner or the trading advisors. If this were to occur, Grant Park will bear the costs of defending such suit or action and will be at further risk if its defense is unsuccessful, which could result in losses to Grant Park.
The general partner relies heavily on its key personnel to manage Grant Park’s trading activities.
In managing and directing the day-to-day activities and affairs of Grant Park, the general partner relies heavily on Mr. Kavanagh, Mr. Meehan and Maureen O’Rourke, the general partner’s chief financial officer. The loss of the
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services of any of these persons, or the inability of any of them to carry out their responsibilities, may have an adverse effect on the management of Grant Park.
The general partner relies on the trading advisors and their key personnel.
The general partner relies on the trading advisors to achieve trading gains for Grant Park, allocating to each of them responsibility for, and discretion over, trading of their allocated portions of Grant Park’s assets. The trading advisors, in turn, are dependent on the services of a limited number of persons to develop and refine their trading approaches and strategies and execute Grant Park’s transactions. The loss of the services of any trading advisor’s principals or key employees, or the failure of those principals or key employees to function effectively as a team, may have an adverse effect on that trading advisor’s ability to manage its trading activities successfully or may cause the trading advisor to cease operations entirely, either of which, in turn, could negatively impact Grant Park’s performance. Each of Grant Park’s trading advisors is controlled, directly or indirectly, by one or more individuals. The death, incapacity or prolonged of such individuals likely would these trading advisors’ operations, and could result in their operations entirely, which could affect the value of an investment in Grant Park.
Grant Park may be exposed to style drift .
The general partner cannot control the trading conducted by each trading advisor or reference trader and relies primarily on information provided by such advisors or traders in assessing investment strategies, the underlying risks of different trading strategies and, ultimately, determining whether, and to what extent, the general partner will allocate Grant Park’s assets to such trading advisors. “Style drift” is the risk that a trading advisor or reference trader may deviate from the stated or expected investment strategy or methodology. Style drift can occur abruptly if a trading advisor or reference trader believes that it has identified an investment opportunity for higher returns from a different approach, or it can occur gradually, such as if, for example, an advisor or trader changes its leverage level or modifies its trading signals incrementally over time. Style drift can also occur if a trading advisor or reference trader focuses on factors it had deemed immaterial in its offering documents – such as particular statistical information or returns relative to certain benchmarks. Additionally, style drift poses a particular risk for multiple-manager structures such as Grant Park, since Grant Park may be exposed to particular markets or strategies to a greater extent than was anticipated by the general partner when it assessed the portfolio's risk-return characteristics and allocated assets to certain trading advisors or swap arrangements incorporating reference traders. This may, in turn, result in overlapping strategies or methodologies among various trading advisors or reference traders. The general partner's sole remedy in the event of a by a trading advisor or reference trader from its offering or other governing documents may be only to cause Grant Park to withdraw capital, subject to any applicable withdrawal restrictions.
The general partner may terminate, replace and/or add trading advisors and reference traders in its sole discretion and the trading advisors and reference traders or their trading strategies may not continually serve Grant Park, which may have an adverse effect on Grant Park’s performance.
The general partner may terminate, substitute or retain trading advisors and reference traders on behalf of Grant Park in its sole discretion. Moreover, it is possible that any trading advisor will exercise its rights to terminate the advisory agreement with Grant Park under certain conditions or the advisory agreement with any trading advisor, once it expires, will not be renewed on the same terms as the current advisory agreement for that trading advisor. The addition of a new trading advisor or reference trader and/or the removal of one or more of the current trading advisors or reference traders may cause disruptions in Grant Park’s trading as assets are reallocated and new trading advisors or reference traders transition to Grant Park, which may have an adverse effect on Grant Park’s performance.
Changes in the general partner’s allocation of the assets of each class of Grant Park among trading advisors and reference traders may result in poorer performance by Grant Park.
The general partner may reallocate assets among the trading advisors and reference traders upon termination of a trading advisor or reference trader, retention of a new trading advisor or reference trader or on the first day of any month. Consequently, Grant Park’s net assets may be apportioned among trading advisors and reference traders in a different manner than the current apportionment. The general partner’s allocation of assets will directly affect the
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profitability of Grant Park’s trading, possibly in an adverse manner. For example, a trading advisor or reference trader may experience a high rate of return but only be managing a small percentage of Grant Park’s net assets. In this case, the trading advisor’s or reference trader’s performance could have a minimal effect on the net asset value of Grant Park. Furthermore, adding, terminating or replacing trading advisors and reference traders cannot provide any assurance that Grant Park’s trading will be successful.
Third parties may infringe or otherwise violate a trading advisor’s intellectual property rights or assert that a trading advisor has infringed or otherwise violated their intellectual property rights, which may result in significant costs and diverted attention.
Third parties may obtain and use a trading advisor’s intellectual property or technology, including its trade secrets and trading program software, without permission. Any unauthorized use or misappropriation of a trading advisor’s proprietary trade secrets, software and other technology could adversely affect its competitive advantage. Proprietary software and other technology are becoming increasingly easy to duplicate, particularly as employees with proprietary knowledge leave the owner or licensed user of that software or other technology. Each trading advisor may have difficulty monitoring unauthorized uses of its proprietary software and other technology. The precautions it has taken may not prevent misappropriation or infringement of its proprietary software and other technology. Also, third parties may independently develop proprietary software and other technology similar to that of a trading advisor or claim that the trading advisor has violated their intellectual property rights, including copyrights, trademark rights, trade names, trade secrets and patent rights. As a result, a trading advisor may have to in the future to protect its trade secrets, determine the validity and scope of other parties’ proprietary rights, itself that it has or otherwise other parties’ rights, or itself that its rights are . Any of this type, even if the trading advisor is and regardless of the merits of the action, may result in significant costs, of resources from Grant Park, or require the trading advisor to change its proprietary software and other technology or enter into royalty or licensing agreements.
The success of Grant Park depends on the ability of each of the trading advisors’ and reference traders’ personnel to accurately implement their trading systems, and any failure to do so could subject Grant Park to losses.
Trading advisors’ and reference traders’ computerized trading systems rely on the trading advisors’ and reference traders’ personnel to accurately process the systems’ outputs and execute the transactions specified by the systems. In addition, each trading advisor and reference trader relies on its staff to operate and maintain its computer and communications systems upon which the trading systems rely. Execution and operation of each trading advisor’s and reference trader’s systems is therefore subject to human error. Any failure, inaccuracy or delay in implementing any of the trading advisors’ systems and executing Grant Park’s transactions could impair Grant Park’s ability to identify potential profit opportunities and benefit from them. It could also result in decisions to undertake transactions based on inaccurate or incomplete information, which could cause substantial losses.
Cybersecurity risks could have material adverse effects on Grant Park .
Cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. The general partner will seek to prevent and mitigate any such incidents but there is no guarantee that it will be successful in such efforts. A cybersecurity incident could have numerous material adverse effects on Grant Park and potentially on its investors. Such incidents could impair the operations, liquidity and financial condition of Grant Park, amongst other potential threats and risks. Cyber threats and/or incidents could cause financial costs from the theft of Grant Park assets (including proprietary information and intellectual property) as well as numerous unforeseen costs including, but not limited to: litigation expenses, preventative and protective costs, remediation costs and costs associated with reputational . Such could also compromise investor personal information and subject such information to the risk of or theft.
The inability of Grant Park to access, or the failure of, electronic trading and order routing systems may adversely affect Grant Park’s trading.
Grant Park may trade on electronic trading and order routing systems, which differ from traditional open outcry pit trading and manual order routing methods. Transactions using an electronic system are subject to the rules and
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regulations of the exchanges offering the system or listing the contract. Characteristics of electronic trading and order routing systems vary widely among the different electronic systems with respect to order matching, opening and closing procedures and prices, error trade policies and trading limitations or requirements. There are also differences regarding qualifications for access and grounds for termination and limitations on the types of orders that may be entered into a system. Each of these matters may present different risk factors with respect to trading on or using a particular system. Each system may also present risks related to system access, varying response times and security. In the case of internet-based systems, there may be additional risks related to service providers and the receipt and monitoring of electronic mail.
Grant Park may experience substantial losses on transactions if a trading advisor’s computer or communications systems fail or if a trading advisor, or third parties on which a trading advisor depends, fail to upgrade computer and communications systems.
Each trading advisor’s trading activities, including risk management, depends on the integrity and performance of the computer and communications systems supporting it. Extraordinary transaction volume, hardware or software failure, cyber-attack, power or telecommunications failure, natural disaster or other catastrophe could cause any trading advisor’s computer systems to operate at an unacceptably slow speed or even fail. A significant degradation or failure of the systems that a trading advisor uses to gather and analyze information, enter orders, process data, monitor risk levels and otherwise engage in trading activities may result in substantial losses, liability to other parties, lost profit opportunities, harm to the trading advisors’, the reference traders’, the general partner’s and Grant Park’s reputations, increased operational expenses or of technical resources.
The development of complex communications and new technologies may render existing computer and communication systems supporting the trading advisors’ trading activities obsolete. In addition, these systems must be compatible with those of third parties, such as the systems utilized by exchanges, clearing brokers and executing brokers used by the trading advisors. If these third parties upgrade their systems, the trading advisors will need to make corresponding upgrades to continue effectively their trading activities. Grant Park’s future success will in part depend on each trading advisor’s and third party’s ability to respond to changing technologies on a timely and cost-effective basis.
Each trading advisor depends on the reliable performance of the computer or communications systems of third parties, such as brokers and futures exchanges, and may experience substantial losses on transactions if they fail.
Each trading advisor depends on the proper and timely function of complex computer and communications systems maintained and operated by the futures exchanges, brokers and other data providers that the trading advisor uses to conduct its trading activities. Failure or inadequate performance of any of these systems could adversely affect a trading advisor’s ability to complete transactions, including its ability to enter new orders, execute existing orders, modify or cancel orders that were previously entered or close out positions, and could result in lost profit opportunities and significant losses on commodity interest transactions. Any of these conditions could have a material adverse effect on revenues and materially reduce Grant Park’s capital. For example, unavailability of price quotations from third parties may make it difficult or impossible for a trading advisor to use the proprietary software that it relies upon to conduct its trading activities. of records from brokerage firms can make it or for a trading advisor to accurately determine which transactions have been executed or the details, including price and time, of any transaction executed. This of information also may make it or for the trading advisor to reconcile its records of transactions with those of another party or to settle executed transactions.
Forwards, swaps and other derivatives are subject to varying regulation and risks.
On December 16, 2015, the CFTC adopted margin requirements for non-cleared OTC derivatives executed by registered swap dealers or major swap participants for which no U.S. federal banking agency is a prudential regulator. On December 8, 2020, the CFTC adopted certain amendments to its margin requirements for uncleared swaps to revise the calculation method for determining whether certain entities come within the scope of initial margin requirements for uncleared swaps, beginning in the last phase of a phased compliance schedule, which started on September 1, 2022, and the timing for compliance with the initial margin requirements after the end of the phased compliance schedule. Although Grant Park is not directly subject to these margin requirements, to the extent that Grant Park enters into a non-
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cleared OTC derivatives transaction with a counterparty subject to such requirements, Grant Park will be indirectly affected since such counterparty will be required to collect margin from or post margin to, as applicable, Grant Park.
Risks posed by OTC instruments and techniques include: (1) credit risk (the exposure to the possibility of loss resulting from a counterparty’s failure to meet its financial obligations); (2) market risk (adverse movements in the price of a financial asset or commodity); (3) legal risk (the characterization of a transaction or a party’s legal capacity to enter into it could render the financial contract unenforceable, and the insolvency or bankruptcy of a counterparty could preempt otherwise enforceable contract rights); (4) operational risk (inadequate controls, deficient procedures, human error, system failure or fraud); (5) documentation risk (exposure to losses resulting from inadequate documentation); (6) liquidity risk (exposure to losses created by inability to the derivative); (7) systemic risk (the risk that financial in one institution or a major market will cause financial to the financial system); (8) concentration risk (exposure to from the concentration of closely related risks such as exposure to a particular industry or exposure linked to a particular entity); and (9) settlement risk (the risk faced when one party to a transaction has performed its obligations under a contract but has not yet received value from its counterparty).
The failure to comply with the USA Patriot Act may subject Grant Park to substantial negative consequences.
The USA Patriot Act of 2001, as amended (the “Patriot Act”) contains, among other things, provisions intended to safeguard against the laundering of money in the United States by individuals involved in illicit or illegal activities. The Patriot Act focuses on individuals wishing to invest their money in U.S. ventures and provides that domestic investment entities (such as Grant Park) that accept money from such individuals must conduct a substantial investigation to determine whether prospective investors are, or may be, engaged in illicit or illegal activities. If the general partner inadvertently admits a prohibited person or entity as an investor in Grant Park, substantial negative consequences to Grant Park could result, including but not limited to the freezing and/or forfeiture of all of Grant Park’s assets as well as reputational harm. Grant Park undertakes reasonable efforts to safeguard itself from being used by individuals to disguise their or activities. these efforts, however, there is no guarantee that individuals or those engaged in or activities will be screened from participating as investors in Grant Park.
The failure to comply with economic sanction laws and the U.S. FCPA may subject Grant Park to substantial negative consequences .
Economic sanction laws in the United States and other jurisdictions may prohibit the general partner and Grant Park from transacting with or in certain countries and with certain individuals and companies. In the United States, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers and enforces laws, Executive Orders and regulations establishing U.S. economic and trade sanctions. Such sanctions prohibit, among other things, transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals identified by OFAC. In addition, certain programs administered by OFAC prohibit dealing with individuals or entities in certain countries regardless of whether such individuals or entities have been specifically identified by OFAC.
The general partner and Grant Park are committed to complying with the U.S. Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws, anti-bribery laws and regulations, as well as anti-boycott regulations, to which they are subject. In recent years, the U.S. Department of Justice and the SEC have devoted greater resources to enforcement of the FCPA. While the general partner will generally seek to comply with the FCPA, such efforts may not be effective in all instances to prevent violations. In addition, despite the general partner’s efforts, trading advisors may engage in activities that could result in FCPA violations. Any determination that the general partner or Grant Park has violated the FCPA or other applicable laws could subject Grant Park to, among other things, various penalties, fines, litigation or general of investor confidence, any one of which could materially affect Grant Park’s ability to its investment objective and/or conduct its operations.
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Tax Risks
Partnership treatment is not assured.
Grant Park has previously received an opinion of counsel, based on factual representations and customary assumptions, to the effect that, under current U.S. federal income tax law, Grant Park will be treated as a partnership for U.S. federal income tax purposes, provided that (a) at least 90% of Grant Park’s annual gross income has previously consisted of and currently consists of “qualifying income” as defined in Section 7704 of the Internal Revenue Code of 1986, as amended, and (b) Grant Park is organized and operated in accordance with its governing agreements and applicable law. The general partner believes it is likely, but not certain, that Grant Park will continue to meet the foregoing test. However, an opinion of counsel is subject to changes in applicable tax laws and is not binding on the Internal Revenue Service, any other taxing authority or any court.
If Grant Park were to be treated as an association or publicly traded partnership taxable as a corporation instead of as a partnership for U.S. federal income tax purposes, (1) its net taxable income would be taxed at corporate income tax rates, thereby substantially reducing its profitability, (2) limited partners would not be allowed to deduct their share of losses, and (3) distributions to limited partners, other than liquidating distributions, would constitute dividends to the extent of Grant Park’s current and accumulated earnings and profits and would be taxable as such.
Limited partners’ tax liability may exceed their cash distributions.
Cash is distributed to limited partners at the sole discretion of the general partner, and the general partner does not currently intend to distribute cash to limited partners. Limited partners nevertheless will be subject to federal income tax, and in some cases, state, local or foreign income tax, on their share of Grant Park’s net income and gain each year, regardless of whether they redeem any units or receive any cash distributions from Grant Park.
Limited partners could owe taxes on their share of Grant Park’s ordinary income despite overall losses.
Gain or loss on domestic futures and options on futures as well as on most foreign currency contracts will generally be taxed as capital gains or losses for U.S. federal income tax purposes. Interest income and other ordinary income earned by Grant Park generally cannot be offset by capital losses. Consequently, limited partners could owe taxes on their allocable share of Grant Park’s ordinary income for a calendar year even if Grant Park reports a net trading loss for that year. Also, particular operating expenses of Grant Park, such as trading advisor consulting and incentive fees, may not be deductible, or may be subject to limitations, for purposes of calculating limited partners’ federal and/or state and local income tax liability.
There is the possibility of a tax audit.
No assurances can be given that Grant Park’s tax returns will not be audited by a taxing authority or that an audit will not result in adjustments to Grant Park’s tax returns. Any adjustments resulting from an audit may require each limited partner to file an amended tax return and to pay additional taxes plus interest, which generally is not deductible, and might result in an audit of the limited partner’s own tax return. An audit of a limited partner’s tax return could result in adjustments of non-Grant Park, as well as Grant Park, income and deductions.
Procedures and rules that apply in the case of an audit of a partnership for taxable years beginning after December 31, 2017 generally provide that assessment and collection of additional income taxes will be made at the partnership level rather than at the partner level. As a result, any such income tax assessment would be borne by limited partners that own units of Grant Park at the time of such assessment, which may be different persons, or persons with different ownership percentages, than persons owning units for the tax year at issue.
Tax law changes could affect an investment in Grant Park.
Legislative, regulatory or administrative changes to the tax laws could be enacted or promulgated at any time, either prospectively or with retroactive effect, and may adversely affect Grant Park and/or its investors. The individual and collective impact of such changes is uncertain and may not become evident for some period of time.
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