CAMPBELL FUND TRUST Annual Report: A Snapshot for Investors

Unlock the essentials of CAMPBELL FUND TRUST's annual report with our plain-language breakdown. This summary aims to give you a clear picture of the fund's activities and financial health, highlighting key insights to help you understand its operations.

1. Business Overview: What CAMPBELL FUND TRUST Does

CAMPBELL FUND TRUST operates as an investment fund, primarily aiming to grow investors' capital through strategic investments in a diverse portfolio of financial instruments. Unlike a traditional company, it does not sell products or services; it manages capital.

Investment Focus: The fund employs a broad investment approach, spanning various asset classes and global markets:

• Fixed Income: The fund allocates a significant portion to debt instruments, including:
  • Government Bonds: Such as generally safe U.S. Treasury Bills.
  • Corporate Bonds: Loans to companies across a wide array of sectors (financial services, real estate, technology, industrials, materials, consumer discretionary, utilities, communications, consumer staples, healthcare, energy) and geographies (U.S., U.K., Japan, Canada, Germany, Netherlands, France, Ireland, Switzerland, Australia).
  • Commercial Paper: Short-term, unsecured corporate debt from various sectors and countries.
  • Asset-Backed Securities (ABS): Investments backed by pools of assets like auto or equipment loans.
• Cash & Equivalents: The fund maintains liquidity by holding deposits in banks (U.S., Japan, France) and investing in Money Market Funds.
• Derivatives: The fund actively uses complex financial instruments for various purposes, including hedging, income generation, and potentially speculation:
  • Futures Contracts: Agreements to buy or sell assets (interest rates, metals, energy, agriculture, stock indices) at a future date, taking both "long" (expecting price increases) and "short" (expecting price decreases) positions.
  • Foreign Exchange Forwards: Agreements to exchange currencies at a future date at a set rate, also used for both long and short positions.
  • Credit Default Swaps (CDS): These act like insurance against a bond defaulting. The fund both "buys protection" (to hedge its own credit exposure or bet on a company's struggles) and "sells protection" (taking on credit risk for a fee, betting a company will remain solvent). This includes exposure to both investment-grade (lower risk) and non-investment-grade (higher risk) credit.
  • Interest Rate Swaps: Used to exchange fixed interest payments for variable ones, or vice-versa, to manage interest rate exposure.

Capital Units: CAMPBELL FUND TRUST offers various "Capital Units" (Class A, Class B, Class D, Class W). These typically represent different share classes, each designed for specific investor types and often featuring distinct fee structures, minimum investments, or distribution policies.

2. Risk Factors

CAMPBELL FUND TRUST's complex investment strategy exposes it to several significant risks that could adversely affect its performance and the value of its Capital Units.

• Market Risk: The general risk that investment values will decline due to overall market movements, economic downturns, or other broad market factors.
• Interest Rate Risk: Changes in interest rates significantly impact the value of the fund's extensive bond holdings and interest rate derivatives. Rising rates generally decrease bond values, while falling rates can reduce income from new investments.
• Credit Risk: The risk that bond issuers or derivative counterparties may default on their obligations, causing a loss for the fund. The fund's involvement in "non-investment grade" credit default swaps signals its willingness to assume higher credit risk for potentially greater returns.
• Liquidity Risk: The risk that the fund cannot quickly sell certain investments at a fair price, especially less liquid assets or during market stress. This could impact its ability to meet redemption requests.
• Derivatives Risk: Derivatives are highly volatile and leverage the fund's exposure, potentially leading to losses exceeding the initial investment. Their complex nature also introduces operational, valuation, and counterparty risks.
• Foreign Exchange Risk: Investments in non-U.S. assets and foreign exchange derivatives expose the fund to currency fluctuations, which can either enhance or diminish returns upon conversion back to the fund's base currency.
• Counterparty Risk: The risk that a party to a derivatives contract or other financial transaction fails to meet its obligations, potentially causing the fund a loss.
• Valuation Risk (Level 3 Assets): Valuing Level 3 assets (those using unobservable inputs) is subjective, meaning their reported value could be inaccurate and lead to potential write-downs or significant adjustments.
• Operational Risk: Risks arise from inadequate or failed internal processes, people, and systems, or from external events.
• Regulatory Risk: Changes in laws, regulations, or government policies could affect the fund's operations, investment strategies, or asset values.

3. Financial Health

Asset Valuation: The fund values its assets using a three-tiered "Fair Value Inputs" system, which reflects valuation reliability:

• Level 1: Assets valued using readily available, quoted prices in active markets (e.g., publicly traded stocks, highly liquid government bonds). These represent the most reliable valuations.
• Level 2: Assets valued using observable inputs other than quoted prices, such as prices for similar assets in less active markets or observable market data like interest rates and yield curves.
• Level 3: Assets valued using unobservable inputs and models, relying significantly on management's assumptions. These are the most subjective and carry the highest valuation risk.

This summary provides a foundational understanding of CAMPBELL FUND TRUST's investment approach and risks. Use this information to inform your investment decisions.