10-Q: Man-AHL Diversified I L.P. Reports Q3 Gain Amid YTD Loss

Man-AHL Diversified I L.P. reported a net gain of $6.6 million for Q3 2025, a significant turnaround from the prior year, though year-to-date net assets decreased by over $16.5 million due to redemptions and earlier losses.

Summary

• Total partners' capital decreased by $16,502,259 from $76,261,491 at December 31, 2024, to $59,759,232 at September 30, 2025.
• For the nine months ended September 30, 2025, the Partnership recorded a net loss from operations of $4,121,983, compared to a net gain of $2,830,547 for the same period in 2024.
• For the three months ended September 30, 2025, the Partnership reported a net gain from operations of $6,616,104, a substantial improvement from a net loss of $8,906,015 in the prior year's comparable quarter.
• Net asset value per unit for Class A Series 1 decreased to $4,650.03 at September 30, 2025, from $4,868.88 at December 31, 2024.
• The total return for Class A Series 1 for the three months ended September 30, 2025, was 11.73%, a significant improvement from (9.81)% in the prior year.
• The total return for Class A Series 1 for the nine months ended September 30, 2025, was (4.49)%, a decline from 2.90% in the prior year.
• The AHL Diversified Program, a quantitative trend-following system, trades globally across market sectors including currencies, bonds, energies, stock indices, interest rates, credit, metals, and agriculture.
• The Partnership's assets allocated to initial margin for open trading positions totaled $19,350,184.45, representing 32.38% of capitalization as of September 30, 2025.

Sentiment

Score: 4

Explanation: While the most recent quarter (Q3 2025) showed a strong positive turnaround, the overall nine-month performance for 2025 reflects a significant net loss and a substantial decrease in partners' capital, largely driven by redemptions and earlier losses. This indicates a challenging year-to-date performance despite recent improvements.

Positives

• The Partnership achieved a net gain from operations of $6,616,104 for the three months ended September 30, 2025, a strong rebound from a net loss of $8,906,015 in the same period last year.
• Total return for Class A Series 1 units significantly improved to 11.73% for Q3 2025, compared to a negative 9.81% in Q3 2024.
• Performance in August and September 2025 was positive, driven by gains in equities, commodities, and currencies, with specific strong contributions from precious metals, Asian indices, and short dollar positioning.
• Management fees and servicing fees decreased for both the three-month and nine-month periods ended September 30, 2025, indicating potentially lower costs or reduced asset base.

Negatives

• Total partners' capital decreased by $16,502,259 for the nine months ended September 30, 2025, primarily due to redemptions of $12,442,397 and a net loss from operations of $4,121,983.
• The Partnership recorded a net loss from operations of $4,121,983 for the nine months ended September 30, 2025, a significant decline from a net gain of $2,830,547 in the comparable prior-year period.
• Net asset value per unit for all series (Class A Series 1, Class A Series 2, Class B Series 1) decreased from December 31, 2024, to September 30, 2025.
• Net investment income allocated from the Trading Company decreased for both the three-month and nine-month periods ended September 30, 2025, compared to 2024.
• July 2025 performance was negative, with losses in FX (broad-based short dollar, long GBP, SGD, Euro) and fixed income (long Euribor, SONIA, Swedish swaps, Italian BTPs).

Risks

• Investing in the Partnership is speculative and involves substantial risks, with the possibility of losing the entire investment.
• Markets are volatile and difficult to predict, influenced by various factors including interest rates, governmental policies, weather, and geopolitical events.
• Trading is highly leveraged, meaning a small price movement can result in immediate and substantial loss, potentially exceeding the amount invested.
• Markets may be illiquid at times, making it difficult to execute or liquidate open positions at desired prices, especially due to daily price fluctuation limits or trading suspensions.
• Speculative position limits may restrict futures trading, potentially requiring liquidation of positions at unfavorable times.
• Cash flow issues may necessitate premature closing of positions due to short-term margin requirements, potentially leading to substantial losses.
• Trading decisions based on technical, trend-following strategies are vulnerable to non-trending or 'whip-saw' markets, leading to unprofitable transactions and increased expenses.
• Model and Data Risk: reliance on proprietary mathematical quantitative models and third-party data, which are prone to errors, omissions, imperfections, and malfunctions (System Events) that can adversely affect performance.
• Trade Systems and Execution of Orders: proprietary algorithmic trading systems may malfunction or fail to react adequately to market events, leading to severe losses or missed opportunities.
• Trade Error Risk: occasional trading errors are inherent due to the complexity, speed, and volume of transactions.
• Trading in OTC markets exposes the Partnership to greater risks, including less governmental regulation, absence of clearinghouse guarantees, and higher credit failure risk.
• Enhanced regulation of OTC derivatives markets (e.g., EMIR, Dodd-Frank) may increase costs, make highly tailored transactions more difficult, and introduce uncertainty.
• Exchanges for Physicals/Swaps/Risk (EFP/EFS/EFR) involve counterparty credit risk and may not be deemed accepted by the clearinghouse until the next business day.
• Options on futures contracts may be more volatile than futures contracts, with sellers/writers facing unlimited risk.
• Trading on non-U.S. exchanges and markets exposes the Partnership to currency exchange rate fluctuations, exchange controls, less regulatory oversight, and counterparty credit risk.
• Institutional Risks: custodians (banks, brokers) may encounter financial difficulties that impair the Partnership's operations or capital position.
• Counterparty Risk: the inability of counterparties to perform on transactions, particularly uncleared swap and currency forward transactions, could lead to substantial losses.
• Affiliated Parties Conflicts of Interest: the General Partner and Trading Advisor are affiliates, creating potential conflicts in managing the Partnership and setting fees.
• MiFID II: new regulatory obligations may impact investment strategy and lead to increased compliance obligations and expenses.
• Effects of Health Crises and Other Catastrophic Events: such events can disrupt markets, interrupt operations, reduce Net Asset Value, limit liquidity, and potentially suspend redemptions.
• Tariffs and Trade Wars: increased economic volatility and trade barriers could adversely affect the global economy and the Partnership's financial performance.

Future Outlook

The AHL Diversified Program aims to deliver substantial capital growth for commensurate levels of volatility over the medium term, independent of stock and bond market movements, through speculative trading of various financial derivatives. The General Partner believes that market conditions with pronounced price trends offer a greater likelihood of profitability. The program may also, to a limited extent, invest in stocks in the future. The General Partner anticipates that G-7 interest rates will remain the primary market exposure for the foreseeable future.

Management Comments

• "Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report."
• "Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report."
• "The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures... and internal control over financial reporting... for the registrant and have designed such controls and procedures... to ensure that material information... is made known to us... and to provide reasonable assurance regarding the reliability of financial reporting."
• "The registrants other certifying officer(s) and I have disclosed... all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting... and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting."

Industry Context

The Partnership operates a quantitative, trend-following strategy, which typically thrives in markets with sustained price movements. The report highlights mixed market conditions, with periods of strong trends in specific sectors like precious metals and certain stock indices, but also challenging periods in FX and fixed income due to policy uncertainty and interest rate fluctuations. The fund's performance is directly tied to its ability to identify and capitalize on these trends across a diversified portfolio of global markets, including currencies, bonds, energies, stock indices, interest rates, credit, metals, and agriculture. The mention of 'risk assets advance' and 'S&P 500 and Korean Kospi hitting all-time highs' in June 2025 suggests a generally favorable environment for equity-linked strategies during that month, while 'broad-based short dollar position generated losses' in July indicates challenges for certain currency strategies.

Comparison to Industry Standards

• NA

Corporate Governance

Related Party Transactions

• Man Investments (USA) Corp. serves as the General Partner of the Partnership and the Trading Company, and is a subsidiary of Man Group plc.
• AHL Partners LLP (the Advisor) acts as trading advisor to the Partnership and the Trading Company, and is an affiliate of the General Partner and a subsidiary of Man Group plc.
• Man Investments Inc. (MII), an affiliate of the Advisor and General Partner, serves as the placement agent for all classes of units of the Partnership and receives monthly servicing fees.
• Management fees are paid to the Advisor and General Partner, and servicing fees are paid to MII, all of which are affiliates.

Stakeholder Impact

• Shareholders (Limited Partners) experienced a decrease in total partners' capital and net asset value per unit year-to-date, indicating a negative impact on their investment value despite a positive recent quarter.
• The General Partner and Advisor (Man Investments (USA) Corp. and AHL Partners LLP) continue to earn management and servicing fees, which, while lower year-over-year, represent ongoing revenue for these affiliated entities.
• The speculative nature and high leverage of the trading activities expose investors to substantial risk, including the potential loss of their entire investment.
• The reliance on quantitative models and data, along with the inherent risks of trading in OTC and non-U.S. markets, could impact the Partnership's ability to generate consistent returns for its limited partners.

Next Steps

• The Partnership will continue to engage in speculative trading of futures and forward contracts and related instruments through its investment in Man-AHL Diversified Trading Company L.P. pursuant to the AHL Diversified Program.
• The General Partner will continue to oversee the operations and management of the Partnership.
• The Partnership's units are continuously offered as of the first business day of each month, and limited partners may redeem units as of the end of any month with 10 days prior written notice.

Key Dates

Recommendation

The Partnership experienced a significant net loss and a substantial decrease in partners' capital year-to-date, indicating a challenging period. While the most recent quarter showed a strong positive turnaround, the overall performance for the nine-month period is negative. The fund operates a highly speculative, leveraged, and complex quantitative trading strategy with inherent risks, including model risk and counterparty risk. Given the volatility and the significant year-to-date capital erosion, a 'hold' recommendation is appropriate. Investors should monitor future performance closely to see if the positive momentum from Q3 can be sustained and if the fund can recover its year-to-date losses, while also carefully considering the high-risk profile of this speculative commodity pool.

Keywords

Hedge Fund, Commodity Pool, Managed Futures, Quantitative Trading, Trend Following, Derivatives, Futures Contracts, Forward Contracts, Swap Agreements, SEC Filing, 10-Q, Financial Performance, Net Asset Value, Risk Management, Alternative Investment