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GLOBAL DIVERSIFIED FUTURES FUND L.P. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

May 14, 2014

Liquidity and Capital Resources

The Partnership does not engage in sales of goods or services. Its only assets are its investments in the Funds and cash. The Fund's do not engage in sales of goods or services. The Funds' only assets are their equity in trading accounts, consisting of cash and cash margin, net unrealized appreciation on open futures contracts, net unrealized appreciation on forward contracts and commodity options purchased, if applicable, and interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investments in the Funds. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the first quarter of 2014.

The Partnership's capital consists of the capital contributions of the partners, as increased or decreased by net income or loss on trading and by expenses, interest income and redemptions of Redeemable Units and distributions of profits, if any.

For the three months ended March 31, 2014, Partnership capital decreased 9.9% from $14,952,043 to $13,471,808. This decrease was attributable to the redemptions of 152.5290 Redeemable Units totaling $201,822, coupled with the net loss of $1,278,413. Future redemptions could impact the amount of funds available for investment in the Funds in subsequent periods.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. The General Partner believes that the estimates utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership's/Funds' significant accounting policies are described in detail in Note 7 of the Financial Statements.

The Partnership records all investments at fair value in its financial statements, with changes in fair value reported as a component of net realized gains (losses) and change in net unrealized gains (losses) in the Statements of Income and Expenses and Changes in Partners' Capital.

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Results of Operations

During the Partnership's first quarter of 2014 the net asset value per Unit decreased 8.6% from $1,436.62 to $1,313.65 as compared to an increase of 0.5% in the first quarter of 2013. The Partnership experienced a net trading loss, before fees and expenses in the first quarter of 2014 of $995,096. Losses were primarily attributable to the Fund's trading of commodity futures in energy, grains, U.S. and non-U.S. interest rates, metals, softs and indices and were partially offset by gains in currencies and livestock. The Partnership experienced a net trading gain, before fees and expenses in the first quarter of 2013 of $456,999. Gains were primarily attributable to the Master's trading of commodity futures in currencies, livestock, metals, softs and indices and were partially offset by losses in energy, grains, U.S. and non-U.S. interest rates.

During the first quarter, the Partnership posted a loss in Net Asset Value per Unit as trading losses in the global stock index, energy, metals, and global interest rate markets more than offset trading gains in the agricultural and currency sectors. The most significant losses were incurred within the global stock index sector, primarily during January, from long positions in U.S., European, and Asian equity index futures as prices declined as economic growth momentum in China weakened and the U.S. Federal Reserve announced measures to further taper its quantitative easing program. Additional losses in the sector were incurred during March from long positions in Asian equity index futures as prices fell amid concern a weakening Chinese manufacturing base would curtail the region's economic output. Within the energy markets, losses were experienced during January from long positions in crude oil and its related products as prices dropped sharply during the first half of the month due to an increase in production from Libya. Additional losses were incurred during March from long positions in crude oil and its related products as prices declined during the first half of the month on reports of higher-than-expected inventory levels in the U.S. Losses within the metals sector were experienced primarily during February due to short positions in aluminum futures as prices advanced after a report showed China's new credit increased to a record during January, boosting demand prospects for industrial metals. Additional losses within the metals sector were incurred during January from long positions in copper futures as weakening manufacturing reports from Asia reduced demand for the industrial metal, thus pushing prices lower. Within the global interest rate markets, losses were recorded during January from short futures positions in U.S. Treasury notes and British Long Gilt as prices advanced as investors sought the safety of fixed income instruments amid growing global uncertainties. Further losses in the sector were incurred during March from long positions in U.S. Treasury note futures as prices declined after comments made by newly appointed Federal Reserve Chair Janet Yellen indicated the Fed may raise interest rates in the near future. A portion of the Partnership's losses for the quarter was offset by trading gains achieved within the agricultural complex during February and March from long positions in lean hog futures as prices moved higher on concerns U.S. pig herds would not be sufficient to meet current world demand. Additional gains were achieved during January from long positions in live cattle futures as prices moved higher over concerns of supply shortfalls in the U.S. Within the currency sector, gains were achieved during March due to long positions in Brazilian real versus the U.S. dollar after the value of the real increased following central bank stimulus measures which caused an inflow of foreign capital into the South American nation. Additional gains were recorded during February from long positions in the British pound, Swiss franc, and euro versus the U.S. dollar as the relative value of these European currencies strengthened against the U.S. currency.

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Commodity markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increases the possibility of profit. The profitability of the Funds depends on the existence of major price trends and the ability of the Advisors to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisors are able to identify them, the Funds expect to increase capital through operations.

Interest income on 80% of the Partnership's allocable portion of the average daily equity maintained in cash in each of the Funds' brokerage accounts during each month was earned at a 30- day U.S. Treasury bill rate determined weekly by CGM based on the average noncompetitive yield on 3-month U.S Treasury bill maturing in 30 days or at the monthly average of the 4-week U.S Treasury bill rate. Interest income for the three months ended March 31, 2014 decreased by $1,311, as compared to the corresponding period in 2013. The decrease in interest income is due to lower U.S. Treasury bill rates and lower average net assets during the three months ended March 31, 2014, as compared to the corresponding period in 2013. The amount of interest income earned by the Partnership/Funds depends on the average daily equity in the Partnership's/Funds' accounts and upon interest rates over which neither the Partnership/Funds nor CGM/MS&Co has control.

Selling agent fees are calculated as a percentage of the Partnership's adjusted net asset value as of the end of each month and are affected by trading performance and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Selling agent fees for the three months ended March 31, 2014 decreased by $58,753, as compared to the corresponding period in 2013. The decrease in brokerage fees was due to lower average net assets during the three months ended March 31, 2014, as compared to the corresponding period in 2013.

Certain clearing fees are based on the number of trades executed by the Advisors for the Funds. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees for the three months ended March 31, 2014, decreased by $4,549, as compared to the corresponding period in 2013. The decrease in clearing fees is primarily due to a decrease in the number of trades during the three months ended March 31, 2014, as compared to the corresponding period in 2013.

Management fees are calculated as a percentage of the Partnership's adjusted net asset value as of the end of each month and are affected by trading performance and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Management fees for the three months ended March 31, 2014 decreased by $33,168, as compared to the corresponding period in 2013. The decrease in management fees was due to lower average net assets during the three months ended March 31, 2014, as compared to the corresponding period in 2013.

Incentive fees are based on the new trading profits generated by each Advisor as defined in the management agreements among the Partnership, the General Partner and each Advisor and are payable annually. There were no incentive fees for the three months ended March 31, 2014 and 2013. To the extent an Advisor incurs a loss for the Partnership, the Advisor will not be paid incentive fees until such Advisor recovers any net loss incurred by the Advisor and earns additional new trading profits for the Partnership.

As of March 31, 2014 and December 31, 2013, the Partnership's assets were allocated among the Advisors in the following approximate percentages:

Advisor March 31, 2014 December 31, 2013 Aspect Capital Limited. $ 5,039,291 37 % $ 5,437,526 36 % Altis Partners (Jersey) Limited. $ 3,839,786 29 % $ 4,318,245 29 % Blackwater Capital Management LLC $ 4,592,731 34 % $ 5,196,272 35 % 20



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Source: Edgar Glimpses


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