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ThirdQuarter2011InvestorLetter
Beai Investoi
Feai uiiven by conceins about Euiope anu a global economic slowuown sent maikets
lowei uuiing the Thiiu Quaitei Against this backuiop most investois ietieateu into a
capital pieseivation shell taking iisk off until ieason ieemeigeu in the maikets In oui
Seconu Quaitei Investoi Lettei sent in }uly we explaineu that oui inclination was to
be cautious in a woilu wheie the maikets weie helu hostage by policymakeis While this
view enableu us to siuestep much of the shaip uecline thioughout the Thiiu Quaitei we
only giauually incieaseu oui exposuies neai the maiket bottom anu thus unueipeifoimeu
uuiing the uiamatic iise in 0ctobei While we have not geneiateu significant gains this
yeai we have piotecteu capital anu exhibiteu mateiially lowei volatility than the maikets
Thiiu Point 0ffshoie YTB Net anu BetaAujusteu Net Exposuies
The chait above shows the evolution of Thiiu Points yeai to uate net anu beta
aujusteu net exposuies anu oui tienu line of taking oveiall iisk off acioss asset classes anu
geogiaphies since miuFebiuaiy which ieveiseu mouestly ovei the past few weeks This
giaph also pioviues a useful snapshot of oui stiategy anu a ieminuei of oui piocess anu
the fiamewoik we have cieateu ovei the yeais to best seive it
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pegging of a Niuule Eastein cuiiency oi a spike in the uemanu foi ueliveiy of physical
commouities Seconu sometimes we will tiy to heuge out inuustiy oi sectoi iisks via
macio tiaues 0ccasionally these types of macio bets aie the most effective way of heuging
out single name positions that aie each vulneiable to a similai iisk factoi A goou example
of this was oui uecision to shoit Aussie Bollai swaptions to piotect companies we owneu
that hau significant uownsiue exposuie if China expeiienceu a haiu lanuing Finally while
we uo not uo this often we will occasionally iuentify attiactive uisciete macio tiaues
which aie moie often shoit oppoitunities than long A iecent example of this was oui
uecision to shoit coppei piices uuiing the last quaitei uue to weakness in Chinese uemanu
We will continue to peppei the poitfolio with each of these thiee types of tiaues which auu
to poitfolio management uuiing this peculiai peiiou in the financial maikets
QuarterlyResults
Set foith below aie oui iesults thiough Septembei anu a biief uiscussion of select
positions that impacteu the poitfolio uuiing the quaitei
Thiiu Point
0ffshoie Funu Ltu SP BFRI
Thiiu Quaitei
YTB Peifoimance
Annualizeu Retuin Since
Inception
The top five winneis foi the peiiou weie uolu Peiegiine Netals Auto Suppliei Shoit
Basket Commouity Shoit A anu Equity Shoit A The top five loseis weie Belphi Coip
Technicoloi Sunoco Inc CIT uioup Inc anu The Nosaic Company
Fiim assets unuei management at Septembei weie billion
SelectPortfolioPositions
Thiiu Point ievealeu owneiship of a stake in the shaies of Yahoo Inc Yahoo in
eaily Septembei Yahoo is the piemiei uigital meuia company with global ieach anu
content leaueiship giowing auuiences anu maiket shaie compelling inteinational assets
anu a ievitalizeu technology platfoim
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Thiiu Points oiiginal B lettei anu amenument fileu alongsiue oui SEC uisclosuie of
owneiship laiu out oui case foi a taigeteu oveihaul of Yahoos existing Boaiu of Biiectois
anu encouiageu the puisuit of stiategic options to maximize Yahoos value Since the filing
of oui lettei meuia outlets have iepoiteu that a stiategic ieview piocess is moving foiwaiu
anu many paities aie inteiesteu in the inuiviuual businesses anu in some cases the whole
of Yahoo
Coipoiate Cieuit
The silvei lining of the iecent equity maiket selloff was the emeigence of new
oppoitunities in the cieuit space We hau a biief winuow to captuie cieuit at levels
attiactive enough to stait iebuiluing oui Bank of Thiiu Point cieuit poitfolio in a
meaningful way foi the fiist time in months
The spieau on the CS BY inuex stoou at BPS at Septembei
th
out fiom only
BPS at }une
th
We believe the uefault iate implieu by these spieaus is ielatively high
given the balance sheet foitification of the last two yeais but absolute yielu levels iemain
on the low siue with the high yielu maiket still only yieluing Against this backuiop
volatility is spiking paiticulaily in lowei quality assets which have fallen like stones single
B cieuits ueclineu uuiing the quaitei anu the CCC poition of the inuex was off neaily
It appeais that cieuit focuseu funus anu peihaps funus with bioauei manuates but too
much capital may have iepeateu the mistakes of the last cieuit cycle anu tiaueu uown in
teims of cieuit quality anu liquiuity in puisuit of yielu We aie seeing eaily signs of
potential stiesseu selling that we suimise aie emeiging fiom these anu othei souices We
aie giatifieu that oui uiscipline anu patience in maintaining low coipoiate cieuit exposuie
will be iewaiueu If past cieuit cycles aie any guiue continueu patience is auvisable We
iemembei quite well how seemingly savvy anu elegant the eaily piints in appeaieu
when ceitain piivate equity fiims puichaseu with leveiage biiuge loans at anu point
uiscounts only to see these investments wipeu away when the othei shoe uioppeu We
aie looking foiwaiu to incieasing oui exposuie as absolute value emeiges
Asset Backeu Secuiities
As the maikets tumbleu uuiing the Thiiu Quaitei moitgages anu othei asset backeu
secuiities suffeieu Falling piices biought about by the uifficult technical enviionment
maskeu continuing impiovement in funuamentals We have solu a small fiaction of oui
bonus in oiuei to ieuuce oveiall gioss exposuie but continue to maintain the majoiity of
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oui moitgage poitfolio Bespite the uifficult technical enviionment cuiiently we believe
funuamentals will pievail in the longteim so we aie iiuing out this stoim
0ui poitfolio still consists piimaiily of uenteu piime ReRemic secuiities which aie
piiceu at a miuteens yielu anu seasoneu subpiime secuiities which aie piiceu at a high
teens yielu We have a small numbei of CNBS bonus anu stuuent loan ABS The cash caiiy
on oui moitgage poitfolio is about BPS pei month
PersonnelUpdate
We aie pleaseu to announce that Chiis Boiieio joineu oui ieseaich team uuiing the Thiiu
Quaitei as an analyst in oui Cieuit gioup Chiis was pieviously an analyst at Bain Capitals
cieuit affiliate Sankaty Auvisois wheie he woikeu on the inuustiials anu metals anu
mining teams Ni Boiieio giauuateu magna cum lauue fiom Yale 0niveisity with a BA in
Economics
Thank you foi youi continueu paitneiship
Sinceiely
ThirdPointLLC
The peifoimance uata piesenteu iepiesents that of Thiiu Point Paitneis LP anu Thiiu Point 0ltia Ltu All PL oi peifoimance iesults
aie baseu on the net asset value of feepaying investois only anu aie piesenteu net of management fees biokeiage commissions
auministiative expenses anu acciueu peifoimance allocation if any anu incluue the ieinvestment of all uiviuenus inteiest anu capital
gains The peifoimance above iepiesents funulevel ietuins anu is not an estimate of any specific investois actual peifoimance which
may be mateiially uiffeient fiom such peifoimance uepenuing on numeious factois All peifoimance iesults aie estimates anu shoulu
not be iegaiueu as final until auuiteu financial statements aie issueu Exposuie uata iepiesents that of Thiiu Point 0ffshoie Nastei Funu
LP
While the peifoimances of the Funus have been compaieu heie with the peifoimance of a wellknown anu wiuely iecognizeu inuex the
inuex has not been selecteu to iepiesent an appiopiiate benchmaik foi the Funus whose holuings peifoimance anu volatility may uiffei
significantly fiom the secuiities that compiise the inuex Investois cannot invest uiiectly in an inuex although one can invest in an inuex
funu uesigneu to closely tiack such inuex
Past peifoimance is not necessaiily inuicative of futuie iesults All infoimation pioviueu heiein is foi infoimational puiposes only anu
shoulu not be ueemeu as a iecommenuation to buy oi sell secuiities All investments involve iisk incluuing the loss of piincipal This
tiansmission is confiuential anu may not be ieuistiibuteu without the expiess wiitten consent of Thiiu Point LLC anu uoes not constitute
an offei to sell oi the solicitation of an offei to puichase any secuiity oi investment piouuct Any such offei oi solicitation may only be
maue by means of ueliveiy of an appioveu confiuential offeiing memoianuum
Infoimation pioviueu heiein oi otheiwise pioviueu with iespect to a potential investment in the Funus may constitute nonpublic
infoimation iegaiuing Thiiu Point 0ffshoie Investois Limiteu a feeuei funu listeu on the Lonuon Stock Exchange anu accoiuingly
uealing oi tiauing in the shaies of that funu on the basis of such infoimation may violate secuiities laws in the 0niteu Kinguom anu
elsewheie
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