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Owl Creek Asia letter

Owl Creek Asia letter

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Published by DealBook

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Categories:Types, Business/Law
Published by: DealBook on Dec 23, 2011
Copyright:Attribution Non-commercial

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05/02/2013

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1
December
 
9,
 
2011
 
Performance
 
Since
 
Inception
1
 
HSIKMXCN TPX MXAP
Gross Net Gross Net Gross Net
29.06% 36.30%
16.42% 4.37% Jul
Dec
 
2007* 22.32% 17.86% 23.36% 18.69% 26.28% 21.02%
46.38%
50.74%
40.70%
41.57% 2008
21.64%
21.64%
20.98%
20.98%
20.54%
20.54%56.51% 62.45% 7.68% 37.86% 2009 23.64% 23.64% 25.47% 25.47% 34.12% 32.28%8.55% 5.06% 0.75% 17.30% 2010
 
5.80% 5.16% 7.69% 6.21% 8.04% 6.46%
1.79%
0.24% 1.26%
0.77% Jan
11
0.32%
0.32%
0.32%
0.32%
0.33%
0.33%
0.46%
1.89% 4.56% 0.81% Feb
11 1.36% 1.15% 1.41% 1.19% 1.44% 1.22%1.11% 5.18%
7.62%
0.79% Mar
11 0.40% 0.32% 0.55% 0.44% 0.55% 0.44%0.99% 1.50%
2.01% 2.84% Apr
11 5.51% 4.42% 5.64% 4.53% 5.71% 4.58%0.64% 0.47%
1.56%
2.03% May
11 0.88% 0.71% 1.34% 1.08% 1.43% 1.16%
4.75%
3.62% 1.32%
0.69% Jun
11 0.48% 0.36% 0.54% 0.42% 0.53% 0.41%0.19%
0.65%
0.92% 1.54% Jul
11 5.00% 4.06% 5.08% 4.14% 5.07% 4.13%
8.24%
9.37%
8.38%
8.29% Aug
11
6.74%
5.53%
7.06%
5.80%
7.09%
5.83%
13.77%
16.80%
0.37%
8.91% Sep
11
12.62%
11.56%
12.79%
11.64%
12.90%
11.73%12.94% 14.86% 0.38% 7.67% Oct
11 6.29% 6.29% 6.50% 6.50% 6.79% 6.79%
9.23%
8.28%
4.65%
6.52%EstimatedNov
11
0.3%
0.3%
0.4%
0.4%
0.5%
0.5%
19.40%
20.15%
17.26%
15.21%EstimatedYTD
 
thru
 
Nov
11
1.6%
1.6%
1.1%
1.1%
1.0%
1.0%
5.24%
8.50%
55.51%
16.40%Estimated
 
ITD
 
thru
 
Nov
1123.4% 18.1% 30.2% 23.6% 44.0% 34.1%Owl
 
Creek
 
Asia
 
I,
 
LP* Owl
 
Creek
 
Asia
 
II,
 
LP*Owl
 
Creek
 
Asia
 
Fund,
 
Ltd*
 
*
 
Inception
 
Date
 
was
 
July
 
2,
 
2007.
 
Dear
 
Friends
 
and
 
Investors:
 
For
 
the
 
third
 
quarter
 
of 
 
2011,
 
the
 
Owl
 
Creek
 
Asia
 
Fund,
 
Ltd.
 
(the
 
“Fund”)
 
was
 
down
 
15.0%
 
gross
 
and
 
13.4%
 
net
 
bringing
 
our
 
performance
 
for
 
the
 
year
 
to
6.8%
 
gross
 
and
6.8%
 
net,
 
compared
 
to
 
MSCI
 
China
 
down
 
24.2%
 
and
 
TOPIX
 
down
 
13.5%
 
through
 
September.
 
In
 
October
 
and
 
November,
 
the
 
Fund
 
was
 
up
 
an
 
estimated
 
6.3%
 
gross
 
and
 
net
 
bringing
 
our
 
performance
 
for
 
the
 
year
 
to
 
an
 
estimated
1.0%
 
gross
 
and
 
net
 
versus
 
MSCI
 
China
 
down
 
20.2%
 
and
 
the
 
TOPIX
 
down
 
17.3%.
 
640 Fifth Avenue, 20
th
Floor New York, NY 10019T212 688-2550F212 753-2760
 
2
Net
net,
 
the
 
Fund
 
has
 
managed
 
through
 
the
 
volatile
 
markets
 
so
 
far
 
this
 
year
 
to
 
deliver
 
essentially
 
flat
 
performance,
 
outperforming
 
the
 
markets
 
on
 
a
 
relative
 
basis,
 
and
 
protecting
 
capital
 
which
 
sets
 
up
 
the
 
Fund
 
with
 
a
 
portfolio
 
that
 
has
 
significant
 
upside
 
potential
 
in
 
2012.
 
On
 
the
 
positive
 
side,
 
the
 
Fund
 
has
 
been
 
able
 
to
 
generate
 
alpha
 
on
 
both
 
the
 
long
 
and
 
short
 
side
 
this
 
year.
 
We’ve
 
had
 
a
 
fairly
 
high
 
hit
 
ratio
 
on
 
our
 
single
 
name
 
longs
 
and
 
shorts
 
which
 
has
 
produced
 
the
 
Fund’s
 
flattish
 
performance
 
despite
 
having
 
average
 
net
 
equity
 
exposure
 
of 
 
50
60%
 
for
 
the
 
year.
 
In
 
particular,
 
Sun
 
Art,
 
Brilliance,
 
Aiful,
 
and
 
QR
 
National
 
have
 
been
 
large
 
contributors
 
on
 
the
 
long
 
side,
 
and
 
on
 
the
 
short
 
side,
 
Taiwanese
 
airlines,
 
construction
 
machinery,
 
and
 
the
 
heavy
 
duty
 
truck
 
segment
 
in
 
China
 
have
 
worked
 
out
 
well.
 
What
 
we
 
have
 
gotten
 
wrong
 
is
 
our
 
large
 
net
 
exposure
 
to
 
the
 
equity
 
markets,
 
which
 
was
 
the
 
reason
 
for
 
the
 
Fund’s
 
drawdown
 
in
 
August
 
and
 
September.
 
We
 
did
 
not
 
have
 
single
 
names
 
that
 
performed
 
disproportionately
 
worse
 
than
 
their
 
beta
exposure
 
would
 
suggest
 
nor
 
did
 
we
 
have
 
an
 
issue
 
with
 
our
 
gross
 
exposures.
 
We
 
were
 
simply
 
too
 
net
 
long
 
going
 
into
 
a
 
severe
 
downturn
 
in
 
the
 
equity
 
markets.
 
Inception
 
Date
 
was
 
July
 
2,
 
2007.
 
The
 
graph
 
above
 
reflects
 
the
 
composition
 
of 
 
Owl
 
Creek
 
Asia
 
Master
 
Fund,
 
Ltd's
 
portfolio
 
at
 
each
 
month
 
end.
 
The
 
composition
 
of 
 
the
 
portfolio
 
will
 
vary
 
daily.
 
Exposure
 
includes
 
the
 
notional
 
exposure
 
of 
 
total
 
return
 
swaps
 
and
 
futures
 
contracts.
 
As
 
we
 
have
 
written
 
about
 
in
 
our
 
previous
 
letters,
 
we
 
believed
 
this
 
exposure
 
was
 
 justified
 
because
 
of 
 
the
 
compelling
 
and
 
event
driven
 
nature
 
of 
 
the
 
bottoms
up
 
opportunities
 
we
 
found
 
and
 
our
 
top
 
down
 
view
 
that
 
the
 
markets
 
would
 
do
 
okay.
 
While
 
we
 
have
 
gotten
 
the
 
bottoms
up
 
mostly
 
right,
 
our
 
top
 
down
 
view
 
has
 
clearly
 
been
 
wrong
 
this
 
year.
 
We’ve
 
always
 
believed
 
our
 
strengths
 
are
 
in
 
the
 
bottoms
 
up,
 
the
 
micro…
 
the
 
alpha.
 
But
 
by
 
having
 
such
 
a
 
large
 
net
 
equity
 
exposure,
 
we
 
were
 
making
 
implicit
 
bets
 
on
 
the
 
macro…
 
on
 
the
 
beta…
 
that
 
we’ve
 
had
 
less
 
conviction
 
in.
 
We
 
feel
 
that
 
by
 
having
 
a
 
smaller
 
net
 
exposure,
 
our
 
performance
 
will
 
be
 
more
 
representative
 
of 
 
our
 
strengths
 
and
 
that
 
we
 
will
 
also
 
be
 
able
 
to
 
manage
 
through
 
the
 
volatility
 
of 
 
the
 
markets
 
more
 
effectively.
 
We
 
remain
 
long
biased
 
and
 
do
 
want
 
some
 
market
 
exposure,
 
but
 
given
 
how
 
uncertain
 
we
 
expect
 
the
 
macro
 
environment
 
to
 
remain
 
for
 
the
 
foreseeable
 
future
 
(years,
 
not
 
months),
 
we
 
think
 
it
 
is
 
prudent
 
to
 
run
 
with
 
smaller
 
nets
 
going
 
forward.
 
So,
 
we
 
expect
 
to
 
run
 
with
 
 
3
a
 
narrower
 
range
 
of 
 
net
 
equity
 
exposure
 
going
 
forward,
 
in
 
the
 
0
50%
 
range
 
versus
 
our
 
historical
 
range
 
of 
 
about
 
0
80%.
 
At
 
the
 
end
 
of 
 
November,
 
our
 
net
 
equity
 
exposure
 
was
 
approximately
 
35%.
 
We
 
continue
 
to
 
like
 
the
 
micro
 
stories
 
behind
 
our
 
names,
 
on
 
both
 
the
 
long
 
and
 
short
 
side,
 
and
 
feel
 
that
 
the
 
market
 
is
 
pricing
 
in
 
a
 
much
 
higher
 
likelihood
 
of 
 
a
 
China
 
hard
 
landing
 
than
 
we
 
believe
 
is
 
warranted.
 
Over
 
the
 
last
 
three
 
months,
 
we
 
have
 
visited
 
about
 
half 
 
of 
 
our
 
portfolio
 
companies
 
and
 
have
 
spoken
 
with
 
all
 
of 
 
them
 
and
 
feel
 
strongly
 
that
 
our
 
investment
 
theses
 
are
 
largely
 
unchanged.
 
We
 
have
 
used
 
the
 
recent
 
volatility
 
in
 
these
 
markets
 
to
 
adjust
 
our
 
portfolio,
 
adding
 
to
 
high
 
conviction
 
names
 
such
 
as
 
China
 
Shanshui,
 
Visteon,
 
Far
 
East
 
Horizon,
 
and
 
Hui
 
Xian
 
REIT
 
while
 
also
 
trimming
 
our
 
winners
 
such
 
as
 
PICC
 
and
 
Brilliance.
 
We’ve
 
added
 
a
 
number
 
of 
 
single
 
name
 
shorts
 
across
 
the
 
construction
 
machinery,
 
consumer,
 
and
 
telecom
 
sectors
 
to
 
replace
 
the
 
index
 
hedges
 
we
 
put
 
on
 
over
 
the
 
last
 
few
 
months.
 
Single
 
name
 
shorts
 
currently
 
represent
 
about
 
85%
 
of 
 
our
 
short
 
book.
 
While
 
the
 
external
 
environment
 
(Europe
 
and
 
US)
 
continues
 
to
 
drive
 
liquidity
 
and
 
the
 
markets
 
in
 
Asia,
 
China
 
remains
 
very
 
much
 
in
 
flux
 
as
 
the
 
year
 
long
 
tightening
 
by
 
the
 
central
 
government
 
has
 
had
 
its
 
desired
 
effect,
 
a
 
slowing
 
Chinese
 
economy
 
and
 
lower
 
inflation.
 
CPI
 
in
 
October
 
was
 
5.5%,
 
down
 
from
 
the
 
peak
 
of 
 
6.5%
 
in
 
July,
 
and
 
we
 
expect
 
it
 
to
 
be
 
around
 
4%
 
by
 
the
 
beginning
 
of 
 
2012.
 
While
 
the
 
very
 
early
 
stages
 
of 
 
easing
 
are
 
starting,
 
liquidity
 
conditions
 
remain
 
tight
 
in
 
China.
 
Property
 
sales
 
continue
 
to
 
slow
 
and
 
housing
 
inventories
 
rise
 
with
 
the
 
home
 
purchase
 
restriction
 
being
 
the
 
primary
 
limiting
 
factor.
 
We
 
expect
 
the
 
next
 
internal
 
catalyst
 
for
 
the
 
Chinese
 
market
 
to
 
be
 
easing
 
in
 
some
 
form
 
of 
 
reserve
 
rate
 
requirement
 
cuts,
 
a
 
loosening
 
in
 
housing,
 
and
 
fiscal
 
stimulus.
 
We
 
remain
 
convinced
 
that
 
a
 
hard
 
landing
 
in
 
China
 
is
 
not
 
in
 
the
 
cards,
 
as
 
the
 
slowdown
 
is
 
primarily
 
self 
inflicted
 
through
 
the
 
tightening
 
which
 
leaves
 
the
 
government
 
room
 
to
 
ease.
 
China’s
 
position
 
contrasts
 
starkly
 
with
 
both
 
Europe
 
and
 
the
 
US,
 
who
 
have
 
zero
 
bound
 
interest
 
rates
 
and
 
huge
 
budget
 
deficits,
 
which
 
makes
 
both
 
monetary
 
and
 
fiscal
 
stimulus
 
exceedingly
 
difficult.
 
On
 
November
 
30,
 
China
 
announced
 
a
 
cut
 
in
 
its
 
reserve
 
rate
 
requirement
 
by
 
50
 
bps
 
which
 
in
 
isolation
 
is
 
not
 
that
 
impactful,
 
but
 
we
 
believe
 
this
 
signals
 
the
 
official
 
beginning
 
of 
 
easing.
 
Owl
 
Creek
 
Flagship
 
Funds
 
Owl
 
Creek
 
Overseas
 
Fund,
 
Ltd.
 
was
 
down
 
16.5%
 
net
 
in
 
the
 
third
 
quarter
 
and
 
is
 
down
 
an
 
estimated
 
13.0%
 
YTD
 
net
 
through
 
November
 
compared
 
to
 
1.1%
 
for
 
the
 
S&P
 
500.
 
The
 
flagship
 
funds
 
have
 
assets
 
of 
 
$5.1
 
billion
 
as
 
of 
 
December
 
1.
 
In
 
Conclusion
 
The
 
Asia
 
funds
 
have
 
assets
 
of 
 
$325
 
million
 
as
 
of 
 
December
 
1.
 
As
 
always,
 
please
 
do
 
not
 
hesitate
 
to
 
contact
 
us
 
with
 
whatever
 
questions
 
you
 
may
 
have
 
and
 
call
 
or
 
email
 
Kim
 
Smith
 
(kims@owlcreeklp.com)
 
if 
 
you
 
have
 
any
 
questions
 
about
 
investing
 
in
 
the
 
funds.
 
We’d
 
like
 
to
 
thank
 
you
 
for
 
your
 
continued
 
support
 
in
 
our
 
team
 
and
 
our
 
process.
 
Sincerely,
 
Jeff Altman Jeff Lee
Jeffrey
 
A.
 
Altman
 
Jeffrey
 
F.
 
Lee
 
…and
 
the
 
rest
 
of 
 
the
 
Owl
 
Creek
 
Team.
 

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