CONVEX ASIA FUND LP | OCTOBER 2016 1 FOR PROFESSIONAL INVESTORS ONLY CONVEX ASIA FUND LP Monthly Update – October 2016 Monthly Review The Convex Asia Fund LP, Class ‘A’ was down -0.85%* net for the month of October 2016. Performance attribution CAF Net AF Net AF Net AF Net Outright Net Outright Net Outright Net Outright Net RV Net RV Net RV Net RV Net Outright Outright Outright Outright -0.86 0.86 0.86 0.86% REHEDGE REHEDGE REHEDGE REHEDGE 0.00% 0.00% 0.00% 0.00% Carry Carry Carry Carry 0.0 0.0 0.0 0.02% Relative Value Relative Value Relative Value Relative Value -0. 0. 0. 0.07% VAR VAR VAR VAR -0. 0. 0. 0.28 28 28 28% Skew Skew Skew Skew -0.01 0.01 0.01 0.01% Other Other Other Other 0.08 0.08 0.08 0.08% Vol Vol Vol Vol -0. 0. 0. 0.01 01 01 01% Delta Delta Delta Delta 0.00% 0.00% 0.00% 0.00% -0.85 0.85 0.85 0.85% Tail Tail Tail Tail -0.57 0.57 0.57 0.57% Curve Curve Curve Curve 0.0 0.0 0.0 0.00% CVX CVX CVX CVX 0.00% 0.00% 0.00% 0.00% Spread Spread Spread Spread 0.00% 0.00% 0.00% 0.00% Tact Tact Tact Tact 0.00% 0.00% 0.00% 0.00% VARSPREAD VARSPREAD VARSPREAD VARSPREAD 0.00% 0.00% 0.00% 0.00% -0.86 0.86 0.86 0.86% Term Term Term Term 0.00% 0.00% 0.00% 0.00% Corr Corr Corr Corr 0.00% 0.00% 0.00% 0.00% Tact Tact Tact Tact -0. 0. 0. 0.08 08 08 08% Vol Vol Vol Vol 0.00% 0.00% 0.00% 0.00% -0.0 0.0 0.0 0.07% *Reflects Convex Asia Fund LP – Class ‘A’ net investor returns. Past performance is not a guarantee of future returns, and an investment in the Fund could lose value. Performance attribution is based on the Trading Level of the Fund. Trading Level is defined as the product of the fund’s NAV multiplied by the Funding Factor. The Funding Factor is 1x for Convex Asia Fund LP, while the Funding Factor is 2x for Convex Asia Fund PF LP. Fees and expenses are allocated pro rata with the absolute gross return of each strategy in order to arrive at the net performance figures. Source: City Financial, internal data Market Review Interest Rates With an apparent flick of a switch, bond markets shifted from pricing “deflation” risk to pricing “inflation” risk in October. Despite the general outlook for global growth remaining skewed towards weakness and below trend growth, rates have moved higher. It is yet to be determined if this ‘inflation’ enthusiasm will expand to anything more meaningful. Moves in October were modest, but, to be precise, US 10y bond yields rose 20.3bps, Korean 10y bond yields rose 22.2bps, Euro 10y bonds rose 21.7bps and 10y JGBs rose 2bps under “YCC” (Yield Curve Control) governance. Modest moves in the context of the heavy compression of yields in recent years, but significant given the overall low levels of yields. Given such moves, has the opportunity to hedge higher rates become significantly more restricted? Quite the reverse, we would argue, as the asymmetry that we track in the portfolio has accelerated over the last three months, so much so that we have almost doubled our potential sensitivity to moves higher in rates over that period.
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CONVEX ASIA FUND LP | OCTOBER 2016 1
FOR PROFESSIONAL INVESTORS ONLY
CONVEX ASIA FUND LP
Monthly Update – October 2016
Monthly Review
The Convex Asia Fund LP, Class ‘A’ was down -0.85%* net for the month of October 2016.
Performance attribution
CCCCAF NetAF NetAF NetAF Net Outright NetOutright NetOutright NetOutright Net RV NetRV NetRV NetRV Net
Past performance is no guarantee of future results, and an investment in the Fund could lose value. __________________________ (1) The investment services being offered in connection with this track record are neither offered by, nor associated with, Fortress Investment Group LLC, its affiliates or the directors, officers, employees, members, partners, shareholders or controlling persons of any of the foregoing (collectively, “Fortress”). This track record reflects investment returns resulting from the investment activities of the Fortress Convex Asia Master Fund of which Mr David Dredge as CIO and Mr Julian Ings-Chambers as Managing Director from 11 October 2011 through the termination date, 30 June 2016, on behalf of Fortress clients during the period specified above, during which the track record was maintained by Fortress in the normal course of business solely for Fortress’s use. For the avoidance of doubt, this document is not associated with Fortress’s business in any way, and Fortress will not have any future association with the investment funds or advisory services discussed herein. Further, you should not view the inclusion of the track record herein as an indication that Fortress endorses any such investment fund or services because Fortress expressly disclaims any such endorsement. Fortress disclaims all liability associated with these materials. To the extent you choose to make an investment or otherwise engage in a relationship with any person based on this track record, you do so at your own risk and there can be no assurance that results similar to those in the track record will be achieved.
All performance figures through 2014 and 2015 are based on audited financial information and, with respect to 2016, are based on estimated and unaudited financial information and are, in each case, confidential. The performance data set forth above reflect returns, net of all fees and expenses, for both Class A and Class B day one “new issue” eligible investors. Allocation of “new issues” to “new issue” eligible investors may result in returns that are higher than returns earned by other investors.
Investors in Class A are subject to 1.5% management fee, 20% incentive allocation, and other expenses. The descriptions of the management fees, incentive allocations, and other expenses to which investors are subject are set forth in detail in the Fund's offering documents. The summaries in this paragraph are not binding and do not alter the terms of such documents, which govern in all respects.
The Class A returns are hypothetical and projected from the Class B returns (a share class traded pari passu with Class A), with the Class A fee structure imposed upon them. The Class A returns do not represent profit and loss that any investor has actually received.
The Class B returns have not been provided as this class is now closed to new investment.
CONVEX ASIA FUND LP - CLASS A NET INVESTOR RETURNS
CONVEX ASIA FUND LP | OCTOBER 2016 15
DISCLOSURE
This document is intended for professional use only; it should not be relied upon by private clients. It is provided for information
purposes only and should not be interpreted as investment advice. It does not purport to be an inducement, recommendation or offer to
invest in any fund. Any offering is made only pursuant to the relevant offering document, together with the current audited financial
statements of the relevant fund, if available, and the relevant subscription/application, all of which must be read in their entirety. No
offer to purchase securities will be made or accepted prior to receipt by the offeree of these documents and the completion of all
appropriate documentation. Whilst the information contained in this document has been prepared in good faith, no representation or
warranty, express or implied, is given by City Financial Investment Company Limited or any of its Directors, partners, officers, affiliates
or employees. Past performance is not a guide to future performance. City Financial Investment Company Limited (Registration No.
020473901) is incorporated in England and Wales and the registered office is at 62 Queen Street, London EC4R 1EB. The company is
authorised and regulated by the Financial Conduct Authority. The representative of the Fund in Switzerland is Hugo Fund Services SA, 6
Cours de Rive, 1204 Geneva. The distribution of Shares in Switzerland must exclusively be made to qualified investors. The place of
performance for Shares in the Fund distributed in Switzerland is at the registered office of the Representative.