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For the second quarter ended June 30, 2012, Titan Masters International Fund,
Ltd. returned an estimated -1.51%, net of all fees and expenses.
3-Year Since Inception Since Inception
Q2 2012 YTD 2012 Annualized Annualized Cumulative
Titan Masters International Fund, Ltd. -1.51% 3.30% 6.88% 6.98% 104.16%
Note: All returns are net of all fees and expenses. The Fund’s inception was December 2001.
PERFORMANCE OVERVIEW
Through the first two months of the second quarter, Titan subsequently found that the industry’s net long exposure at
Masters International Fund, Ltd. had contained its quarterly the end of the quarter was the lowest in years. The result of
decline to 0.76% while the S&P 500 lost 6.60% and global these factors was a disappointing, aberrational month that
equity indexes fell even further. Our expectation for the
Fund to rebound nicely in June was not realized, as it
slipped 0.76% despite the S&P recouping 4.12%. We $1,000 Invested on December 1, 2001
haven’t seen this degree of single-month underperformance Titan Masters International Fund vs.
since the Fund’s start 11 years ago, and we have worked to S&P 500 Total Return
understand why it occurred. Managers with widely varying $2,500
exposures – from our highly net-short, short-biased $2,000
manager to our two highly net-long, long-biased managers –
$1,500
were down on the month. After examining industry data and
$1,000
speaking with our managers, we conclude that June was a
$500
highly negative alpha month on the short side and a
moderately difficult month on the long side. We suspect this $0
theme park company. We have seen him cycle into several so severely reduce the pool of talented managers who can
interesting new positions in the past three months, such as manage capital on behalf of Titan.
Western Digital and various companies in the energy sector.
Grant Harrell, Titan’s embed in the London hedge fund
With the Fund’s modest capital inflows and proceeds from market the past five years, is returning to our New York
redeeming our investment with Dialectic Antithesis, at the office after successfully transitioning Reid Murphy to lead
beginning of the third quarter we opted to increase exposure our European manager research operation. A seven-year
with certain existing positions rather than add any new Titan veteran, Grant already is adding lots of capacity to our
managers. We added to CCI Technology, GS Gamma, efforts to identify and screen for talented global macro and
Jericho, Omni, Pelham, PFM Healthcare and Scopus. We commodity managers.
were fortunate to have inflows just as some of the Fund’s
best performing and harder-to-access managers decided to As always, do not hesitate to contact us with any questions
take in more capital to invest in great opportunities they about your investment with Titan Advisors.
were seeing. Sincerely,
In the second half of the year, we likely will continue adding
incrementally to our highest conviction allocations in the
portfolio. At the same time, we will continue the redemption
process with Pershing Square and Southpoint Capital. George J. Fox
Managing Member
Titan Fund Advisors, LLC
LOOKING AHEAD
Past performance is not indicative of future results. Performance of each investor
Our greater use of managed accounts has been especially may vary based upon the class or series of investment, time of initial investment,
and other specific terms applicable to such investment. The information contained
helpful this year. While we still mostly allocate capital to fund herein is confidential and circulation or disclosure of all or any part of this material
structures, the managed accounts we maintain with several is prohibited without the written consent of Titan Fund Advisors, LLC.
firms are permitting us to gain a more nuanced
understanding of how our managers navigate volatile
markets. By examining daily performance – with an
occasional peak at intra-day activity – we sometimes are
able to compress the time it takes us to reach the
confidence levels needed to add or reduce our investments.
To be sure, we are not forgetting that some level of volatility
is necessary to generate an attractive return, so we aren’t in
danger of allowing very short-term fluctuations to be
determinative. But the quality of our due diligence effort has
risen along with better transparency of daily profit and loss
drivers that’s conferred by our having managed accounts.
We will continue to invest through these structures when
available and appropriate. Still, we are not interested in
limiting ourselves only to those managers who accept
managed accounts, since many highly successful managers
accept subscriptions only in their commingled funds. We
believe it would not be in the best interest of our investors to