Traxis Fund Confidential: Performance Review - February 28

Traxis Fund Confidential
Performance Review – February 28

(February 1 through February 28)
Annualized Since
February YTD Inception (6/2/03)
Traxis Fund LP Gross Return1 -4.63% -10.42% 4.56%
2
Traxis Fund LP Net Return (1.5% Fee) -4.78% -10.66% 0.65%
3
Traxis Fund LP Net Return (2.0% Fee) -4.82% -10.74% 0.22%
S&P 500 Total Return4, 5 -10.65% -18.18% -2.70%
MSCI All Country World Index Total Return4, 6 -9.73% -17.41% 0.64%
US Government 10 Year Note -1.36% -5.88% 4.47%
Past performance is no guarantee of future results and current performance may be higher or lower than the
performance quoted. See important footnotes 1-6 in section called “Notes to Performance”.
Monthly Performance (%)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2003 Gross1 - - - - - 2.79 4.23 5.71 1.66 2.78 -0.91 3.66 21.55
Net (1.5% Fee)2 - - - - - 2.10 3.26 4.50 1.23 2.16 -0.87 2.89 16.21
Net (2.0% Fee)3 - - - - - 2.07 3.23 4.46 1.19 2.12 -0.90 2.85 15.93
2004 Gross1 -0.54 -0.92 1.12 1.35 -3.63 1.18 -4.94 1.60 -3.45 -0.14 1.58 6.78 -0.53
Net (1.5% Fee)2 -0.70 -1.06 0.98 1.13 -3.68 0.94 -5.08 1.44 -3.60 -0.28 1.40 6.63 -2.38
Net (2.0% Fee)3 -0.74 -1.10 0.94 1.12 -3.75 0.90 -5.12 1.39 -3.64 -0.32 1.36 6.58 -2.86
2005 Gross1 -0.38 1.48 -2.06 -0.70 1.49 0.16 3.58 1.72 6.01 -3.11 4.70 3.18 16.86
Net (1.5% Fee)2 -0.48 1.33 -2.23 -0.86 1.33 0.00 3.51 1.29 4.83 -2.73 3.80 2.54 12.71
Net (2.0% Fee)3 -0.53 1.29 -2.27 -0.90 1.29 -0.04 3.49 1.39 4.78 -2.76 3.76 2.50 12.35
2006 Gross1 4.32 0.09 1.08 2.88 -7.10 0.92 0.57 2.75 1.35 3.13 1.97 1.50 13.79
Net (1.5% Fee)2 3.54 -0.05 0.79 2.21 -5.89 0.61 0.34 2.08 0.96 2.43 1.48 1.10 9.70
Net (2.0% Fee)3 3.50 -0.09 0.76 2.18 -5.92 0.58 0.31 2.04 0.93 2.39 1.45 1.07 9.26
1
2007 Gross 1.17 -0.01 1.13 3.39 3.65 1.99 1.89 -2.38 7.78 8.53 -4.30 -0.45 23.93
Net (1.5% Fee)2 0.83 -0.13 0.76 2.60 2.82 1.48 1.41 -2.08 6.23 6.93 -3.73 -0.60 17.24
Net (2.0% Fee)3 0.80 -0.17 0.73 2.56 2.79 1.45 1.38 -2.11 6.19 6.88 -3.76 -0.63 16.76
2008 Gross1 -6.23 -0.86 -4.11 7.05 -0.46 -4.61 1.18 -0.58 -8.19 -11.18 -5.77 3.36 -27.61
Net (1.5% Fee)2 -6.38 -1.02 -4.27 6.91 -0.61 -4.76 1.02 -0.74 -8.52 -11.52 -6.05 3.22 -29.34
Net (2.0% Fee)3 -6.42 -1.06 -4.31 6.86 -0.65 -4.80 0.98 -0.78 -8.56 -11.56 -6.09 3.17 -29.70
2009 Gross1 -6.07 -4.63 -10.42
2
Net (1.5% Fee) -6.18 -4.78 -10.66
Net (2.0% Fee)3 -6.21 -4.82 -10.74
The information and any disclosures provided herein are in summary form and have been prepared for informational purposes for investors of the Traxis
Funds. Please refer to the confidential offering memorandum of the Fund in which you invest (the “Memorandum”) for more detailed information and
disclosures. The information and any disclosures provided herein may be considered confidential. Any use, distribution, modification, copying, forwarding
or disclosure by any person is strictly prohibited. The information and any disclosures provided herein do not constitute a solicitation or offer to purchase
or sell any security or other financial product or instrument. The current month performance data herein is an estimate. Past performance does not
guarantee future returns. There can be no assurance that any Fund will achieve any targeted rates of return, and there is no guarantee against the loss of
your entire investment. For Investor/Qualified Prospective Investor use only: This material may not be reproduced, shown or quoted to anyone other than
the intended user.
2
Significant Contributors Significant Detractors
Long Russia Stocks Long US Stocks – S&P 500
Long US Home Builder Stocks Relative to S&P 500 Long US Stocks – Small Cap Value
Long Europe Short Rates Long Emerging Markets Stock Index
Long US Drillers / Short US Integrated Oil Stocks Long Turkey Bank Stocks
Short 10 and 30 Year US Treasuries Long China Property Stocks
US 2 yr / 10 yr Yield Curve Steepener Long EMEA Corporate Credit
Short Emerging Markets Metal Stocks Short Japan Stocks
Long Thai Banks / Short EM Index Long India Stocks
Short Australia Stocks Long Global Bank Stocks
Short Protection on US Financials CDS Basket Long Germany Stocks
Investment Commentary
This is now officially the worst start of the year for stocks in nearly 80 years. January had the
biggest fall for any January in history, February was another horrendous month for equity
markets around the world and, at the time of this writing, March is shaping up no differently.
After a sickening 37% decline in 2008, the S&P 500 is now already down 25% for the year, the
New York Stock Exchange Index has collapsed 34.6% and the US banking index is down a
staggering 60%. We ran a modest net long most of last month and still lost a most
disappointing 4.6% on the month.
These are very discouraging times. In addition to the epochal financial and economic crisis the
world confronts, there are passionate arguments as to whether stock declines are accelerating
because of investor dismay with President Obama’s program to redistribute the wealth or
because the economic agenda of the new administration is not big enough or specific enough.
Although the new President’s approval rating on the latest Washington Post poll is still high and
rising, some argue the steep fall in stock prices since the inauguration argues his standing with
the stock market is in a steep decline. The fear and even conviction is swelling that the world is
plunging toward a depression analogous to that of the 1930s.
It is different this time

Debt deflation cycles are different and global economic activity continues to disappoint already
pessimistic expectations. As the data filter in, we estimate that Q4 GDP shrank at a 5.7% rate
for the global economy, which is worse than any quarter in the two deep post war recessions of
the intended user.
3
1974 and 1982. This was driven by the US’s 6.2% decline, Europe’s -5.8% and Japan’s -12%,
ably assisted by bungee jumps of -20% to -30% in growth in Taiwan, Korea and Singapore.
We have taken down our estimates of global growth for the next 4 quarters and have pushed out
any semblance of recovery well into the second half of the year (See Table 1). If this forecast
turns out close to being right, the US economy will have declined 4.0% peak to trough, worse
than 1974’s 3.1% decline and 1982’s 2.6%. Note that the prior two recessions only saw declines
Table 1: Traxis Quarterly Global GDP Forecasts of 0.5% on average so this
would be 8 times worse. The
2008 Actuals 2009 Forecasts
Q3 Q4 Q1 Q2 Q3 Q4
US unemployment rate will
US ‐0.5 ‐6.2 ‐6.5 ‐3.0 1.0 1.5 most likely peak at 10%,
EMU ‐1.0 ‐5.7 ‐6.0 ‐2.0 0.0 1.5 much higher than 2003’s
UK ‐2.8 ‐6.0 ‐4.0 ‐1.5 1.5 2.0 6.4% and the 7.8% reached
Japan ‐2.3 ‐12.7 ‐8.0 ‐2.0 1.5 2.0 in the early 1990’s recession
China 6.4 1.5 5.0 6.5 7.5 8.0
(remembered by the
Rest of EM 3.1 ‐5.6 ‐4.8 ‐0.6 2.4 3.5
Rest of Dev 0.0 ‐2.5 ‐5.0 ‐1.5 0.0 2.0
infamous “jobless
WORLD 0.3 ‐5.7 ‐5.1 ‐1.3 1.4 2.4
recovery”). For the global
economy, the peak to trough
decline will likely be 3% driven by the worst decline in economic activity since WWII for
developed economies (-4%) and decline in EM activity (-1.1%),worse than in 1998 (-0.8%).
It has become increasingly clear that we are entering entirely uncharted territory. Most of our
understanding of modern financial markets is based on the Post War period. Our understanding
of the relationships between financial markets and economic factors, such as growth, inflation,
monetary and fiscal policy, has also been shaped by the experience and the analysis of the past
50 years.
Value investing and economic “mean-reversion”

For example, one of the most successful investment strategies for the past 50 years has been
value investing: buying the cheapest stocks while avoiding the most expensive stocks. The basic
premise of this strategy is that the market will tend to overprice the risk of failure or bankruptcy
of certain companies and thus result in the valuation of these companies being significantly
below that of the rest of the market. A systematic dispassionate allocation to lowly valued
companies relative to highly valued companies has resulted in significant positive performance
over any kind of medium-term horizon. Using the simplest of those value strategies (buying low
P/Book and shorting high P/Book) has returned 4.2% p.a. from 1945 to 2006 (with no market
exposure - see Chart 1). The one-year return of this market-neutral strategy initiated 9 months
into every post-war recession would have returned 7.1% on average. However, the experience
of the past 18-24 months has highlighted that part of the reason this strategy was so successful
the intended user.
4
Chart 1: Simple Value Strategy Relative Performance*
10
Annualized Return 1945‐2006:

Low Price /
Annualized Return Book Portfolio: 15.3%
through 2006: 4.2%
S&P 500: 11.9%

High Price /
1
Book Portfolio: 10.7%
1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004
* Low P/Book vs. High P/Book index; uses Russell and Fama/French style indices as available
was not so much because of its intrinsic “buy cheap, sell dear” wisdom. Rather it might simply
have succeeded because the average recession in the post-War period only lasted 10 months and
so, if in every bear market, six or nine months into the recession, one were to have bought the
stocks most affected by the downturn (i.e., the lowly valued stocks), inevitably within a few
months, an economic recovery would arrive and would drastically reduce the risk of failure and
default of these companies. They would then benefit from the most dramatic re-pricing and
value would outperform. On the other hand, if the recession were to last 44 months as it did
between 1929 and 1933, most lowly valued stocks would continue to underperform as the risk
of failure (and actual failures) would dramatically increase with each passing month of the
recession. Not surprisingly therefore, value stocks underperformed by -25%, -35% and -6% in
1930, 1931 and in 1H 1932 respectively, for a massive -54% underperformance over the cycle.
(The following year was a different story: +120% for value stocks vs +44% for the market). In
other words, the value stocks have “mean-reverted” powerfully in the post war period economic
cycles because the economic environment has “mean-reverted” and the economic ship has
righted itself relatively quickly each time. In the few unusual, deep and long recessions such as
the Great Depression, the relationship has disconnected as in this cycle so far. One of the most
important questions to gauge which investment strategy to adopt therefore must be: how likely
is it that the U.S and global economy slip into a depression similar to the Great Depression of
the 1930s? In other words, is our economic forecast bearish enough?
The Great Depression – by the numbers:

We have studied the Great Depression in depth and found that, despite the similarities between
the current period and the early 1930s, there were many more differences that make anything
close to a repeat extremely unlikely. It might be useful to recap how bad the US economy did
indeed get in the 1930s and compare that to the next worst recession to get a sense of what this
recession would have to look like to qualify as Great Depression II.
the intended user.
5
1929‐1932/1933 Next Worst Instance*
S&P 500 Decline ‐87% ‐49% (‘00‐‘02)
Real GDP Decline ‐33% ‐3.2% (‘57‐‘58)
Nominal GDP Decline ‐50% ‐2.7% (‘58)
Length of Recession 3.7 years 1.3 years (‘73‐‘75)
Industrial Production Decline ‐54% ‐14% (‘58)
EPS decline ‐75% ‐54% (‘00‐‘02)
Dividend decline ‐55% ‐16% (‘73‐‘75 in real terms)
Peak Unemployment rate 25.6% 10.8% (‘82)
* 1950 to 2007, excluding current episode
In economic terms, using real GDP decline, the Great Depression was therefore ten times worse
than any other recession in the post-war period. In stock market terms, it was 3 times worse as it
halved three consecutive times to decline nearly a whopping 90%.
There are many competing explanations for the Great Depression, all significantly influenced by
philosophical biases, be they Keynesian, Monetarist, Austrian, or other. Charles Kindleberger in
his seminal book, The World in Depression 1929-1939, described the main causes as
“considerable instability in the system and the absence of a stabilizer” and dismisses the usual
debate between Keynesians and Monetarists – “whether the failure of the money supply to grow
led to a decline in spending, or whether an independent, autonomous decline in spending led to a
decrease in the money supply?” Our read of the history is that the depth of the Depression was
caused by a combination of existing imbalances and excesses which needed to be redressed,
combined with poor policy responses and significant systemic weaknesses.
The world in 1929

1) Imbalances and excesses included:
- A very overvalued stock market (trading at 25x normalized earnings)
- A high degree of speculation (e.g., broker loans of $8,515m on Oct. 4, 1929 or 10% of
market cap)
- Excessive leverage in the economy (with total credit at 200% of GDP)
- Overinvestment in capital goods and housing (though housing peaked earlier, in 1925, when
the Florida land boom turned to bust)
2) Systemic weaknesses included:

- the lack of FDIC insurance (9,000 banks failed with depositors losing most of their money)
the intended user.
6
- the lack of automatic stabilizers such universal unemployment insurance (which was
implemented only as part of the Social Security Act of 1935)
- what John Kenneth Galbraith labeled in his book The Great Crash, “the poor state of
economic intelligence” by which he meant a relatively primitive understanding of the tools
of economic policy-making which led to some significant policy errors
3) Significant policy errors included:

- raising interest rates during the economic contraction in 1931 to support the dollar
- raising taxes in 1932 as balancing the budget was an article of faith of both parties in 1930s
- maintaining the gold standard until 1932 (Bernanke & Harold James in The Gold Standard,
Deflation, and Financial Crisis in the Great Depression have shown that the earlier a
country left the gold standard the earlier and the better it recovered)
- starting a global trade war with the passing of the Smoot Hawley tariff in 1930
Reviewing these factors, it is relatively clear, disturbingly, that some of the imbalances that
preceded the Great Depression (as outlined above) have much in common with some of the
imbalances which preceded this recession - in particular, excessive leverage and speculation
(particularly in credit markets). In many ways, the leverage in the system today is actually much
greater than in 1929 (though perhaps not entirely comparable given the different stage of
economic development in 1929). (See charts 2 and 3 of total credit to GDP – today vs 1930s).
Chart 2: Credit as a % of GDP in The Great Depression
350 Total Debt Outstanding by Sector
300
1929 Debt Liquidation in 1930s and 1940s
250
200%
200
150
100 Government
50 Financials
Corporates
Households
0
Jan‐ Nov‐ Sep‐ Jul‐ May‐ Mar‐ Jan‐ Nov‐ Sep‐ Jul‐ May‐ Mar‐ Jan‐ Nov‐ Sep‐ Jul‐ May‐
20 21 23 25 27 29 31 32 34 36 38 40 42 43 45 47 49
Source: Federal Reserve, BEA, Morgan Stanley Research
the intended user.
7
Chart 3: Credit as a % of GDP Since 1952
Total Debt Outstanding by Sector through September 2008
400
Total = 350% of GDP
350
Government
300 Levering up since 1982
GSE
250
Financials
200
150 Corporates
100
50 Households
0
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007
It is also relatively clear to us that most of the systemic weaknesses that compounded what
surely would have been a nasty recession into the worst economic debacle of the century have
been remedied and the policy errors are unlikely to be repeated (at least not the same ones). For
example:
1) Though banks have already failed and many more will go under in this recession, the
FDIC has a relatively streamlined process for taking over the insolvent institutions while
guaranteeing that depositor’ assets are safe, which will prevent negative second and third
round effects of bank failures.
2) In a monetary policy that is already the most proactive this century, the Fed moved to
quantitative easing within 12 months of the start of the crisis. This does not guarantee that
policy will be effective immediately but it makes an enormous difference to the entire
financial system and the economy that the Fed stands ready to provide liquidity and credit
even as a substitute to the private banking system (See charts 4 and 5 on Money Supply
today vs 1930s).
3) Despite the widespread job losses, the economic impact of unemployment is much less
dramatic due to the universal nature of the current unemployment insurance system
(extended an additional 13-20 weeks recently).
the intended user.
8
Chart 4: M1 in 1929 ‐ 1937
32
(US$ Billions)
30
28
26 27% contraction in Narrow Money Supply
24
22
20
18
1929 1931 1933 1935 1937
Chart 5: M1 and Monetary Base Today
(US$ Billions)
2370
2220
2070 15%
1920 M1
1770
1620
1470
1320
1170
1020 87%
Monetary Base
870
720
Jan‐06 Jan‐07 Jan‐08 Jan‐09
4) We do have serious misgivings about the US stimulus package (its size, composition, the
expectations of a multiplier greater than 1 and its impact on the long-term indebtedness of
the country) but it is clear that, at least, this time around, no party is thinking of anything
as counterproductive as raising taxes in this downturn.
5) In terms of the dollar, it is clearly unhelpful that the dollar has appreciated over 20% in
the past 12 months but it remains fairly valued on most estimates of PPP and therefore
should not be a significant impediment for US exporters.
the intended user.
9
Probable economic path; Debt liquidation or socialization?
Our conclusions from this analysis are that, despite many similarities in the imbalances between
1929 and 2007, the almost diametrically opposed policy responses as well as the many built-in
systemic safeguards make a repeat of the Great Depression extremely unlikely. (We are however
aware of wisdom in the quip – “Those who don’t study the past will repeat its error. Those who
do study it will find new ways to err.”). A much more likely outcome is one where the
necessary economic adjustment required in resolving our imbalances will be spread out over
time. In the 1930s, after a debt liquidation - driven 30% collapse in real GDP (Andrew Mellon’s
infamous “liquidate everything” mantra), the economy rebounded by nearly 50% in the
subsequent 3 years such that the 1929 peak in activity was fully recovered by 1937. Actually, in
the 20 years that followed the 1929 peak, the economy grew 73% (including the Depression)
(See chart 6).
Chart 6: US Real GNP from 1929 to 1949
(US$ Billions)
1950
1800
1650
1500
1350
+73% (or +2.8% per year)
1200
1050
900
750
600
1929 1931 1933 1935 1937 1939 1941 1943 1945 1947 1949
On the other hand, Japan in the 1990s and 2000s provides a reasonable case study for what
smoothing the adjustment over time may resemble. It had a similar stock market and real estate
bubble which caused a serious banking crisis and ultimately resulted in a prolonged period of
weak growth. Japan’s debt binge of the 1980s was effectively socialized by the government and
total debt outstanding was never liquidated, simply transferred from the private sector to the
public sector. As a result, Japan’s economic downturns were nowhere near as severe as a
Depression (on average -3.6% peak-to-trough decline in real GDP) but by the end of 2010, 20
years after the peak of its bubble, Japan’s GDP growth will only be 19% above where it was in
1989 (See chart 7). The implications are clear: massive fiscal and monetary stimulus (including
zero interest rates and quantitative easing) and a full-scale bailout of the banking sector by the
federal government were successful in preventing a Depression as well as its attendant trauma
and politically unacceptable social costs but not in preventing the necessary and inevitable
workout of the structural imbalances and excesses in the economy. So the cost of spreading the
the intended user.
10
580 Chart 7: Japan Real GDP from 1990 to 2010
560 (¥ Yen)
540
520
500
480
+19% (or +0.90% per year)
460
440
420
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
adjustment over time is lower terminal wealth and lower GDP but ostensibly lower social costs
in the smoother, less disruptive adjustment. So far in this cycle, we seem to be heading for
Japan-style scenario of socializing the excess debt through the (See chart 8) various (global)
bailouts and stimulus packages in an attempt to smooth the adjustment over a longer period.
Interestingly, despite the very different policy responses and economic paths chosen, markets, it
appears, are difficult to fool. Japanese equities declined almost as much as the Dow did during
the depression and as the Topix continues to make new lows 20 years after its peak, the recovery
in Japan is clearly taking longer than it did for the Dow Jones in the 1930s.
Chart 8: Credit as a % of GDP in Japan
400
350
300
Government
250
200
150 Corporates
100
50 Households
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Source: BoJ, IMF, Morgan Stanley Research
the intended user.
11
From a valuation perspective, other than the Great Depression, all other secular bear market
lows (1938, 1942, 1974 and 1982) occurred at equity valuation levels between 7-11x normalized
EPS (or 9-12.5x Graham-Dodd P/E) which corresponds to 500-700 on the S&P (See chart 9).
Chart 9: Normalized P/E
(Based on Reported Earnings Normalized vs GDP)
40
35
30
25
20
Ave. 16.0
15
10
10.7x 9.9x
10.4x
5 7.1x 7.9x
4.3x 1938, 1942, 1974, 1982 Median Norm P/E = 9.2x
0
1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007
Those lows were secular bear market lows in that real returns from those lows over any horizon
(a month, a year or a decade) were always positive. At 9.9x normalized earnings, we have now
entered that zone of secular undervaluation where subsequent future returns for the next two
years will likely be a massive 50-100%. What will determine where in this zone we bottom out
and when value begins to get unlocked will be a function of when the economy turns, as was
the case in ‘32, ‘38, ‘74, and ’82 (see chart 10). The reason
Chart 10: In 1932 and 1938, Stocks Bottomed When Economic Activity
(Industrial Production) Turned
10 18
S&P 500 (RHS) 16
9
14
8
12
7
10
6
8
Industrial Production Index (LHS)
5 6
4 4
1931 1932 1933 1934 1935 1936 1937 1938
the intended user.
12
to exclude 1932 from this valuation analysis is that it took a depression with industrial
production down 54%, GDP down 30% to get stock market valuations in 1932 down to 4x
normalized earnings or the equivalent of 250-300 on the S&P today (rather than 9.2x at the other
secular lows1). As we have been discussing in this letter, we view an economic decline of that
magnitude as very unlikely. We believe ’38, ’42, ’74, ’82 represent economic conditions dire
enough to be our most likely worst case. For example, in 1938, the economy shrank by 13.2%,
unemployment was still 20%, and stocks still bottomed at 10.7x normalized P/E (or 9.6x
Graham-Dodd), not 4x.
An examination of the history of the relationship between stocks and bonds is illuminating as
well. Chart 11 shows the performance of the S&P 500 versus the thirty year U.S. Treasury bond.
Note that as of today the great bull run of the 1980s and 1990s has been completely reversed.
1932 represented a 32 year round trip in stocks returns versus bonds returns. This current
episode constitutes a 29 year round trip (and almost a 41 year one).
Chart 11: US Stocks vs US Long‐term Bonds: Relative Total Return
10
8
A 29‐year round trip...
3 ...and almost a 41‐year
round trip.
2
0
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
As Bernard Baruch wrote in 1932 as a foreword to the publication of the new edition of Charles
Mackay’s great classic, Extraordinary Popular Delusions and the Madness of Crowds;
1
As a side note, those abnormally depressed valuations of 1932 (near 4x normalized earnings) were
followed by a 180% rally in the subsequent 12 months and 400% real returns in the subsequent 4 ½
years.
the intended user.
13
Although there be no scientific cure, yet, as in all primitive, unknown (and therefore diabolic)
spells, there may be potent incantations. I have always thought that if, in the lamentable era of
the “New Economics” culminating in 1929, even in the very presence of dizzily spiraling
prices, we had all continuously repeated “two and two still make four” much of the evil might
have been averted. Similarly, even in the general moment of gloom in which this is written, when
many begin to wonder if declines will never halt, the appropriate abracadabra may be: “They
always did.”
Barton M. Biggs Madhav Dhar Cyril Moullé-Berteaux Amer Bisat
the intended user.
14
Traxis Fund LP Exposure Report as of February 28, 2009
Estimated Exposure4
Net Gross Long Gross Short Total Gross
Equity
US 9.1% 15.0% -5.9% 20.9%
Europe 0.0% 2.3% -2.3% 4.6%
Japan 0.0% 0.7% -0.7% 1.4%
Emerging Markets 17.4% 22.4% -5.0% 27.4%
Rest of World1 -1.0% 0.0% -1.0% 1.0%
Total Equities 25.5% 40.4% -14.9% 55.3%
Fixed Income2
US 11.0% 16.0% -5.0% 21.0%
Europe 5.0% 5.0% 0.0% 5.0%
Japan 0.0% 0.0% 0.0% 0.0%
Emerging Markets 7.3% 7.3% 0.0% 7.3%
Rest of World1 0.0% 0.0% 0.0% 0.0%
Total Fixed Income 23.3% 28.3% -5.0% 33.3%
Opportunistic
Currencies3 -4.2% 0.0% -4.2% 4.2%
Metals 0.0% 0.0% 0.0% 0.0%
Energy 0.0% 0.0% 0.0% 0.0%
Total Opportunistic -4.2% 0.0% -4.2% 4.2%
TOTAL FUND nm 68.7% -24.1% 92.8%

5
Portfolio VaR = 7.8%
1
Australia, Hong Kong, Singapore, Canada, New Zealand
2
All expressed in US 10-year note equivalent terms
3
Gross Long, Gross Short = Long, Short USD
4
Figures may not add due to rounding
5
Monthly, 95% confidence Value-at-Risk. Since October 2008, calculation uses equal weights
on the past 12 months of historical data rather than exponential weights, which results in a
lower VaR calculation following periods of relatively high market volatility.
the intended user.
15
Notes to Performance
1
The estimated gross return represents the investment return of each of the Traxis Fund Onshore LP, Traxis Fund Offshore LP and Traxis Fund Offshore
II LP (collectively, the “ Traxis Fund” or the “Fund”), before deduction of any fees and expenses, including the management fee and incentive
allocation. Investors in the Traxis Funds will receive under separate cover a capital account statement showing their individual capital account balance
for the beginning and end of such period.
2
The indices are unmanaged portfolios of securities. Their performance results do not reflect the deduction of management fees, incentive compensation,
commissions or other expenses. The performance of the indices may vary from that of the Master Fund. The Master Fund may, at times, have higher or
lower volatility than any of the indices.
3
The S&P 500 Total Return Index consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted
index with each stock’s weight in the Index proportionate to its market value. The index is one of the most widely used benchmarks of U.S. equity
performance. As a Total Return index, it measures the market performance, including price performance and income from dividend payments.
4
The MSCI Inc. ACWI (All Country World Index) Total Return is a free-float adjusted market capitalization index that is designed to measure equity
market performance in the global developed and emerging markets. As a Total Return index, it measures the market performance, including price
performance and income from dividend payments.
Contact Information
Fund: Administrator:
Timothy Shannon David Saul
Traxis Partners International Fund Services (Ireland) Limited
600 Fifth Avenue, 26th Floor Third Floor, Bishop’s Square, Redmond’s Hill
New York, NY 10020 Dublin 2, Ireland
Tel: 212.332.5169 Tel: (353 1) 655 8231
Fax: 212.332.5178 Fax: (353 1) 707 5101
Email: TShannon@traxispartners.com Email: David.Saul@imsi.com
Data Sources
Traxis Partners may from time-to-time use one of more of the following data sources in the Investment Commentary, tables or charts: Bloomberg,
Markit Group, JPMorgan, Global Insight, Emerging Portfolio.com, MSCI Inc. Index (an affiliate of Morgan Stanley & Co.), Eurostat, Thomson
Facts and views presented in this Report are subject to change, and there is no guarantee that the Fund will invest in accordance with such views.
These are our views as of the date hereof and not as of any future date.
Qualifications
The information presented in this report to investors in the Traxis Funds (the “Report”) is highly confidential and may be delivered to investors
who previously received a Memorandum (as defined below) in Traxis Fund Onshore LP (the “US Feeder Fund”), Traxis Fund Offshore LP (the
“Cayman Feeder Fund”) and Traxis Fund Offshore II LP (the “Cayman Feeder Fund II”) (collectively, the “Feeder Funds” and individually a
“Fund”). This Report is not to be reproduced or distributed to any other persons (other than professional advisers of any investors receiving these
materials), and is intended solely for the use of the persons to whom it has been delivered. Any investor (and each employee, representative, or
other agent of any investor), however, may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of a
Fund and all materials of any kind (including opinions or other tax analyses) that are provided to an investor relating to such tax treatment and tax
structure. This Report has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or
sell Interests or any other security or instrument or to participate in any trading strategy. This Report should be read in conjunction with each
Fund’s confidential offering memorandum. Moreover, the specific terms applicable to the Interests described generally in this Report, and offered
in the Memorandum, will be governed by the terms of the applicable limited partnership agreement (the “Partnership Agreement”) for the US
Feeder Fund, the Cayman Feeder Fund or the Cayman Feeder Fund II, as the case may be. No representation or warranty (express or implied) is
made or can be given with respect to the accuracy or completeness of the information in this Report. No person has been authorized to make any
representations concerning the Interests described in this Report that are inconsistent with the statements contained in this Report, the
Memorandum, or the applicable partnership agreement.
There can be no assurance that a Fund’s investment objectives will be achieved or that there will be any return of capital. Holding an investment
in a Fund involves a high degree of risk, including the risk that the entire amount invested may be lost.
the intended user.
16
Additional information is available upon request. Traxis Partners LP and its affiliates (“Traxis Partners”) disclaim any and all liability relating to
this Report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, this
information.
To recipients in Canada: The information presented in this Report may be delivered by Traxis Partners or placement agents engaged by the Fund,
to permit prospective investors in the Provinces of Ontario, Québec, British Columbia, Alberta and Manitoba only. As stated above, this Report
has been prepared for informational purposes and is not, and under no circumstances is to be construed as, an advertisement or a private or public
offer of the Interests. No securities commission or similar authority in Canada or elsewhere has reviewed or in any way passed upon this
document and any representation to the contrary is an offense.
The Interests and investment strategies described in this Report have not been registered with, or approved or disapproved by, the US Securities
and Exchange Commission, the US Commodity Futures Trading Commission, the Cayman Islands Monetary Authority, or any other US or Cayman
Islands federal or state governmental agency or regulatory authority or any national securities exchange. No agency, authority or exchange has
passed upon the accuracy or adequacy of this Report, the Memorandum or the merits of an investment in the Interests. Any representation to the
contrary is a criminal offense.
Investors should not construe the contents of this Report as legal, tax or financial advice. Each investor should consult his, her or its own
professional advisors as to the legal, tax, financial or other matters relevant to an investment in a Fund. Traxis Partners does not render advice on
tax or tax accounting matters to clients. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the
purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws.
There is no guarantee that the benchmarks listed in the Performance Review on page 1 of this Report are representative benchmarks against which
the performance of a Fund should be compared.
Traxis Partners and/or each of their employees may have investments in securities or derivatives of securities of companies or in sectors mentioned
in this Report and may trade them in ways different from those discussed in this Report.
Under the Investment Advisers Act of 1940, Traxis Partners LP is required to maintain a disclosure document, otherwise known as Part II of Form
ADV. In summary, Part II of Form ADV discloses, among other things, the advisory services provided, fees charged by these entities, as well as
certain affiliations. If you would like to receive a copy of Part II of Form ADV for the entities above, please send a written request to Investor
Relations, Traxis Partners, 600 Fifth Avenue, 26th Floor, New York, New York 10020 or email your request to
investor_relations@traxispartners.com.
Traxis Partners does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not
intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the
taxpayer under U.S. federal tax laws. Federal and state tax laws are complex and constantly changing. You should always consult your
own legal or tax advisor for information concerning your individual situation.
Risk Factors and Conflicts of Interest

Please refer to a Fund’s Memorandum for a more detailed discussion of risks. As the investment program of Traxis Fund LP (the “Master Fund”)
develops and changes over time, an investment in the Fund may be subject to additional and different risk factors from those described herein.
An investment in a Fund is a potentially suitable investment only for sophisticated investors who, in consultation with their own investment and tax
advisors, fully understand and are capable of assuming the risks inherent in investing in the Fund.
In addition, certain inherent and potential conflicts of interest exist between and among the general partners of the Feeder Funds and Master Fund
(the “General Partners”), the adviser to the Master Fund, and each of their respective affiliates on the one hand and the Fund on the other, as
defined and as more fully described in the Memorandum.
Investment and Trading Risks. An investment in any Fund is speculative and involves substantial risks, including risk of loss of your entire capital
investment. The investment program of the Master Fund, in which each Fund invests, involves significant trading risks, including risks arising
from: the volatility of the global equity, currency, and fixed income markets; short sales; leverage; the potential illiquidity of derivative
instruments; the potential loss from counterparty defaults; and borrowing. No guarantee or representation is made that the Master Fund’s
investment program will be successful. Investment results may vary substantially over time.
Reliance on Fund Management. The Master Fund’s overall success, and in turn that of each Fund, is largely dependent on the skill and expertise
of the Adviser and its principals to develop and implement the investment program and objectives pursued by the Master Fund. If any of the
principals of the Adviser cease to be involved in the management of the Master Fund and its investment program, or if the Advisory agreement
entered into with the Adviser (the “Advisory Agreement”) is terminated and the Adviser no longer manages the Master Fund’s investment
program, each Fund could be adversely affected. There is no prohibition on any principal of the Adviser resigning.
the intended user.
17
Limited Liquidity. There is no public or secondary market for the Feeder Funds’ Interests, and no such market is expected to develop in the future.
An investment in a Fund provides only limited liquidity through quarterly withdrawals after the expiration of a one year lock-up period, and such
withdrawal rights may be delayed or deferred as agreed upon from time to time by the General Partner and the Adviser. Investors may not transfer
all or any portion of their Interests without the written consent of the General Partner of the relevant Fund, which consent may be withheld in its
discretion and which is expected to be granted, if at all, only under extenuating circumstances.
Compensation Arrangements. The Adviser, in addition to a management fee, will receive, indirectly, compensation in the form of a fee based on
the performance of the Master Fund’s investments. The receipt by the Adviser of a performance-based fee may create an incentive for the Adviser
to make investments that are riskier or more speculative than those that might have been made in the absence of such a fee. In addition, the
performance-based fee will be calculated on a basis that includes realized and unrealized appreciation of assets, and any such fee paid to the
Adviser may be greater than if such a fee was based solely on realized gains. In addition, a Fund’s fees and expenses may offset such Fund’s
trading profits.
Diversification. Although it is anticipated that the Master Fund will be diversified across different investment views and strategies, the Master
Fund may concentrate its investments in a limited number of issuers, countries, sectors, currencies or instruments. Adverse movements in a
particular economy, sector or instrument type in which the Master Fund is concentrated could negatively affect performance and increase risk of
loss to a considerably greater extent than if the Master Fund’s investments were more diversified.
Leverage. The investment program will involve margin transactions, short sales, and short-term borrowings; these types of leverage can, in
certain circumstances, have an adverse affect on a Fund. The Adviser may enter into option transactions, forward and futures contracts and may
buy and sell securities on margin, increasing the volatility of the Master Fund’s investments. Trading securities on margin, unlike trading in
futures (which also involve margin) will result in interest charges and, depending on the amount of trading activity, such charges could be
substantial. In addition, because the use of leverage will allow the Master Fund to control positions worth significantly more than its actual
investment in such positions, the amount that the Master Fund may lose in the event of adverse price movements will be high in relation to the
amount of its investment. The use of leverage will also magnify the volatility of changes in the value of the Master Fund’s portfolio investments.
Non-US Investments. The Master Fund may invest in securities of non-US issuers listed on non-US securities exchanges or traded in non-US
over-the-counter markets. Investments in certain foreign securities may be subject to greater risks than investments in US securities due to a
variety of factors including currency controls and currency exchange rate fluctuations, changes in governmental administration or economic or
monetary policy or changed circumstances in dealing between nations. Risks associated with investing in non‑US securities may be greater with
respect to those issued by companies located in less developed countries.
Investments in Non-US Currencies. Portions of the Master Fund’s assets may be held or traded in securities denominated in non-US currencies
and may therefore be subject to risks associated with investments in such currencies.
Market Liquidity. During periods of limited liquidity and higher price volatility, the Master Fund’s ability to acquire or dispose of its investments
at a price and time that the Master Fund deems advantageous may be impaired.
Absence of Regulatory Oversight. The Traxis Funds are not registered as investment companies under the U.S. Investment Company Act of 1940
(the “1940 Act”) in reliance on an exception from the definition of investment company available to privately offered investment companies. The
significant investor protection provisions of the 1940 Act will not apply to an investment in the Fund.
Placement Fees and Other On going Fees. The payment of the Placement Fee and the payment of other on going fees (the latter of which are to
be paid by the Adviser or a General Partner or either of their affiliates) could create conflicts of interest between and among the General Partner,
the Adviser on the one hand, and the Feeder Fund and the Master Fund on the other. A portion of the management fee may be shared with with
placement agents engaged by Traxis Partners on an on going basis in connection with their sales of the Feeder Fund and registered
representatives may share in a portion of that fee.
Risk Management Risk management involves determining the risk of the portfolio as precisely as possible. This process implies an effort to
monitor risk, but should not be confused with and does not imply low risk. The Funds’ portfolio formation is designed to give it a good sense of the
risks to which the Funds’ portfolio will be exposed, but these estimates are subject to error.
the intended user.

Traxis Fund Confidential: Performance Review - February 28

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Traxis Fund Confidential

Performance Review – February 28

Monthly Performance (%)

Significant Contributors Significant Detractors

It is different this time

Value investing and economic “mean-reversion”

The Great Depression – by the numbers:

The world in 1929

2) Systemic weaknesses included:

3) Significant policy errors included:

Barton M. Biggs Madhav Dhar Cyril Moullé-Berteaux Amer Bisat

Traxis Fund LP Exposure Report as of February 28, 2009

TOTAL FUND nm 68.7% -24.1% 92.8%

Risk Factors and Conflicts of Interest

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