Investments (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Investments Managed by TP LLC

The Company’s investments are managed by its investment manager, Third Point LLC (“Third Point LLC” or the “Investment Manager”), under long-term investment management contracts. The Company directly owns the investments that are held in separate accounts and managed by Third Point LLC. The following is a summary of the separate accounts managed by Third Point LLC:



	2016		2015
Assets	($ in thousands)
Total investments in securities	$	2,619,839	$	2,290,779
Cash and cash equivalents	5		57
Restricted cash and cash equivalents	298,940		330,915
Due from brokers	284,591		326,971
Derivative assets	27,432		35,337
Interest and dividends receivable	6,505		10,687
Total assets	3,237,312		2,994,746
Liabilities and non-controlling interest
Accounts payable and accrued expenses	1,374		770
Securities sold, not yet purchased	92,668		314,353
Securities sold under an agreement to repurchase	—		8,944
Due to brokers	899,601		574,962
Derivative liabilities	16,050		15,392
Interest and dividends payable	386		1,345
Non-controlling interest	35,674		16,157
Total liabilities and non-controlling interest	1,045,753		931,923
Total net investments managed by Third Point LLC	$	2,191,559	$	2,062,823

Schedule of the Largest Concentration of the Company's Asset-Backed Securities

As of December 31, 2016 and 2015, the Company’s asset-backed securities (“ABS”) holdings were as follows:



	2016				2015
	($ in thousands)
Re-REMIC (1)	$	44,359	17.4	%	$	195,889	39.6	%
Subprime RMBS	117,152		46.0	%	174,777		35.3	%
Collateralized debt obligations	3,433		1.3	%	50,455		10.2	%
Market place loans	44,143		17.3	%	13,247		2.7	%
Other (2)	45,765		18.0	%	60,355		12.2	%
	$	254,852	100.0	%	$	494,723	100.0	%

(1) Mezzanine portions of the re-securitized real estate mortgage investment conduits (“re-REMIC”) structure of ABS.

(2) Other includes: U.S. Alt-A positions, commercial mortgage-backed securities, market place loans, Non-U.S. RMBS and student loans ABS.

Schedule of investments, categorized by the level of the fair value hierarchy

The following tables present the Company’s investments, categorized by the level of the fair value hierarchy as of December 31, 2016 and 2015:



	December 31, 2016
	Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs		Total
	(Level 1)		(Level 2)		(Level 3)		Total
Assets	($ in thousands)
Equity securities	$	1,450,966	$	2,255	$	—	$	1,453,221
Private common equity securities	—		—		4,799		4,799
Private preferred equity securities	—		—		48,834		48,834
Total equities	1,450,966		2,255		53,633		1,506,854
Asset-backed securities	—		237,224		17,628		254,852
Bank debt	—		48,546		8,350		56,896
Corporate bonds	—		209,025		9,255		218,280
U.S. Treasury securities	—		327,016		—		327,016
Sovereign debt	—		200,913		—		200,913
Total debt securities	—		1,022,724		35,233		1,057,957
Options	343		681		—		1,024
Trade claims	—		9,022		—		9,022
Total other investments	343		9,703		—		10,046
Derivative assets (free standing)	961		26,471		—		27,432
	$	1,452,270	$	1,061,153	$	88,866	2,602,289
Investments in funds valued at NAV							72,655
Total assets							$	2,674,944
Liabilities
Equity securities	$	71,457	$	—	$	—	$	71,457
Corporate bonds	—		17,683		—		17,683
Options	—		3,528		—		3,528
Total securities sold, not yet purchased	71,457		21,211		—		92,668
Derivative liabilities (free standing)	1,608		13,116		1,326		16,050
Derivative liabilities (embedded)	—		—		92		92
Total liabilities	$	73,065	$	34,327	$	1,418	$	108,810



	December 31, 2015
	Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs		Total
	(Level 1)		(Level 2)		(Level 3)		Total
Assets	($ in thousands)
Equity securities	$	1,181,865	$	19,758	$	—	$	1,201,623
Private common equity securities	—		919		4,357		5,276
Private preferred equity securities	—		—		24,178		24,178
Total equities	1,181,865		20,677		28,535		1,231,077
Asset-backed securities	—		492,106		2,617		494,723
Bank debt	—		2,158		7,660		9,818
Corporate bonds	—		79,938		3,252		83,190
U.S. Treasury securities	—		186,471		—		186,471
Sovereign debt	—		260,024		21		260,045
Total debt securities	—		1,020,697		13,550		1,034,247
Options	—		8,911		—		8,911
Rights and warrants	416		—		—		416
Trade claims	—		8,329		—		8,329
Total other investments	416		17,240		—		17,656
Derivative assets (free standing)	—		35,337		—		35,337
	$	1,182,281	$	1,093,951	$	42,085	2,318,317
Investments in funds valued at NAV							34,264
Total assets							$	2,352,581
Liabilities
Equity securities	$	228,009	$	—	$	—	$	228,009
Sovereign debt	—		5,856		—		5,856
Corporate bonds	—		76,131		—		76,131
Options	690		3,667		—		4,357
Total securities sold, not yet purchased	228,699		85,654		—		314,353
Derivative liabilities (free standing)	—		14,372		1,020		15,392
Derivative liabilities (embedded)	—		—		5,563		5,563
Total liabilities	$	228,699	$	100,026	$	6,583	$	335,308

Schedule of reconciliation of the balances for all investments measured at fair value using significant unobservable inputs

The following table presents the reconciliation of all investments measured at fair value using Level 3 inputs for the years ended December 31, 2016 and 2015:



	January 1, 2016			Transfers in to (out of) Level 3			Purchases		Sales			Realized and Unrealized Gains(Losses) (1)			December 31, 2016
	($ in thousands)
Assets
Private common equity securities	$	4,357		$	—		$	60	$	—		$	382		$	4,799
Private preferred equity securities	24,178			—			20,574		(60		)	4,142			48,834
Asset-backed securities	2,617			17,390			5,433		(3,527		)	(4,285		)	17,628
Bank debt	7,660			—			3,248		(928		)	(1,630		)	8,350
Corporate bonds	3,252			—			12,651		(7,288		)	640			9,255
Sovereign debt	21			—			—		(20		)	(1		)	—
Total assets	$	42,085		$	17,390		$	41,966	$	(11,823	)	$	(752	)	$	88,866
Liabilities
Derivative liabilities (free standing)	$	(1,020	)	$	—		$	—	$	(306	)	$	—		$	(1,326	)
Derivative liabilities (embedded)	(5,563		)	—			6,072		(861		)	260			(92		)
Total liabilities	$	(6,583	)	$	—		$	6,072	$	(1,167	)	$	260		$	(1,418	)


	January 1, 2015			Transfers in to (out of) Level 3			Purchases		Sales			Realized and Unrealized Gains(Losses) (1)			December 31, 2015
	($ in thousands)
Assets
Private common equity securities	$	1,443		$	—		$	4,384	$	(192	)	$	(1,278	)	$	4,357
Private preferred equity securities	—			—			18,991		—			5,187			24,178
Asset-backed securities	4,720			(2,212		)	4,929		(2,563		)	(2,257		)	2,617
Bank debt	—			—			8,123		—			(463		)	7,660
Corporate bonds	3,799			—			—		(372		)	(175		)	3,252
Sovereign debt	—			19			—		—			2			21
Total assets	$	9,962		$	(2,193	)	$	36,427	$	(3,127	)	$	1,016		$	42,085
Liabilities
Derivative liabilities (free standing)	$	(962	)	$	—		$	—	$	(173	)	$	115		$	(1,020	)
Derivative liabilities (embedded)	(9,289		)	—			4,417		(3,152		)	2,461			(5,563		)
Total liabilities	$	(10,251	)	$	—		$	4,417	$	(3,325	)	$	2,576		$	(6,583	)


(1)	Total change in realized and unrealized gains (losses) recorded on Level 3 financial instruments is included in net investment income (loss) in the consolidated statements of income (loss).

Schedule of significant unobservable inputs used

The following table summarizes information about the significant unobservable inputs used in determining the fair value of the Level 3 investments held by the Company. Level 3 investments not presented in the table below generally do not have any unobservable inputs to disclose, as they are valued primarily using dealer quotes, or at cost.



December 31, 2016
Assets	Fair value ($ in thousands)		Valuation technique	Unobservable (U) and observable inputs (O)	Range
Derivative liabilities (embedded)	$	92	Discounted cash flow	Contractual variable annual investment credit (U)	0.0% - 2.5%
				Mean monthly investment return (U)	0.8	%
				Duration from inception of contracts (U)	5.0 years
				Duration from valuation date (U)	3.0 years
				Interest rates (O)	U.S. Treasury spot rates
Private equity investments	47,608		Market approach	Discount (U)	5.0% - 25.0%
				Volatility (U)	40.0% - 60.0%
				Time to exit (U)	0.4 - 2.8 years
				Multiple (U)	2.0 - 3.8x

December 31, 2015
Assets	Fair value ($ in thousands)		Valuation technique	Unobservable (U) and observable inputs (O)	Range
Corporate bond	$	2,444	Discounted cash flow	Yield (U)	10.4% - 11.4%
				Duration (U)	3.0 years
				Credit spread (U)	986 bps
				Volatility (U)	25.0% - 35.0%
Derivative liabilities (embedded)	$	5,563	Discounted cash flow	Contractual variable annual investment credit (U)	0.0% - 2.5%
				Mean monthly investment return (U)	1.2	%
				Duration from inception of contracts (U)	5.0 - 5.5 years
				Duration from valuation date (U)	4.0 - 5.0 years
				Interest rates (O)	U.S. Treasury spot rates

- Definition

Tabular disclosure of all significant concentrations of risk, including credit risk and market risk, arising from all financial instruments (as defined), whether from an individual counterparty or groups of counterparties. The disclosure concerning concentrations of risk may consist of the following information: (1) for concentrations of credit risk disclosure may include: (a) information about the (shared) activity, region, or economic characteristic that identifies the concentration, (b) the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instrument, the entity would incur if parties to the financial instruments that make up the concentration failed completely to perform according to the terms of the contracts and the collateral or other security, if any, for the amount due proved to be of no value to the entity, (c) the policy of requiring collateral or other security to support financial instruments subject to credit risk, information about the entity's access to that collateral or other security, and the nature and a brief description of the collateral or other security supporting those financial instruments, and (d) the policy of entering into master netting arrangements to mitigate the credit risk of financial instruments, information about the arrangements for which the entity is a party, and a brief description of the terms of those arrangements, including the extent to which they would reduce the entity's maximum amount of loss due to credit risk and (2) for disclosure of quantitative information about the market risks of financial instruments that is consistent with the way the company manages or adjusts those risks, disclosure may include: (a) more details about current positions and perhaps activity during the period, (b) the hypothetical effects on comprehensive income (or net assets), or annual income, of several possible changes in market prices, (c) a gap analysis of interest rate re-pricing or maturity dates, (d) the duration of the financial instruments, (e) the entity's value at risk from derivatives and from other positions at the end of the reporting period and the average value at risk during the year, or (f) other ways of reporting quantitative information as internally developed.

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