Third Point’s Daniel Loeb discusses portfolio adjustments and the SEC’s dropped investigation

June 26th, 2010
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Hedge fund manager Third Point Management recently sent out its investor letter for the first quarter of 2010. CEO Daniel S. Loeb opened the update with a review of the importance of “macro” themes, particularly the global economic environment, during the past year. Overall Mr. Loeb remains cautiously optimistic about the future, balancing his frustration with the Obama Administration’s stance on the markets - “It is neither health care nor financial reform which has stressed markets most in 2010, but rather the continued politicizing of the regulatory process and the abandonment of free market capitalist principles that have undermined investor confidence,” he writes - with his recognition of the need for financial reform and bank regulation. And despite the current precarious global situation, while fund managers and investors alike watch Europe, China and Japan, the government’s stance on Wall Street, tax increases, and BP’s ever-growing oil slick all with trepidation, Third Point seems posed to continue its solid returns, the investor letter states.

Last month, Third Point Management reduced or sold positions in companies without near-term hard catalysts and anything that would be negatively affected by increased government regulation to limit gross and net exposure. The reductions caused Third Point’s equity exposure to drop around 10% on a cash basis and 16% “beta adjusted,” the letter states. The firm also added some credit and risk arbitrage positions, commenting that “we are also seeing risk arb spreads widening, and yields on corporate debt have become very attractive recently.”

Mr. Loeb concluded his letter with a review of Third Point’s first quarter performance results for this year: “Performance for the first quarter was driven primarily by gains in post-reorganization equities, financials equities, mortgage bonds, and the realization of a long-eld private position.” Third Point’s flagship hedge fund, the Third Point Partners LP, returned 16.6% during the first quarter, which outpaces the Credit Suisse Event-Driven Index’s 4.8% return. The top gainers in the hedge fund’s portfolio were Delphi Corp, PHH Corp, Ception, Chrysler, and CIT, while the top losers were Gartmore Group, United Co. Rusal, and Heidelberg, Cement, as well as two shorts positions.

More in-depth analysis of one of the firm’s equity investments, Aspen Technology, revealed numerous potential catalysts for the company in the future. The firm also mentioned that it had monetized its position in Ception Therapeutics and that “Third Point’s exit value was 3.2x [the] investment for a 36% IRR.”

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Third Point Management Company
Related People: Daniel Loeb; James L. Carruthers*; Munib Islam; Robert Schwartz; Tim Lash
Related Entities: Third Point LLC; Third Point Opportunities Master Fund LP; Third Point Resources LP; Third Point Ultra Master Fund LP; Third Point Ventures
Related Article Tags: Multi-Strategy, Long Short, Equity, Debt and Global Macro Hedge Fund News; Hedge Fund Spotlight Reports

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