| Daniel Loeb, Third Point (Bloomberg) |
By Michelle Celarier
Third Point CEO Daniel Loeb argued recently that hedge funds are in the “first innings of a washout.” But that’s certainly not the case for the $16.3 billion Third Point, which is bucking the trend and taking in fresh capital.
Like many hedge fund firms, Third Point lost money last year, with its offshore fund down 1.22 percent, and some investors withdrew their money. But Loeb’s losses were minor compared with those of most of his peers, and redemptions were less than 2 percent of capital, or $300 million. The “recent outflows” led the firm to open the fund to new money, according to an investor letter from JP Morgan, which said it received $40 million in additional capacity for its clients.
Loeb told investors in his first quarter letter that Third Point was “well-positioned to seize the opportunities borne out of this chaos and [is] pleased to have preserved capital through a period of vicious swings in treacherous markets.”
This year is still rocky, however. Third Point Offshore is down 0.4 percent though April, trailing the Standard & Poor’s 500 stock index’s 1.7 percent gain. But last year was only the third losing year for Third Point since it launched its first fund in December 1996. Its offshore fund had annualized net return of 16.21 per cent since that time through the end of 2015, compared with the S&P 500’s annualized return of 7.31 percent, according to a December 2015 Third Point executive summary.
Third Point Partners, the onshore fund, launched in January 2005, has an annualized net return of 10.93 percent through the end of 2015, while the S&P 500 Index has an annualized return of 7.08 percent over the period. Both funds’ annualized performance is about double the HFR event-driven index for the same time period.
Hedge fund managers at the recent annual SkyBridge Alternatives (SALT) Conference in Las Vegas bemoaned the industry’s sorry performance of late, and many said they believed fees would come down from the “2 and 20” that has been the industry standard. But Loeb apparently didn’t get the memo. New subscriptions to his funds will be charged 2 percent of assets and a 20 percent incentive fee. The new money has a one-year soft lockup (with a 5 percent early redemption fee). After that, redemptions are quarterly with 65 days’ notice. However, the funds also have a fund-wide gate, which means Third Point isn’t required to redeem more than 20 percent of its total equity on any withdrawal date.
Third Point typically has 30 to 50 positions in its portfolio, which can include distressed debt and equities. Top positions typically account for 3 to 5 percent of assets under management, with leverage typically 1.4 times equity, according to the executive summary.
The firm has 78 employees, 25 of whom are investment professionals. It also employs two full-time risk management experts.
Third Point declined to comment.
