Third Point Still Net Long Distressed Debt & MBS: Latest Exposure & Positions ~ market folly

Wednesday, April 7, 2010

Third Point Still Net Long Distressed Debt & MBS: Latest Exposure & Positions

Dan Loeb's hedge fund recently sent out their performance update for their Offshore fund and in it we saw their latest exposure levels and top positions. Earlier today we learned that Third Point was up 15.58% for the year in our batch of first quarter 2010 hedge fund performance numbers. They were up 8.1% in March alone and had a solid month. Their $1.74 billion Offshore fund's cumulative performance is an astonishing 859% with annual standard deviation of 13.8% a correlation to the S&P of 0.39 and a Sharpe Ratio of 1.30, rounding out an impressive set of statistics. To learn to be a great investor like that, we point to Dan Loeb's recommended reading list.

Let's next check in on their exposure levels. In equities, they are net long consumer names at 12.2%, financials at 13.1%, and healthcare at 8.2%. They are ever so slightly net short the market indices and energy. In credit, they are net long distressed at 31.3%, Performing at 13.5%, and mortgage backed securities - MBS at 19.2%. The positive performance as of late can be attributed to their financial plays in equities and their distressed credit plays. Other exposure levels include a 6.5% net exposure to risk arbitrage and a 7.4% exposure to privates. In terms of geographic exposure, Loeb's hedge fund is net long America by 107%, net long Europe by 20% and neutral in Asia.

Third Point's top positions are as follows and keep in mind that they own multiple securities in all of these companies so it's not just simply an equity position or a debt position. Unfortunately, there is no further breakdown as to specifics:

- Chrysler
- Delphi Corp
- CIT Group
- PHH Corp
- Dana Holding Corp

So, they still own many of the names we saw referenced in their investor letter. Loeb's hedge fund also made note of some of their top winners and losers. Many of their losing stakes were un-named short positions which is understandable given the fact that the market doesn't seem to want to go down. They also lost on their Gartmore Group Ltd and Ford (multiple securities) positions. Their top winners include: PHH Corp, Delphi, Chrysler, SemCrude LP (multiple securities) and Liberty Media Corp Interactive. In terms of new portfolio activity, we saw they recently updated two positions and then reduced a position.

That wraps it up. To learn to invest like this fund manager, we defer you to Dan Loeb's recommended reading list. We'll continue to check in on Third Point each month to provide you updates. In the mean time, for more information you can head to Third Point's commentary, as well as our look at their equity portfolio.

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