Latest Exposure Levels From Dan Loeb's Hedge Fund Third Point LLC ~ market folly

Thursday, July 8, 2010

Latest Exposure Levels From Dan Loeb's Hedge Fund Third Point LLC

Dan Loeb's Offshore Fund at Third Point LLC recently released its latest performance and exposure breakdown. Loeb's hedge fund is worth following simply for this fact: it's generated an annualized return of 17.7% versus 4.1% for the S&P 500 since December 1996. Not to mention, they've done so with a correlation to the S&P of 0.40. Needless to say, those are impressive figures. Those of you desiring to follow in his footsteps can check out Dan Loeb's recommended reading list for wisdom.

For the month of June 2010, Third Point was down 2.0% largely due to their long equity positions in financials. Yet, despite the rough month, they are still up 10.2% for 2010. As of last tally, their Offshore Fund managed $1.793 billion. So while hedge funds had a brutal May, it looks like June was also a losing month for many big players.

Now, to the good stuff: the portfolio breakdown. We've covered countless times how Loeb's fund has been net long distressed debt. This trend remains unchanged. Third Point is 25.1% net long distressed credit and 19.8% net long MBS. While their distressed exposure contributed to negative performance in June, their MBS exposure contributed positively.

Here are Third Point's top positions (keep in mind they own multiple securities in each of these names):

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

As you'll notice from previous times we've covered Loeb's portfolio, his top holdings remain pretty much unchanged. In equities, Loeb's hedge fund has their largest net long exposure in financials (at 7.8% net long) followed by consumer names (at 4.7% net long). In terms of total long/short exposure, Third Point is 37.9% net long equities and -12.2% short, leaving them 25.7% net long. This is slightly below the average hedge fund exposure levels of around 30% net long. Geographically speaking, Third Point continues to be net short Asia at -1%. They are net long the Americas to the tune of 87% and Europe to the tune of 13%.

In the equity realm, Loeb made note in a recent letter that Third Point still fancies post-bankruptcy equities, deeming them cheap. We'll have to see if any new positions pop in that regard when their next 13F filing is released in a month or so. Loeb's top winning positions last month included two shorts, Icelandic Bank debt, 'Asset Backed Security A', and Novartis/Alcon arbitrage. His top losers were PHH Corp (multiple securities), Liberty Media Interactive, Macy's, Lyondell, and CIT Group (multiple securities). Touching on some of those specific names, you'll recall that Jamie Dinan of York Capital recently stated he was bullish on Lyondell at the Ira Sohn Investment Conference (notes from the event here). Many hedge funds also own a position in Liberty Media and it appears on Goldman Sachs' VIP list. Lastly, you'll recall that David Einhorn's Greenlight Capital has a large CIT stake.

That wraps up notable information from Third Point's latest update. Be sure to savor these broad portfolio updates from Third Point as it's really all you'll get based on Loeb's new philosophy. Per his recent investor letter, his hedge fund won't be talking about their new positions until *after* they've been publicly disclosed via 13F filings. As such, these sector breakdowns are all we'll get in the mean time. As always though, we'll continue to monitor the SEC filings like a hawk. Recent disclosures made by Third Point in that regard include a stake in Xerium Technologies as well as a newly revealed position in Roomstore.

For more resources from Third Point, we of course point you to Dan Loeb's recommended reading list.

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