REG-Third Point Investors Ltd: Third Point Releases Q1 2023 Investor Letter

Third Point InvestorsAnnouncement

18/05/2023 14:15

18 May 2023

Third Point Publishes Q1 2023 Investor Letter

Preserving liquidity and buying power to take advantage of markets when they
“break”

Highlights:
* The First Quarter of 2023 was characterized by volatility across investment
classes, as well as the failure of Silicon Valley Bank and the contagion that
followed
* Positions in LVMH, Disney and Microsoft gained while Fidelity National
Information Services, Bath & Body Works, and Colgate experienced losses
* New positions in UBS and Alphabet highlighted where catalysts for value
creation have emerged
* Updates on Corporate Credit and Structured Credit, which now comprise more
than 40% of NAV due to the compelling investment opportunity presented
 

Third Point LLC, the Investment Manager of Third Point Investors Limited
(“TPIL” or the “Company”) announces it has published its quarterly
investor letter for Q1 2023. The full letter can be accessed at the
Company’s website:
https://www.thirdpointlimited.com/resources/portfolio-updates

 

Performance Key Points:
* Third Point LLC (“Third Point” or the “Investment Manager”) returned
-4.2% in the flagship Offshore Fund (the “Master Fund”) during the first
quarter of 2023, compared with the S&P 500 Index return of 7.5% and the MSCI
World Index return of 7.9% in the same period.  
* The top five positive contributors for the quarter were Salesforce Inc.,
Advanced Micro Devices, LVMH, The Walt Disney Co., and Microsoft Corp. 
* The top five negative contributors for the quarter were Fidelity National
Information Services, American International Group Inc., Bath & Body Works
Inc., Glencore International PLC, and Alphabet Inc. FIS, Bath & Body Works,
and Colgate have both since “beat and raised” guidance, indicating that
many management teams are adopting very conservative tones in this uncertain
macro environment.
 

Outlook and Market Commentary:
* For the First Quarter of 2023, the Investment Manager’s returns lagged the
indices despite strong performance from several new investments including
Salesforce and AMD. 
* While Third Point were on the right side of some of the sector dispersion
during the quarter, losses on the short equity portfolio and in some
Financials long positions more than offset these gains, leading to
disappointing results.  
* Looking ahead, the Investment Manager sees encouraging signs that inflation
is moderating. At the same time, labour markets remain stubbornly tight. With
monetary and fiscal policy essentially pushing in opposite directions,
monetary policy is likely to remain tight for longer than would otherwise be
necessary. 
* Third Point’s strategy is to preserve liquidity and buying power to take
advantage of markets when they “break”. While overall indices remain
elevated, the Investment Manager is finding more chances to provide liquidity
across all three asset classes in which it invests – credit, structured
credit, and equity – opportunities which have been key drivers of
performance for the fund. 
* The portfolio is currently balanced across industries with a focus on
event-driven names including companies involved in spin-offs, significant
cost-cutting, or other types of under-appreciated business transformation.
 

Portfolio Updates
* New Position in UBS	* Third Point initiated a position in the debt of Credit
Suisse prior to the takeover announcement by UBS. As one of the few funds
remaining with the mandate to pick the “fulcrum security” across the
capital structure, the Investment Manager determined once the emergency rescue
acquisition was announced, the equity of UBS presented the more compelling way
to invest in the situation and rotated from CS bonds into UBS stock.
* Third Point views the rescue of CS as a transformative deal for UBS at a
highly compelling price and with downside-protected terms.
 
* New position in Alphabet (GOOGL)	* Third Point believes that fears around
the potentially negative impact that AI and ChatGPT/Microsoft may have on
Google’s business created a unique entry point into one of the best consumer
internet assets and businesses of our generation.
* The Investment Manager believes the market underestimates GOOGL’s own
capabilities and opportunities in the emerging field of generative AI, which
can drive product improvements across its Search, Maps, Gmail, Workspace, and
Cloud offerings. 
* Third Point is also encouraged by GOOGL’s commitment to “durably
reengineer its cost base” to deliver sustainable and consistent margin
expansion for investors.
 
* Update on Corporate and Structured Credit	* Both areas of credit (corporate
and structured) contributed positively to First Quarter performance. While
corporate credit spreads have been relatively range-bound, Third Point
continues to see periods of higher volatility that are creating appealing
entry points.
* Third Point took advantage of the broader market volatility created by the
banking sector turmoil in March to add to existing positions on weakness and
initiate new positions. The Credit Suisse investment was the result of a
fruitful collaboration between the equity and credit teams. 
* Within structured credit, residential mortgages and consumer credit
outperformed to start the year, while commercial mortgage-backed securities
(CMBS) underperformed given the well-publicised cracks finally emerging in the
CRE sector. 
* Third Point remains constructive on its residential mortgage exposure,
because of the historically low loan to values where borrowers have 40-50%
equity in their homes locked at a fixed rate below 5%. Given the credit
support at the asset level in residential mortgages and the potential path for
rate cuts over the next 12 months, this exposure is attractive from a credit
and rate perspective.  
 

 

- Ends -

 

 Press Enquiries

 Third Point Elissa Doyle, Chief Communications Officer and Head of ESG Engagement edoyle@thirdpoint.com Tel: +1 212-715-4907  Buchanan  Charles Ryland charlesr@buchanan.uk.com Tel: +44 (0)20 7466 5107 Henry Wilson henryw@buchanan.uk.com Tel: +44 (0)20 7466 5111  

 

 

Notes to Editors

About Third Point Investors Limited

www.thirdpointlimited.com

Third Point Investors Limited (LSE: TPOU) was listed on the London Stock
Exchange in 2007 and is a feeder fund that invests in the Third Point Offshore
Fund (the Master Fund), offering investors a unique opportunity to gain direct
exposure to founder Daniel S. Loeb’s investment strategy. The Master Fund
employs an event-driven, opportunistic strategy to invest globally across the
capital structure and in diversified asset classes to optimize risk-reward
through a market cycle. TPIL’s portfolio is 100% aligned with the Master
Fund, which is Third Point’s largest investment strategy. TPIL’s assets
under management are currently $600 million.

 

About Third Point LLC

Third Point LLC is an institutional investment manager that actively engages
with companies across their lifecycle, using dynamic asset allocation and an
ethos of continuous learning to drive long-term shareholder return. Led by
Daniel S. Loeb since its inception in 1995, the Firm has a 39-person
investment team, a robust quantitative data and analytics team, and a deep,
tenured business team. Third Point manages approximately $12.2 billion in
assets for sovereign wealth funds, endowments, foundations, corporate & public
pensions, high-net-worth individuals, and employees.

 



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