REG-Third Point Investors Ltd: Third Point Releases Q4 2023 Investor Letter

Third Point InvestorsAnnouncement

15/02/2024 07:15

15 February 2024

Third Point Q4 2023 Investor Letter

Third Point LLC, the Investment Manager of Third Point Investors Limited
(“TPIL” or the “Company”) announces it has published its quarterly
investor letter for Q4 2023. The full letter can be accessed at the
Company’s website:
https://www.thirdpointlimited.com/resources/portfolio-updates.

 

Highlights:
* The Master Fund generated a 7.6% gain in the Fourth Quarter, with
contributions from equity longs, risk arbitrage, and corporate credit offset
modestly by equity shorts and hedges. 
* Most of the major detractors during the first and second quarters rebounded
in the second half of the year, which, along with successful risk arbitrage
positions in Activision Blizzard and US Steel, resulted in equity returns
above the benchmark indices for the period. 
* The Investment Manager sees a constructive backdrop for both equities and
credit in 2024, as it continues to find high-quality companies trading at
reasonable valuations.
 

 

Performance Key Points:
* Third Point LLC (“Third Point” or the “Investment Manager”) returned
7.6% in the flagship Offshore Fund (the “Master Fund”) during the fourth
quarter of 2023.
* The top five positive contributors for the quarter were Bath & Body Works
Inc., Microsoft Corp., Pacific Gas & Electric Co., Amazon.com Inc., and United
States Steel Corp.
* The lowest five contributors for the quarter, excluding hedges, were Regal
Rexnord Corp., Hertz Global Holdings Inc., Option Care Health Inc., Veralto
Corp., and Global Blue Group Holding AG.  
 

Outlook and Market Commentary:
* Third Point’s actions in 2023 to improve performance involved significant
analysis and scrutiny of not just what it invests in, but how it invests. On
the long equity side, deep fundamental conviction has enabled the Investment
Manager to see investments through, even when markets or factors cause
temporary underperformance. This conviction grounded Third Point as some of
its main long positions were underperforming earlier in the year but
contributed to the strong performance in the second half of the year and Q4. 
* On the short side, Third Point identified that its hit rate on identifying
alpha shorts was excellent, but that its monetisation of those ideas had been
suboptimal, in part due to extreme volatility which caused the manager to
shorten duration. Third Point addressed this by restructuring its single name
short portfolio to be far more diversified across industry, market
capitalisation, and factor profile, while tightly limiting risk in names with
high short interest. This revised strategy yielded significantly better and
lower volatility returns in the second half of the year. 
* Credit, meanwhile, remained a consistent driver of returns, with strong
results from both corporate and structured credit. 
* While assets have certainly priced in some of the good macroeconomic news on
inflation and rates, Third Point still believes headline equity market
multiples exaggerate the valuation most companies are trading for. The manager
expects returns to be driven by: 	* 1) a more stable interest rate
environment, which should create more event-driven opportunities; 
* 2) Third Point’s duration as a holder, which will continue to be a benefit
in complex event-driven situations and mispriced quality companies; and 
* 3) executing on its playbook in opportunistic credit investing, with
increasing opportunities to act as a liquidity provider during times of
heightened stress.
 

Portfolio Updates
* Corporate Credit Update	* First half performance was driven by successful
investments in cruise lines and in regional banks and CS/UBS debt securities
during the March selloff. Second half performance was driven by exposure to
healthcare and telecom sectors.
* Looking ahead to 2024, Third Point believes that technical and fundamental
factors are conspiring to increase supply in high yield at a time when
companies will experience more balance sheet stress, making credit an
attractive asset class for an extended period.
 
* Structured Credit Update	* Third Point’s structured credit portfolio also
delivered quality, risk-adjusted returns in 2023, with each of the individual
strategies within the portfolio positive except marketplace loans. 
* The largest contributor to performance was the Master Fund’s exposure to
residential mortgage securities, and the Investment Manager remains
constructive on the asset class. While the manager expects some price declines
if rates fall and housing turnover increases, there is still a significant
amount of home equity in borrowers’ hands. 
* Looking forward, Third Point expects to be able to take advantage of bank
stress, as these financial institutions look to offload loans to shore up
balance sheets. Spreads in structured credit also look attractive versus
public corporate credit, and Third Point expects to see a strong bid for these
assets as more investors seek them out.
 

Business Update - Senior Appointments at the Investment Manager
* Third Point’s Chief Compliance Officer, William Song, left the firm
earlier in February. Over the past fifteen years, Will created and oversaw a
robust compliance program, drawing on his prior experience at the Securities &
Exchange Commission. Will stayed on through February to transition his
responsibilities to his Deputy, Jana Tsilman, who has served in that role
since 2017. We welcome Jana to her new role as Chief Compliance Offer.
* Chief Marketing Officer Jenny Wood left the firm at the end of 2023, marking
the culmination of an orderly transition following her decision to leave
earlier in the year. Jenny’s IR responsibilities have been assumed by Ryan
Holland, Head of Investor Relations, who joined us in 2020. On the Marketing
side, Rich Arbucci, who has led private wealth marketing since 2019, has taken
on the role of Co-Head of Marketing.   
* Marc Zwebner has returned to Third Point as Co-Head of Marketing. Marc was
Co-Head of Marketing and a Managing Director at Third Point from 2009-2013.
Most recently, he was the Global Head of Business Development at Avenue
Capital Group.
* Finally, Stoyan Hadjivaltchev has rejoined Third Point. Stoyan was on the
equities team from 2006-2008 and returned as a Managing Director from 2012 to
2020. Stoyan will have a senior role across the equities portfolio, helping to
oversee idea generation, research, portfolio construction, and talent
development.
 

 

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 45-person
investment team, a robust quantitative data and analytics team, and a deep,
tenured business team. Third Point manages approximately $10.6 billion in
assets for sovereign wealth funds, endowments, foundations, corporate & public
pensions, high-net-worth individuals, and employees.

 



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