Legends Fund has taken a position in Third Point, the hedge fund of renowned investor Dan Loeb. We have been investors with Dan Loeb for our individual accounts for many successful years and we consider him one of the best event driven investors in the world. Over the last few months we have built a position in the listed shares of the hedge fund as they traded down to a 20% discount to the underlying fund. Per September 1st we have further built the position through a direct stake in the hedge fund.
Dan Loeb (1961) is the founder and CIO of Third Point, an event-driven, value-oriented hedge fund that invests opportunistically across asset classes including special situation equities, corporate credit, asset -backed securities and macro investments. Mr. Loeb founded the firm in 1995 and has established one of the best track records of in the hedge fund industry.
Third Point seeks steady high-yield like returns via corporate and structured credit markets, as well as larger absolute returns via various long/short equity and distressed debt strategies. Mr. Loeb has been particularly successful in moving the fund’s capital to those market segments that are offering the best risk-rewards at any point in time.
The track record of Third Point is second to almost none. Since inception in June 1995 Third Point has achieved annual net returns of 18.9%. This compares to 9.2% for the S&P 500. Cumulatively, this translates into a 46-fold return over 22 years, whereas a buy-and hold position in the S&P 500 would have resulted in a 7-fold return. And this has been achieved with a 0.4 correlation to US equity markets and a volatility of just 12.6% which also compares favorably to 14.8% of the S&P 500 index. Part of Legend Fund’s exposure is through the Third Point Ultra fund, a leveraged version, which was launched on Jan 1st 1997 and which has an even more remarkable record annualizing at 23.7%. Over the last 5 years, not the easiest for many hedge fund managers, the fund achieved an annual return of 17% with a volatility of 11%.
The rationale for investing partly through the UK listed vehicle (Third Point Offshore Investors LTD), is the fact that we believe the current magnitude of the discount to the underlying fund will prove to be temporary, not in the last place given the healthy dividend paid out by the fund.
Third Point manages USD 16.5bln across its funds and employs 90 people, 35 of whom are investment team members. The firm employs best-in-class service providers and is well aligned with its investors with 7% of the capital being Dan Loeb’s and his team’s.
We look forward to a long-term and rewarding investment.