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Third Point gets some benefit from narrower discount but more to do

Third Point Investors beat the MSCI World Index in NAV terms over 2021, returning 23.6% to the index’s 22.4%. Shareholders also benefitted from some discount narrowing that occurred in the wake of the actions taken by shareholders such as AVI Global over 2021. The return to shareholders was 31.1%. Buying back 3.1m shares in 2021 at an average discount of 16.5% added 46 cents to the NAV. Two new directors joined the board in February 2022.

However, at 14% at the year end and 16.8% today, the discount remains too wide.

The chairman says that with the exception of short positions in listed equities (which dragged on performance as markets rose), each of the long public equity, corporate and sovereign credit, structured credit, and private categories contributed to the return. He highlights two previously unlisted stocks that were recent IPOs: lender Upstart Holdings Inc. and cybersecurity company SentinelOne Inc. These have been two of Third Point’s most successful investments in its 25+ year history. Upstart, which uses a proprietary AI-powered process to underwrite its lending activities, went public in December 2020 and excitement propelled shares to a more than 270% gain in 2021. SentinelOne, which develops autonomous solutions for endpoint cybersecurity, similarly held a successful IPO in June 2021. Third Point’s venture arm led expansion stage funding rounds for these companies in 2015 and advised them on go-to-market strategy, talent acquisition and capital markets, culminating in their public listings.

The chairman says that Third Point’s deep expertise in managing assets across the corporate lifecycle and capital structure, is one of its differentiating features and this was behind the board’s decision taken during the year to allocate an increased proportion of the Third Point Offshore Fund, Ltd. (the underlying Master Fund) to venture capital holdings.

Not all positions were successful, especially those which grappled with a reversion after a strong 2020 or those which suffered from a slower-than-expected emergence from COVID-19 headwinds. The most impactful of these were holdings in payments provider Paysafe Ltd. and mobility company Uber Technologies Inc.

In response to changing market conditions, the manager trimmed its listed equity net exposure over the course of Q4 2021 and into Q1 2022 from a high of almost 80% to below 50% at the time of writing – mostly through sales of secular growth stocks whose valuation multiples are more at risk as interest rates rise.

TPOU : Third Point gets some benefit from narrower discount but more to do

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