Third Point Investors has published an investor letter for the finanl quarter of 2022. Third Point LLC returned 1.2% in the flagship Offshore Fund during the fourth quarter of 2022, compared with the S&P 500 Index return of 9.9% and the MSCI World Index return of 7.5% in the same period. It says:
- Results for the fourth quarter lagged the performance of relevant indices, largely due to Third Point’s defensive positioning, weakness of several large positions, and the write-off or markdowns in crypto-related private investments.
- On the positive side, the investment manager’s largest position, Pacific Gas & Electric Co., appreciated 30%; Bath & Body Works Inc., a new activist position, also rose 30%; and the Twitter risk arbitrage position was held to a close.
- While the investment manager judges these results as lacklustre, it used the market weakness in December to increase equity exposures, initiate several new positions and add to others that were trading at attractive levels.
- Notwithstanding the recent rally in risk assets, which Third Point views as a technical phenomenon that will not be sustained in the longer term, it sees the current environment as ideal for an approach to investing that focuses on companies trading at attractive valuations with catalysts to realize full value. This style of event-driven investing, for which the current market conditions are ideal, is Third Point’s core competency and the foundation upon which the firm was built.
- Credit remains a mainstay of the portfolio and Third Point sees both the asset-backed and corporate credit strategies as benefiting in the environment ahead.
The fund has a new position in American International Group (AIG). The statement says that, alongside an operational turnaround, AIG is repositioning itself as a pure-play P&C insurer via the IPO of its life insurance subsidiary, Corebridge. Third Point believes the proceeds to come from the sell-down of the remaining Corebridge stake will be redeployed primarily towards share repurchases. There is also an opportunity to streamline the corporate expense base with the simplification of AIG’s business as the company no longer operates within the conglomerate structure that governed its operations until a decade ago.
[The surprise in this to us was that Third Point LLC had exposure to crypto-related private investments. We aren’t sure what the hit was from these, it may have been relatively minor. A bit of digging reveals that it backed CipherTrace – a security firm that tracks crypto crimes (where you’d think business would be booming), and a blockchain technology firm called ConsenSys.]
TPOU : Third Point says defensive positioning held it back in Q4 2022