Billionaire Dan Loeb, head of Third Point LLC, claims that his hedge fund is still thriving in spite of widespread pressures against the industry. Speaking at the annual SkyBridge Capital conference (known as SALT) in Las Vegas, Loeb offered hints at new strategies for gleaning returns from mergers and acquisitions and other types of deals. His audience was largely hedge fund insiders, employees, and managers, an audience likely to be sensitive to the struggles of the financial world and probably ready to hear any new technique for bringing in positive returns.
M&A Offers Room for Earn More?
In his speech, Loeb singled out two techniques which had proven successful for Third Point in recent history. First, Loeb explained that the $16 billion hedge fund had found ways to earn more money off of mergers and acquisition deals. Loeb was tight on details in this area, instead offering hedge fund managers in attendance a glimpse of a particular direction they might continue to explore in order to find ways to squeeze more money out of their business dealings.
Second, Loeb highlighted his own firm’s forays into activist strategies. Third Point has not traditionally been known as an activist investing company. These funds typically buy up large stakes in struggling companies with the intention being that they will exert their newfound shareholder power in order to sway the leaders of the target business. The changes activists suggest are nearly always intended to improve sales figures, shareholder earnings, and similar areas.
Third Point Ventures into Activism
Although Third Point’s investment strategy has not typically focused on activism of this type, Loeb revealed a recent story involving multinational Honeywell International, Inc. (HON) that suggests his firm may be changing its tactics, at least when the opportunity seems right. Third Point recently prodded Honeywell executives to spin off the company’s aerospace arm, which has in recent months hindered the performance of the company overall. While this is a far cry from the widespread and aggressive activism of an investor like Carl Icahn, it nonetheless reflects Loeb’s willingness to adopt a variety of strategies in order to find the best profits.
Loeb’s techniques have been paying off. The firm has gained 7.5% since January, with its top fund up 12% in the same period, according to Reuters. This comes after having lost $2 billion in assets in 2016. Loeb told audience members at SALT in 2016 that he believed a wash-out of hedge funds was beginning to take shape. He appears to have recognized the external threats to his own company, and his shifting strategies have worked so far to help stave off investor disappointment, dwindling assets, and, in the case of many funds, closure.