Third Point Down In Q2, Bounces Back In August

Aug 30 2010 | 1:46pm ET

Daniel Loeb is pretty happy with his August performance, ambivalent about his second-quarter performance and downright unhappy with the man he helped elect president of the United States.

Loeb’s Third Point Partners fund dipped 3.5% in the second quarter, which he called “challenging for just about everyone.” But the New York-based hedge fund has been hot in the first month of the third quarter, recouping much if not all of those losses in August. Third Point’s hedge funds are up between 14% and 16% through the first four weeks of August, after Third Point Partners fell to 12.7% through the first six months of the year.

Loeb said the $3.3 billion fund’s performance in the second quarter was driven by its mortgage-backed securities, short book and “select private positions.” The firm’s second-quarter letter was first published by Dealbreaker.com.

The Third Point founder said he still has “high conviction” in his firm’s portfolio. But his faith in President Barack Obama appears to be on the wane, and much of his letter was spent bashing the government. (Loeb, a big Democratic donor, even quoted President Ronald Reagan in the letter’s epigraph.)

“So long as our leaders tell us that we must trust them to regulate and redistribute our way back to prosperity, we will not break out of this economic quagmire,” he wrote. “One can hope only that this Administration, composed of brilliant academics that have had experience in creating the very regulation and overseeing the very institutions that have failed, has learned from its mistakes and will set us down the right path.”

“Perhaps our leaders will awaken to the fact that free market capitalism is the best system to allocate resources and create innovation, growth and jobs. Perhaps they will see the folly of generating greater deficits by ‘investing’ in programs that lead to corruption and distortions of the system,” he added. “Perhaps too, a cloven-hoofed, bristly haired mammal will become airborne and the rosette-like marking of a certain breed of ferocious feline will become altered. In other words, we are not holding our breath and are focused instead on navigating these murky waters for the benefit of our funds.”


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