Friday, 29 July 2016
Last updated 6 hours ago
Mar 13 2009 | 1:06am ET
Another prominent hedge fund is turning to gold to weather tough times. Third Point has told investors that it has moved a substantial amount of its assets into the precious metal, following the lead of another activist hedge fund shop, Greenlight Capital.
Gold is now the single largest holding in Third Point’s fund, the Financial Times reports.
Third Point founder Daniel Loeb, famous for his poison pen, offered a self-critical take in the letter, acknowledging that “mistakes were made” last year. Were they ever: Third Point plunged 38% in 2008, although it has recovered somewhat this year, returning 1.8% so far.
Loeb paints a grim picture of the global economy, calling attention to the “issue of global insolvency which can be addressed only by massive corporate and sovereign restructuring.” He also played up the issue of corporate pension plans.
“I recently read the 10-K for a major steel company based in the U.S. whose pension liability went from a surplus of $200 million at the end of 2007 to a deficit of approximately $2 billion at the end of 2008,” he wrote. “To add insult to injury, in addition to its pension liability, this company’s healthcare plan is underfunded by $3 billion.”
Of course, bad news for this steel company could be good news for Third Point investors: Loeb is now shorting its stock.