Dan Loeb, a prominent hedge-fund manager, has faced a challenging year as his Third Point funds saw a decline of approximately 1.6% through August, following a substantial drop of 21.8% or more in 2022, the Wall Street Journal reports.
These performance figures have lagged behind those of peers and the broader market.
Loeb, who manages around $11.7 billion, adopted a cautious approach this year, anticipating that rising interest rates would impact the U.S. economy. Consequently, he did not hold enough technology shares to fully benefit from the AI-powered rally in the summer that boosted stocks like NVIDIA (NASDAQ:NVDA).
Although Loeb increased his stakes in tech and other higher-risk companies just before these stocks encountered recent setbacks. Strategies that have historically delivered significant gains for Loeb, such as shareholder activism, short selling, and startup investments, have also not proven successful in this environment.
Despite Loeb's proven track record, some investors have chosen to withdraw their investments, with requested withdrawals totaling $850 million or more than 7% of Third Point's assets at the end of Q3. This comes in addition to the approximately $1 billion in redemptions from Third Point funds during the first eight months of the year.
Loeb has a track record of recovering from previous setbacks by making strategic shifts. For instance, after facing significant losses in the first quarter of 2020 due to the onset of the pandemic, Third Point rebounded to end the year with around a 19% gain, driven partly by bets on the resilience of consumer and commercial debt.
“I’m not thrilled with the results, but each time we’ve had 20% drawdowns, we’ve more than made up for them,” Loeb said in an interview with the WSJ.
Third Point has a strong historical track record, delivering average annualized returns of 16% after fees over the past 28 years. Notably, in 2021, the firm's hedge funds saw gains of as much as 27%, underscoring its historical success in generating robust returns for investors.