By Svea Herbst-Bayliss
(Reuters) – Hedge fund manager Daniel Loeb’s firm Third Point will invest in private credit this year as it bets on positive conditions for both credit and equity markets in 2024.
“We will be adding private credit as a complement to our existing strategies and expect to begin investing in this new sector in the next few months,” Loeb wrote to investors in a letter seen by Reuters on Wednesday.
Third Point, which invests roughly $10.6 billion in assets, posted a 3.6% gain in 2023. Although that trails the broader market’s 26% return, it was a victory for the billionaire investor after a 22% loss in 2022.
Last year Third Point hired Chris Taylor, who had previously been CEO of Madison Capital Fund LLC, to build Third Point’s stand-alone private credit business.
Loeb said the new business will be additive to the firm’s existing strategies where nearly 40% of the portfolio is split between structured and corporate credit.
This year, Third Point said it expects returns to be fueled by “a more stable interest rate environment that creates opportunities in event-driven situations, including those where active engagement can help catalyze value.”
At the same time Loeb told investors that Third Point will follow its playbook in “opportunistic credit investing, with increasing opportunities to act as a liquidity provider during times of heightened stress.”
Last year’s top winners include a bet on Bath & Body Works where Third Point pushed for the company to add new talent with industry expertise to the board and for more judicious executive compensation. He stopped short of running a board challenge in March 2023.
Additionally bets on healthcare and telecom credits coupled with a broad end of year rally helped Third Point last year. But there are more opportunities ahead, Loeb said, noting there will be more fiber upgrades and roll outs of fixed wireless but also pressure on some players due to higher cost of capital.
This will make for both long and short “opportunities in both mid-sized and extremely large capital structures.”
(Reporting by Svea Herbst-Bayliss; Editing by Josie Kao)
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