Silver Point Capital is managed by Edward Mule and Robert O’Shea who have previously worked at Goldman Sachs Group, Inc. (NYSE:GS). The fund cashed in on the temporary market boost in response to the central bank easing campaigns in third quarter, generating returns of 15.86 percent in the three quarters of 2012 and 3.13 percent in Q3. With new investments, the AUM rose by $1 billion in third quarter (total AUM was not disclosed, but is estimated to be around $8 billion). Going forward, the managers at the hedge fund are pretty confident about new opportunities and expect the cyclical growth to continue for a longer period this time.
The fund detracted in short positions, where gross revenue detracted -1.9 percent, whereas the revenue rose 6.5 percent in the long positions in Q3. Silver Point lost in longs on equities and debt hedges, while gaining in long positions in liquidations, restructured equities, and secure debt.
The fund was profitable in restructured equities, such as Delphi Automotive PLC (NYSE:DLPH) and American International Group, Inc. (NYSE:AIG) in the last quarter. Both Delphi Automotive PLC (NYSE:DLPH) and American International Group, Inc. (NYSE:AIG) together make up 80 percent of Silver Point’s publicly disclosed long portfolio. Repayments from liquidations of Lehman Brothers, Bernard L. Madoff Investment Securities LLC, WMI Holdings Corp (PINK:WAMUQ), formerly Washington Mutual Inc., MF Global Holdings Ltd (PINK:MFGLQ), Glitnir Banki HF, and payments of bank debt from GRANITE BROADCASTING (PINK:GRRP), YP Holdings, Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), and Oerlikon, also drove performance in third quarter.
Michael Mauboussin: Here’s what active managers can do
The debate over active versus passive management continues as trends show the ongoing shift from active into passive funds. Q2 2020 hedge fund letters, conferences and more At the Morningstar Investment Conference, Michael Mauboussin of Counterpoint Global argued that the rise of index funds has made it more difficult to be an active manager. Drawing Read More
In the third quarter, exposure in the long portfolio was raised moderately. The primary focus of expansion was Silver Point’s positions in liquidation opportunities, as well as an increase of investment in restructured equities and bank debt.
For the present quarter, the fund is focused on event driven investments as the market is vulnerable to euro debt crisis and the US fiscal cliff. The weak growth in most of the major economies can generate bankruptcy and restructuring opportunities, and this is where Silver Point is paying attention. Nevertheless, the strategy would be cau and market exposures will be kept at moderate levels.