Dan Loeb: Central Banks Inflating Is Bullish For Equities


Below are comments from Dan Loeb according to a transcript of The Third Point Reinsurance Ltd (NYSE:TPRE)  conference call.

Also see  Dan Loeb Speaks At Dealbook Conference 2013

A, call over to Daniel Loeb who will discuss the performance of our investments portfolio in the 3rd quarter.

The Third Point Reinsurance Ltd (NYSE:TPRE) — managed by Third Point LLC returns 4.3% in the third quarter bringing year-to-date returns to 16. 9% net of season expenses.

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The Third Point Reinsurance Ltd (NYSE:TPRE) account represents a proximally 10.5% of the assets of funds managed by Third Point LLC. We generated positive results across age of our strategies, Longshore equities, corporate and structured credit and macro investments during the 3rd quarter. Returns were led by the equity portfolio which contributed 3.5% or 80% of total gains. As of September 30, our equity investment have gained 31.6% on average exposure year today versus the S &P’s 500 20% gains. With approximately half the value at risk. Performance has been driven by profits and several key activist divisions as well as by many smaller investment across sectors and geographies.

The quarters equity returns were terminable to successful single name stock selection resulting in significant a generation with modest volatility. Longer exposure decreased in July when several positions reach their price targets and result. Most notable of these were Yahoos repurchase of two thirds of our investment at the previous date of closing price of $29.11 per share in July. At the time of the sale are Yahoo investment had an IRR of 53% a total realized and unrealized gains of $1.1 billion since inception in aggregate across all of third point funds.

Corporate credit added 0. 4% to Q3 returns as both performing and distressed credit positions delivered solid performance. As of September 30, our corporate credit portfolio has returned 15. 5% on average exposure year to date or more than 1000 basis points over Barclays high-yield index — credit has also continue to be a key area of focus. Our sovereign portfolio was up 12. 4% on average exposure in queue three adding another two tenths of the% to returns in the macro portfolio for the quarter.

Finally mortgages have continued to perform we’ll converting 0. 2% returns through September 30 our but has returned 22. 1% on average exposure despite fairly consistent levels of exposure the portfolios contribution has shifted throughout the year. For example, we have been selectively adding (inaudible) bonds recently after selling most of those holdings during the rally in the securities in the 1st quarter.

We are cautiously constructive about the investment environment in the near future and expect exposures to remain relatively consistent with current levels. We will continue on uncovering event driven opportunities especially in special sick situation equity positions.

Q&A with Dan Loeb

Unknown speaker: Switching gears to the investment portfolio and probably for Dan. Can you update us on how the investment portfolio is positioned going into year-end? Obviously, U.S. equity markets continue to have a strong run. Use the word cautiously optimistic. Do you expect some of your longshore acquisitions to take a breather?

Dan Loeb: Well, it’s always difficult to predict what our positions will do over acyclic period. So, I don’t — I wish my crystal ball were more accurate. Obviously I really liked the position that we have and that’s why we’ve committed capital to t hem. Maybe I was a little to guarded in the term cautiously optimistic. Given — particularly in the near-term which is I think what your question it is related to, given monetary policy here, the actions taken by (inaudible) last week in Europe and what is going on in the UK, Japan and even China, we have a global put to equities. So I feel like we are in a mode where economies around the world developed economies are trying to inflate and that is usually a good thing for equities.

Unknown Speaker*

Okay and just a follow-up, Dan. Use the word target price I guess another way, is the gaps between current prices and your target prices narrower than it was earlier in the year?

Dan Loeb: Some are some aren’t. We have added some — the positions that have appreciated to our target prices are closer to our target prices like Yahoo! Inc. (NASDAQ:YHOO) for example, we’ve reduced — we’ve recently put on some new positions which have much higher target prices. So, it’s something that we are continually turning to the portfolio and exiting positions that appreciate and return target prices and selling — and adding two things where we see more — more upside and opportunity.

One thing I want to say about target prices, is — you have to be a little bit expensive about how you think about things. You may have a stock that you think is work — worth X-letter today but because of the nature of the business they are in or the way the management team compounds capital over a couple year period, you may have a higher target price. So, all these things have to be put into context when you’re talking about a shorter-term target or a longer-term target, and it is more art than science determining what constitutes having reached are not reached a target price.

Kai Pan, Morgan Stanley (NYSE:MS): Good morning this is Kai Pan calling in from grid low-cost congratulations is a good start as a public company. The first question actually for Daniel, third point fund is returning about 10% of capital to investors could you.

Unknown Speaker*

Good morning this is Kai Pan calling in from grid low-cost congratulations is a good start as a public company. The first question actually for Daniel, third point fund is returning about 10% of capital to investors could you elaborate a little bit on that and well this limit to Third Point Re’s ability to invest or growing the investment portfolio with Third Point LLC?

Unknown Speaker*

I don’t really have any further comment on that.

We will be sending out a letter to our investors shortly about it. We have said however that the return of capital is — excludes the public funds (inaudible) and offshore investors that are publicly listed funded the UK.

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