Dan Loeb’s Third Point LLC said it is closing its funds to new investors, effective June 1.
In his recent quarterly letter, the New York City hedge fund manager said, with assets under management currently at $6.7 billion, he will halt inflows from new subscriptions. Loeb stresses the recent surge in assets is due to both investor flows and performance.
“Periodically over the past sixteen years, the funds have closed to new subscriptions, and we believe we have reached a point when it is once again prudent to close the funds to new relationships,” he told investors. “We will continue to closely monitor our AUM levels and will provide appropriate notice should this position change.”
At the end of 2009, ThirdPoint only had $2.5 billion in assets. Last year, he was among the top performers, racking up returns of 33.7 percent in the Third Point Offshore Fund, 38 percent in his Ultra fund and 41.5 percent in the Partners fund.
Loeb, who made a name for himself as a belligerent activist investor, also said he is gearing up for more deal activity this year. He points to record high levels of cash on corporate balance sheets, highly incentivized LBO firms, the return of cheap debt financing, and anemic top line growth.
In fact, he points out that there were a “plethora” of spin‐outs and merger investment opportunities in the US and Europe in the first quarter.
Loeb doesn’t say whether he will actively try to convince or encourage companies to execute spin-outs or mergers. But, it would be consistent with his style.
His biggest bet right now is on the energy industry. He says in the letter that beginning in the fourth quarter of 2010, he began looking at deals in the energy sector, specifically spin‐outs. In many of these situations, the energy company used the master limited partnership (MLP) structure for the spinout company. The MLPs typically tax advantages for investors and therefore leads to higher multiples for the entity following the spin, Loeb notes.
“These investments are based on the classic event‐driven recipe of unlocking shareholder value through restructuring, as opposed to directional bets on energy prices,” he further explains.
He said he currently has six of these energy infrastructure spin‐out positions, with an overall concentration of 12 percent.
They include The Williams Companies, which in 2005 spun out a portion of its pipeline business, Williams Partners LP, into an MLP. In February of this year, Williams announced it would sell 19 percent of its Exploration & Production business to the public in the second half of the year via an IPO and then fully spin off the remaining shares in early 2012.
