Third Point Expands into Private Credit, Eyes Strong 2024 Returns

Third Point, the $10.6bn hedge fund led by Daniel Loeb, is expanding its investment strategy by entering the private credit market, driven by expectations of positive conditions in both equity and credit sectors for 2024, according to a report by Reuters citing an investor letter.

Loeb confirmed in the note that the fund will be adding private credit to its portfolio, stating, "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." He elaborated that Third Point will apply its proven approach to "opportunistic credit investing," targeting opportunities to act as a liquidity provider, particularly during times of market stress.

The hedge fund anticipates that returns will be boosted by a more stable interest rate environment, which will create openings for event-driven investments, especially in situations where active engagement can unlock value.

To build out its private credit business, Third Point brought on Chris Taylor, former CEO of Madison Capital Fund, in 2023. Nearly 40% of the firm’s portfolio is currently allocated between structured and corporate credit.

Additionally, Third Point's involvement in Bath & Body Works led to the company appointing new board members with relevant industry expertise and increasing oversight of executive compensation.

After suffering a 22% loss in 2022, Third Point rebounded in 2023, posting a 3.6% gain.