Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Third Point Investors. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
A stellar performance this year shines a positive light on TPOU…
Overview

Third Point Investors (TPOU) has had a stand-out year so far in performance terms, with the manager’s differentiated approach to multi-asset investment delivering very strong returns. As we discuss in Performance, the standout performers this year in absolute terms have been the fund’s private investments, which have subsequently IPO’d and continued to deliver very strong returns as public equities.

The manager has specialist teams in credit, equity, merger/activist and venture strategies, not to mention a specialist short-selling team. Daniel Loeb stepped back into the sole-CIO role at Third Point in mid-2020, and he is responsible for overall capital allocation across the teams, which varies depending on Daniel’s reading of market conditions. Public equity has consistently been the biggest exposure for the fund, but private investments – far from being a trend that Third Point has leapt on recently – has had a consistent presence in the portfolio.

Over the last five years, the average discount to NAV has been 19.3%, but so far in 2021 has averaged 14.8% (Source: Morningstar). Strong performance, as well as a range of initiatives from the board, have seen the discount progressively narrow over the past 18 months. At the time of writing the discount is 13%, and the board has c. $50m of the buyback programme remaining. Some investors view the board’s discount narrowing activities as inadequate, but following the conclusion of a vote recently which saw a representative of the manager remain on TPOU’s board, the board have stated that they hope that they can now focus their efforts “on promoting the attractive value-proposition of the Company to current and potential shareholders”.

Analyst's View

Third Point has a long history of opportunistically investing across asset classes. Their activity during 2020 and 2021 showcases how returns can be driven from different areas of the market and by different teams. During 2020, all of the strategies contributed. This year private investments have been a key driver, showing the benefits of Third Point’s venture team, but also their willingness to invest for the long term given how much value has been added post-IPO.

This is a truly active investment process, and we think TPOU provides an interesting and differentiated exposure for investors in global equities. Private investments now account for only c. 7% of NAV. However, TPOU can now add to private investments outside the master fund, and so we would expect TPOU to increase exposure up to a maximum of 20% at the time of investment. Given the track record of the team, we see this as an attraction for investors as part of a long-term investment in TPOU.

During Q1 2020, TPOU protected capital better than the AIC flexible sector average but has outperformed the AIC Global trust peer group since the start of the recovery. This is an impressive feat and provides one explanation of why the discount has narrowed alongside other board indicatives. There is a credible long-term route towards seeing the discount narrow further. As such, the current discount of 13% could provide an attractive entry point to highly differentiated equity exposure.

bull bear
Good long-term track record, stellar short-term performance
Compared to typical closed-ended funds, relatively poor disclosure on underlying portfolio
Manager’s ability to pivot portfolio on asset classes with good potential risk-adjusted returns
Proposed increase in gearing could lead to higher volatility in the NAV
Discount at wide level in absolute terms; board continue to buy shares back
High OCF compared to long-only equity funds
Continue to Portfolio

Fund History

08 Dec 2021 Fund Analysis
A stellar performance this year shines a positive light on TPOU…
04 Aug 2021 60/40 and other dinosaurs
A simple practical step to take your portfolio from the 1990s into the 2020s...
21 Jul 2021 Every which way but loose
We break down the AIC Flexible sector into more useful segments…
16 Jun 2021 A better class of travel*
Sharing many features of a traditional family office, investment trusts offer ordinary investors a cost-effective solution to managing family wealth...
28 Apr 2021 Fund Analysis
TPOU’s strong performance, and new board initiatives to narrow the discount, offer an attractive package…
28 Oct 2020 Can the passives bull market continue forever?
We examine what the trend to passive investing means for active investment strategies…
30 Sep 2020 Fund Analysis
TPOU’s portfolio has been pivoted year to date, and with renewed focus from board and manager, the discount of 23% looks anomalous…
20 Feb 2020 The return of the activist... but not as we know it.
Why the ‘20s will go down as the decade of the corporate activist...
30 Jan 2020 Is it time to run away?
With a sense of complacency in the air, our analysts debate the best ways to shore up your portfolio's defenses...
05 Dec 2019 Generating returns from robots' mistakes
Taking advantage of the dislocations which occur when algorithms go algo-wrong is a key aspect of this trust's strategy...
05 Dec 2019 Fund Analysis
As "opportunistic multi-asset investors”, Daniel Loeb and Third Point are best known for their activist, value-oriented approach...
28 Nov 2019 Is there a generational opportunity in Japan?
Two of our analysts go head-to-head, arguing the case for Japan...
20 Aug 2019 Exclusive access: tapping into the exciting opportunities favoured by institutions
We explore how Third Point Offshore Limited gives ordinary investors access to institutional-level tactical investing...
26 Apr 2018 The $23.9 trillion dollar question*
Are US equities, which have hit record highs on 71 occasions in the last 12 months, overpriced or are they actually trading at a price worth paying?
View all

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