Daniel Loeb’s $9.3 billion hedge fund Third Point LLC ended 2012 up 21 percent, boosted by its bet that European policy makers would keep Greece in the euro by continuing to support the indebted country.
Third Point gained 3.6 percent in December, its second-best month of the year, the New York-based hedge fund said in a statement today. Third Point’s bet on Greek sovereign debt was its top-performing investment for a third straight month in December, according to the statement.
Loeb, 51, started buying Greek debt in July and August, concluding that a pledge by European Central Bank President Mario Draghi to defend the euro at all costs made an exit from the currency unlikely, Third Point told clients in October. The assets fell as low as about 13 percent of face value in May, before surging at the end of the year ahead of a plan by Greece to buy back bonds to erase some of its debt.
Other “top winners” for Third Point in December included Yahoo! Inc., (YHOO) and American International Group Inc., according to the statement. Third Point in May forced out Yahoo Chief Executive Officer Scott Thompson after criticizing the Web portal’s strategy.
Greek government bonds are no longer one of Third Point’s five-biggest investments, the statement shows. The debt had been its second-biggest position after Sunnyvale, California-based Yahoo in November, indicating the hedge fund sold Greek bonds during last month’s buyback.
The bond repurchases were part of a package of measures approved by euro-area finance ministers to cut Greece’s debt to 124 percent of gross domestic product in 2020 from a projected 190 percent in 2014. Aid from the latest round of rescue funds from the European Union and International Monetary Fund was contingent on the buyback going through.
Greece ended up purchasing bonds with a face value of 31.9 billion euros ($41.8 billion), paying an average of about 33.8 percent of face value to retire the bonds. The buyback was aimed at the 62 billion euros of new bonds issued when Greece restructured its privately held debt in March.
Third Point’s 21 percent gain in 2012 compares with a 6.9 percent average increase through November for other event-driven hedge funds, used by traders try to predict triggers for stocks and bonds such as corporate restructurings and mergers, according to Chicago-based Hedge Fund Research Inc. Hedge funds rose 1.59 percent on average last year, according to data compiled by Bloomberg.
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