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Loeb's Third Point fund beats rivals, ends 2013 with 25 pct gain

Svea Herbst-Bayliss
Thursday, 2 Jan 2014 | 11:05 PM ET

BOSTON, Jan 2 (Reuters) - Activist investor and hedge fund manager Daniel Loeb beat most rivals hands down last year as his flagship fund kept pace with a rallying U.S. stock market and returned 25.2 percent in 2013.

Loeb's $14 billion firm, Third Point, has been one of the industry's best performers for several years now thanks to bets on Greek bonds, Japan's economic recovery and blue-chip U.S. stocks.

He told investors late on Thursday that his Third Point Offshore fund gained 2.3 percent in December, according to a client who received the performance update.

His smaller Third Point Ultra fund, which uses borrowed money to boost returns, fared even better, gaining 3.4 percent last month to end the year up 37.9 percent, the client said.

The figures were above the 6.5 percent global average return of hedge funds in 2013 and were in line with the Standard & Poor's 500 Index which climbed 29.6 percent, the index's strongest annual return since 1997.

Loeb, who most helped install Marissa Mayer as CEO at Yahoo and is currently trying to overhaul auction house Sotheby's, did not specify the investments that powered his strong returns.

While Loeb often employs a go-anywhere trading strategy, last year the bulk of his bets were on large U.S. stocks in the last month, he told clients.

Loeb is expected to give more details on his portfolio when he releases his fourth quarter letter to investors in the next few weeks.

At the end of the third quarter, Loeb's three largest positions included Yahoo, American International Group and Sotheby's. He was also invested in FedEx Corp and said in November that he had taken a stake in Japan's Softbank Corp.

For Third Point, 2013 marks an even better year than 2012 when the fund gained 21.1 percent and the Third Point Ultra fund rose 33.5 percent.

Since launching the flagship fund in 1996, Loeb has delivered average annual returns of 21.3 percent. During that time the broader stock market has gained 9 percent.

Loeb has recently turned away clients and is now even returning some capital to existing investors, saying his fund should not grow much beyond $14 billion because it would be tough to invest the additional money.

While Third Point rose by double digits, many other hedge funds struggled last year, failing to fully participate in the U.S. stock market's rally.

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