Most investors would agree that it's a jungle out there. But for hedge funder Dan Loeb's firm, it's more like a titanic, medieval battle between warring families seeking power and dominion over all.
A bit dramatic, perhaps. But Third Point believes there's a legitimate parallel between investing in the current tumult and the plot intrigue surrounding the HBO program "Game of Thrones," which is popular generally but approaching cult status on Wall Street.
Specifically, the firm compares the market to the "Battle of the Bastards" episode, in which (spoiler alert) House Stark's rule over the North is restored.
"Surging enemies forming a seemingly impossible perimeter, a crush of fellow soldiers on the field, arrows coming in overhead, and the need to avoid panic and deftly use sword and shield to fight your way out of a seemingly impossible situation is a good analogy for the emotional experience of managing assets since last summer," Loeb and Third Point wrote in the firm's latest letter to investors.
While Lord Ramsay Bolton came out on the short-end of the battle in question, Third Point has managed a better outcome.
A correct pivot following the Brexit vote in June, not following the crowd at a time when doing so has been terribly wrong and continued success with an activist position in health care products provider Baxter are three of the strategies that have allowed Third Point to put together gains overall this year, including a second quarter that beat the S&P 500.
First-half returns for the firm were 2.2 percent compared with 3.8 percent for the index, while the second-quarter gain came in at 4.6 percent compared to 2.5 percent for the index.
Third Point said it holds "a constructive long equity position, a sovereign debt investment, high-yield debt investments in energy companies, an event-driven long position and a short equity position in the pharmaceutical industry."
The firm remains "constructive" on equities, with a stock portfolio position as high as 55 percent.
"While observers claim the S&P is expensive, its dividend yield is currently greater than the 30-year bond yield, a relatively rare occurrence not seen since 2009," the letter said. "The dollar's strength earlier this year had weakened overall S&P earnings, and when combined with its softening, the Fed's signals that another rate hike this year is unlikely, and tailwinds from low energy prices, we expect to see earnings improve in the second half.
"Share buybacks and M&A remain robust. Viewed from this perspective, alongside the observation that very few other asset classes or regions offer more attractive returns, we are content to have our capital in a well-diversified portfolio of U.S-centric credit and equities."
The success of the Brexit vote shouldn't have been as big of a surprise as it was, the firm said, adding that it quickly covered shorts afterwards, added to longs and built some new event-driven positions in Europe.
"The idea that the outcome was unforeseeable is incorrect — the polls correctly forecast a coin flip — but elites dismissed the possibility," Third Point said. "There is a lot to learn from this group-think pitfall, which we nearly fell into ourselves."
—CNBC's Kate Kelly contributed to this report.