Activist hedge fund manager Dan Loeb, who's more than doubled the return over the last two decades, is beating the market again this year while most of his big-name peers are struggling.
But the Wall Street titan admitted Thursday his strong performance was partly due to good fortune.
Earlier this year the manager bet big on President Donald Trump's pro-growth economic agenda. The prediction turned out to be wrong, but he made money anyway.
"Better lucky than right. We expected the market to go up, but for different reasons. We thought it would be based on generally positive, growth oriented policies enacted by the [Trump] administration: lower taxes, infrastructure spending, health care reform, etc. None of these things transpired," Loeb said on the Third Point Reinsurance second-quarter earnings call Thursday.
"What has transpired has been global synchronized economic growth and a very accommodative global monetary structure. So I'm happy with the outcome, the reason for it was different from what we anticipated, but we'll take it. While valuations are getting a little more stretched, we're still finding lots of good things to do in the areas of the market we participate in," he added.
Loeb's hedge fund Third Point Offshore was up 4.6 percent in the second quarter, bringing its performance through June to 10.7 percent compared with the S&P 500's 8.2 percent return, according to an investor letter. From inception in December 1996 to June 2017 the fund generated annual net returns of 15.8 percent, more than double the market's performance during that time frame.
The hedge fund manager also shared on the call, which areas of the market he is betting against.
"Our short book is performing very well … We're focusing on is structurally challenged companies that are having a very difficult time in the current environment [such as] retailers, consumer brands, energy-related companies and some companies we think have very low quality earnings [that] we think may be playing accounting games."
The firm has $18 billion of assets under management as of late June. Third Point did not immediately respond to a request for comment.
In regard to Loeb's investment strategy, Third Point materials describe its philosophy as "event-driven, value-oriented," with an "emphasis on special situation equities." The firm "seeks to identify situations where we anticipate a catalyst will unlock value."
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