Dan Loeb, founder Third Point, draws two conclusions about the hedge fund industry and the markets in his recent shareholder letter, according to this recent Bloomberg piece. The first is Loeb believes the hedge fund industry is in the early stages of what he calls a “washout” after the group’s poor returns over the last few years. Loeb says the recent run for many funds is one of the most “catastrophic periods” he has ever seen for hedge fund managers. What’s more, he thinks the complexities of markets over the past few months is a trend that is likely to continue. Funds that are considered market neutral (that go long and short securities) were particularly hard hit as the markets swooned late last year and into the early part of 2016, only to quickly bottom and reverse course. Some market neutral funds got hit on both sides as they tried to position and re-position to the moves. Third Point says that the volatility has produced some “excellent opportunities” in some positions, include Dow Chemical and Anheuser Busch InBev.
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