Loeb's Third Point Boosts Short Wagers on Market Disruption

(Bloomberg) -- Billionaire investor Dan Loeb said he’s increasing his short bets in anticipation of more market disruption.

It’s a good time for us to "have more balance on the short side," Loeb said Thursday on an earnings conference call for his Third Point Reinsurance Ltd., where he oversees investments. Loeb added that he sees more opportunities to find companies that will “go down or materially underperform the rest of the portfolio."

Hedge fund managers have been waiting for a return of volatility to exploit price movements after several years of calm markets. Loeb’s response has been to add to his hedge fund’s equity short portfolio, he said on the call.

"We intend to further increase short exposure to fundamental single names and quantitative derived baskets in 2018 and rely less on market hedges to dampen volatility and reduce net exposure," he said.

He said investors have become increasingly concerned about stock multiples, since after years of low interest rates, there’s finally an alternative to equities in the form of “relatively riskless” two-year treasuries, Loeb said."

Loeb's Third Point Boosts Short Wagers on Market Disruption

Loeb’s Third Point Offshore hedge fund was about flat for the first four months of the year, and gained 0.7 percent last month. The S&P 500 Index lost about 1 percent in the four months. It had about 31 percent short equity exposure as of April 30.

The manager said his firm is watching to see if a recession -- which it doesn’t think is near -- might be closer.

©2018 Bloomberg L.P.