Alternative Market Briefing

Third Point's subprime portfolio returns over 24% in 2012, firm sees increasing opportunities

Monday, October 08, 2012

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Bryan Whalen From Precy Dumlao, Opalesque Asia:

The surge in subprime market gains helped propel Daniel Loeb’s Third Point to post 24.3% positive returns for its subprime portfolio so far this year.

Indeed, the fund’s subprime portfolio posted the highest returns amongst its asset backed securities portfolios. Third Point’s Reremic gained 11.6%, CMBS posted 10.7%, and Other Collateral returned 9.1% as at end September this year.

The firm said in its Third Quarter Investor letter, "Undoubtedly investors have seen a flurry of news articles about improvement in housing prices and correspondingly identifying mortgage-backed securities as the hottest area for credit investing. Our portfolio, representing 15% of our invested capital, has returned 15% YTD on average exposure and we are on track this year to generate the kind of returns we delivered in 2009 and 2010 in this area. All of our collateral types have generated positive returns this year.

The rising demand in diminishing asset has increase pushed profits on subprime backed securities to an estimated 30% this year, according to a Businessweek article.

Bryan Whalen, co-head of mortgage bonds at TCW Group Inc., a Los Angeles-based firm that oversees about $130bn in assets, was quoted as saying, "The contraction is a huge part o......................

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