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From The Opalesque Team:

In his second quarter investor letter, Third Point Partners Daniel Loeb explained how the four funds managed by the firm would build on performance (ranging from +7.9% to +12.2% YTD) for the remainder of 2009. Looking to exploit a wealth of opportunity in the bailed out financials and automotive industries Loeb ramped up the long/short strategy in his funds from a net short exposure (-3.4%) in April to a net long (-37%) position by June 30th. Remaining portfolio concentrations were credit allocations (40+%) and risk arbitrage (20%).

Targeting the two industries in receipt of government bailouts, Third Point is focusing on the financials and automotives industries. A +160% return in 4 months on its Fortis investments, as well as performance gains from investments into the Chrysler Financial loans were largely the result of what Loeb terms "fatigued investors".

Amongst Loeb's targets for investing are adding to current distressed mortgage investments (as of 2Q09 Third Point had taken $20m profits on an investment of $160m in securitized mortgage backed space). "Although initially we had targeted mortgage investments to comprise 5-10% to this distressed investing strategy, depending on the relative opportunity sets in the event-driven space," says Loeb.

Referencing Third Point's performance during the last distressed cycle of 2002-2005, Loeb says "Currently we stand on the proverbial precipice of five years of escalating ......................

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