Since Dan Loeb founded Third Point in 1995, the firm has been known for its equity investments and especially its activism. Early on, Loeb became legendary for his acerbic letters laced with scathing attacks on management.
But in recent years, equities have become the tail wagging what has become more of a credit firm. Today, Third Point manages roughly $21 billion. But more than $14 billion of that sum is in a variety of credit strategies.
This fact was further driven home Wednesday when the firm announced it had secured $400 million of investable capital for the close of Third Point Insurance Solutions Fund I, its first dedicated structured private credit fund for insurance companies. “The Fund provides access to broad and varied private credit opportunities across the U.S. middle market and seeks to generate attractive, capital-efficient returns on behalf of insurance clients,” Third Point said in a press release.
“The launch of our first dedicated insurance solutions vehicle offers a new type of investor access to Third Point’s private credit strategy,” Loeb explained. “Private credit is an essential piece of our expanding credit platform, which offers investors an increasingly broad set of solutions drawing on our three decades of investing in credit markets. The ISF intends to provide insurance companies with broad, differentiated private credit opportunities that offer consistent income and strong absolute returns.”
Third Point said it expects to launch additional products later this year.
The firm expanded its credit business earlier this year when it acquired AS Birch Grove, an $8 billion credit asset manager. Its strategies include a private credit fund focused on middle-market capital.
“When I envisioned acquiring Birch Grove, I believed we could achieve meaningful synergies between our existing strategies and their businesses,” Loeb told hedge fund clients in his first-quarter letter. “I am pleased to say that we are off to a strong start.”
He said the firm’s private credit effort has incubated since late 2023. Loeb also teased that he expects to soon launch several different tailored strategies, including the just-announced insurance-dedicated vehicle as well as a strategy for which he said the firm had recently filed a registration statement with the Securities and Exchange Commission.
Third Point’s private credit strategy is led by Christopher Taylor. The firm notes that in his previous role as CEO of Madison Capital Funding, from 2017 to 2022, Taylor doubled assets under management to $15 billion-plus, including more than $10 billion managed on behalf of New York Life and other insurance companies.
In the first-quarter letter, Loeb said Taylor has “vast experience in direct lending, with a deep network of sourcing and relationships, while Birch Grove’s strength in private credit is in solutions lending.” Loeb added, “Their experienced team has what we feel are equally deep relationships in the middle-market solutions space,” noting that the teams quickly combined to form Third Point Private Credit.
“[They] are coming to market with a strategy that offers access to core middle-market direct lending and capital solutions that will seek to provide investors with attractive current income, risk-adjusted returns, and portfolio diversification,” Loeb elaborated in the letter, providing insight into the firm’s overall credit strategy. “Augmented by Third Point’s three-decade history investing in credit securities and institutional platforms, these integrated businesses aim to offer a powerful combination: a strategy that can tailor a broad range of bespoke lending solutions for middle-market borrowers and create compelling returns for investors.”
Third Point’s flagship investment strategies include event-driven and other public market equities and opportunistic credit; a credit platform offering corporate, asset-backed, private, and CLO strategies; and venture capital.
In the first half of the year, credit kicked in 70 basis points to the hedge fund’s 3.6 percent net P&L, according to the June report. At the end of June, credit accounted for roughly 34 percentage points of the 117 percent net exposure. Virtually all of credit’s exposure was on the long side, almost equally divided between corporate and sovereign credit and structured credit.
