Dan Loeb: Preserve Liquidity To Take Advantage Of Markets When They ‘Break’

Johnny HopkinsDan LoebLeave a Comment

In his recent Q1 2023 Investor Letter, Dan Loeb explained why he is preserving liquidity and buying power to take advantage of markets when they ‘break’. Here’s an excerpt from the letter:

Looking ahead, we see some encouraging signs that inflation is moderating, especially in areas like freight, energy and commodities, supply chains, and even shelter.

At the same time, labor markets remain stubbornly tight. While monetary policy has been firmly contractionary, fiscal policy remains incredibly supportive.

With monetary policy and fiscal policy essentially pushing in opposite directions, monetary policy is likely to remain tight for longer than would otherwise be necessary.

Asset prices are much more sensitive to monetary policy than fiscal, and so this push-pull dynamic is creating risk of the Fed “breaking things” in the asset markets, the long-looming concern we finally saw begin to manifest in the regional banking crisis.

Our strategy is to preserve liquidity and buying power to take advantage of markets when they “break”. While overall indices remain elevated, we are finding more chances to provide liquidity across all three asset classes in which we invest – credit, structured credit, and equity – opportunities which have been key drivers of performance for the fund.

Our portfolio is balanced across industries with a focus on event-driven names including companies involved in spin-offs, significant cost-cutting, or other types of under-appreciated business transformation.

You can read the entire letter here:

Dan Loeb – Q1 2023 Investor Letter

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