Dan Loeb’s Q1 2025 letter highlights some great strategies for navigating uncertainty—part realism, part opportunity, and all about positioning for what’s next. While Third Point’s Offshore Fund was down -3.7%, Loeb reminded investors they outperformed the S&P’s -4.3% slide, saying, “While not unscathed… we feel we are well positioned in several new names for the current environment.”
The quarter started with optimism: “Investor optimism about the new administration’s expected plans for deregulation, improved tax and energy policy, reduced government waste via ‘DOGE’… turned market sentiment decisively negative”, thanks to erratic tariff announcements. One of which, dubbed “Liberation Day,” led to what Loeb called “the most violent selloff since Covid.”
Rather than retreat, Third Point leaned into volatility. Loeb trimmed market-sensitive exposure, especially in tech and consumer names, and shifted focus to “event-driven, activist, and risk arbitrage positions” with catalysts. His view? In uncertain markets, “catalyst-oriented” investments offer a better edge.
Case in point: CoStar. Loeb described it as “the Bloomberg of commercial real estate,” with dominant market share and a “20% CAGR over the past ten years.” But he didn’t mince words about missteps. “Despite the continued strength of its core business… recent capital allocation decisions have derailed CoStar’s compounding algorithm.” He’s talking about CoStar’s aggressive push into Homes.com, which Loeb claims has obscured profits and drained nearly $1 billion annually.
His solution? Activism. Third Point pushed for and won the addition of three new directors, a capital allocation committee, and a review of executive compensation. “We expect to see a meaningful improvement in capital allocation by YE 2025,” Loeb wrote.
On the credit side, Third Point is gearing up for opportunity. Loeb noted that while “any long exposure feels like too much in a decline such as the ‘Liberation Day’ purge,” the firm believes its “credit book is in very good shape.” Structured credit posted a +1.5% gross return, and Loeb sees “compelling opportunities in the months ahead.”
There’s also something big brewing with Birch Grove. Loeb’s acquisition of the $8 billion credit manager integrates “a talented and experienced team” and sets up Third Point Private Credit to target “core middle market direct lending and capital solutions.”
As Third Point celebrates its 30th anniversary, Loeb’s message is clear: adaptability wins. “I believe that Third Point’s edge comes from our collaborative culture and ability to toggle between equities and credit depending on the market environment.”
You can read the entire letter here:
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