Dan Loeb: "We Are In The Process Of Reducing Both Gross And Net Exposure"

Unlike many of his peers (and especially Greenlight), Dan Loeb and his Third Point hedge fund had a tremendous 2017 and started off 2018 strongly, thanks to what was a net long posture in names that performed quite will in the past 2 months. However that now appears to be changing, and in a Thursday conference call discussing results for Third Point Reinsurance Loeb said that "As far as positioning the portfolio, we’ve been in the process of reducing both gross and net." The stated reason for this deleveraging: "to be more nimble in what we think will be more of a range bound market this year."

According to Bloomberg, what prompted this reappraisal of the market"s performance in the coming year is Loeb"s concern that investors are overly optimistic about earnings and economic growth, a point made earlier by both Nomura and SocGen.

“The more pressing issue is whether the rosy assumptions that everybody has about earnings growth this year and next year will be met. I’m not saying they won’t be met, but it’s definitely something, given some of the recent economic data which tends to be noisy, we need to keep an eye on."

Loeb hedged in that he is not calling for an outright slowdown, but noted that while he is "not saying that growth is a problem but it’s definitely an issue that we’re looking at.”

Going back to Loeb"s market bearishness, the billionaire investor predicted that the stock market this year probably won’t have the same tailwinds it had last year. That includes low volatility, which often hinders performance of hedge fund managers, according to Bloomberg.