By Svea Herbst-Bayliss
BOSTON Jan 31 Billionaire hedge fund investor
Daniel Loeb will be losing Rhode Island as a client after the
state's pension fund found his Third Point LLC too risky for its
taste and decided to pull out all of its money.
The state's Investment Commission, which directs how its $8
billion pension fund is invested, voted unanimously on Monday to
redeem $74.3 million from Third Point, Joy Fox, a spokeswoman
for Rhode Island Treasurer Gina Raimondo, said on Friday. The
money will be returned on March 31.
"The purpose of the hedge fund portfolio is to reduce the
(pension) fund's overall sensitivity to equity market moves,"
Fox told Reuters in an email.
"This fund has the highest equity market sensitivity within
the state's hedge fund allocation. With this vote, the
commission is further reducing the beta risk within this portion
of the portfolio."
For Loeb's $14 billion fund, long considered one of the
industry's best performers, Rhode Island's investment is small
and will not hurt dramatically.
But hedge fund managers do not like losing pension funds as
clients because their departure could send a signal about
overall attractiveness to other institutional clients.
Loeb performed well for Rhode Island last year, earning a
24.71 percent return that ranked Third Point as the state's best
performing hedge fund in 2013, according to state documents.
Overall the pension fund returned 14.01 percent for the year.
Rhode Island first put $50 million with Loeb's New
York-based fund in 2012 and the fund's strong performance in
2012 and in 2013 helped it earn a return of 49 percent on that
"The Commission decided to lock in gains of $24.3 million by
redeeming from Third Point, and reallocate about $20 million to
Samlyn, another equity hedge fund," Fox said in the email.
A Third Point spokeswoman underscored what Loeb had done for
Rhode Island's teachers and other retirees.
"Third Point is pleased that Rhode Island's pensioners
earned 49 percent, net of fees, over the two years they invested
with us," she said.
Fund investors had greatly benefited from its prudent
investment approach across multiple market cycles, earning a net
annualized rate of return of 21.3 percent since 1995, she added.
Samlyn Capital, founded in 2007 by Robert Pohly, manages
$78.3 million in assets for the state and was initially hired at
the same time as Loeb's Third Point. Last year it returned 19.10
Fox said the additional $20 million going to Samlyn now will
be invested in a share class that has a 1.5 percent management
fee and 17.5 percent performance fee, slightly lower than the
traditional fees of 2 percent and 20 percent many funds charge.
Over the years, Loeb's strong returns have made him an
industry darling, with so much new money coming his way that he
decided at the end of 2013 to stop taking in new money.
He made over Yahoo and helped install a new chief executive,
and is now embroiled in a battle with auction house Sotheby's
where he told Chief Executive Bill Ruprecht in October that it
is time for him to go and that he wants a board seat.
Rhode Island Treasurer Raimondo has also drawn a lot of
attention by helping reform the state's public pension system
and thanks to her bid to run for governor.
But she has also been criticized for putting as much as
$1.15 billion into hedge funds at a time when they are costly
and have not outperformed the market. Last year the average fund
gained 9.3 percent while the Standard & Poor's 500 Index climbed
Rhode Island is not alone in its commitment to hedge funds.
Many states, including Massachusetts, New York, New Mexico and
Texas have put millions into hedge funds, to try to boost
returns after the 2007-2009 financial crisis.