Does Dan Loeb Secretly Love Short Selling?

Dan Loeb's Third Point has made a strategic bet on the future of short selling by backing Snowhook Capital Management, a newly launched long-short equity firm founded by Stoyan Hadjivaltchev, the hedge fund's former managing director who previously oversaw Third Point's equity short book. The move, which became public as of December 2020, suggests Loeb maintains confidence in disciplined short-selling strategies despite a challenging year for short positions at Third Point.

The timing of Hadjivaltchev's departure and Third Point's investment in his fund is notable given the hedge fund's recent struggles with short bets. Third Point lost 16 percent in the first quarter of 2020 as the Covid-19 pandemic roiled markets. In his Q1 investor letter, Loeb acknowledged the firm's underestimation of pandemic risk, stating: "We did not ascribe adequate probability to a full-blown global pandemic in our scenario analysis around Covid-19 nor to its blunt but necessary cure: a total economic shutdown in much of the world." While Third Point's short positions provided downside protection during the initial market turmoil, they have become a significant drag on performance as markets recovered. According to Third Point's investor reports, short positions have ranked among the fund's top five monthly losers in five of the past nine months, with two of 2019's worst-performing positions also stemming from short bets.

Hadjivaltchev, who had rejoined Third Point in 2012 following an earlier two-year tenure at the fund, departed in September 2020 and immediately launched Snowhook. The separation appears to have been conducted amicably, with Loeb counted among Snowhook's early investors, according to sources familiar with the effort. Snowhook's mandate extends beyond traditional equity short selling, indicating that Hadjivaltchev and his backer view broader opportunities in the long-short space. The investment underscores Loeb's nuanced view of short selling—acknowledging its cyclical challenges while maintaining that disciplined, selective short exposure remains critical to portfolio construction and risk management.