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Jay Petschek's Corsair Capital Management is out with its fourth quarter letter. In it, we see that Corsair finished 2010 up 15.4% which ironically is the exact same number as Corsair's compound net annual return since inception.

Highlighting its overall market view, Petschek writes,

as we believe post-recession equity markets are generally driven by the direction of earnings, which in turn is driven by economic growth, the markets seem to have room to move higher.

Portfolio Positions

Corsair singles out its position in LyondellBasell (NYSE:LYB) in the letter as the hedge fund believes the stock still trades at a discount to its peers. You'll recall that Dan Loeb's Third Point owns LYB in size as well. The company announced a dividend policy and plans to optimize its capital structure.

Petschek also highlights Corsair's stake in CapitalSource (NYSE:CSE) as the company continues its transition from an over-leveraged REIT into a bank. Corsair believes shares are still undervalued and likes the company's debt repurchases and share repurchase plan.

Corsair's letter also focuses on its position in Aon (NYSE:AON). The hedge fund notes that the integration of Hewitt will create shareholder value and further entrench the company's dominant position in human capital solutions. We penned an in-depth analysis of AON in our last issue of our Hedge Fund Wisdom newsletter as many hedge funds had accumulated shares in past quarters.

Corsair Capital Management's full letter and its investment write-up on Neo Material Technologies (NYSE:NEM) is embedded below:

Source: Hedge Fund Corsair's Q4 Longs: 'Markets Have Room to Move Higher'