Subject: Dan Loeb
From: "Arlene Busch" <[email-masked]>
To: <[email-masked]>, <[email-masked]>
Date: Wed, 29 Dec 2010 13:00:57 -0600

Daniel Loeb Vs. Ken Griffin; Loeb Got Less Pay For Nearly Twice The
Success

Daniel Loeb
<http://www.insidermonkey.com/blog/2010/12/08/the-best-of-daniel-loebs-t
hird-point-new-stock-picks/>  is famous for his entertaining letters to
CEOs that show his displeasure with their management style or other
actions. In 2005, Daniel Loeb was upset about Ken Griffin's poaching key
employees from New York hedge funds. To be fair, Ken Griffin
<http://www.insidermonkey.com/blog/2010/12/27/ken-griffin-citadel-invest
or-letter-2010/>  managed to convince fund investors to foot all of the
expenses and he charged 8.75 percentage points in management fees in
2005. On top of that, Citadel collects a 20 percent incentive fee. As a
result, Griffin was able to pay key talented employees more than New
York hedge funds were. Daniel Loeb didn't take this lightly and sent the
following letter to Ken Griffin
<http://www.wilmott.com/messageview.cfm?catid=16&threadid=31987> :

Dear Ken,

I understand that you recently hired an employee of Greenlight
<http://www.insidermonkey.com/blog/2010/12/16/david-einhorn%E2%80%99s-in
vestment-style/>  and have also attempted to hire Third Point employees
in the past. I think Andrew made a horrible decision based upon
discussions that I have had with numerous former and current Citadel
employees/ indentured servants.

I find the disconnect between your self-proclaimed "good to great, Jim
Collins-esque" organization and the reality of the gulag you created
quite laughable. You are surrounded by sycophants, but even you must
know that the people who work for despise and resent you. I assume you
know this because I have read the employment agreements that you make
people sign.

I understand your need to hire employees from other firms, something
that Third Point
<http://www.insidermonkey.com/blog/2010/12/10/third-point-2010-q3-invest
or-letter/>  has not had to do based on the fact that, unlike yourself,
I actually enjoy and have talent in investing and am able to nurture
others within my organization whom I hire from wide ranging disciplines
such as graduate schools, private equity firms and medicine.

Let me be clear that, under no circumstances, are you to approach any
Third Point employees or attempt to offer them jobs. First of all, like
Brad Radoff, who you poached from me some years ago, you do not even
know how to manage people who invest. He has happily returned to the
Third Point fold and is doing extremely well.

Secondly, those that you have approached know the low regard in which I
hold you and your over-rated firm, and they are happy to meet with you
and report back to me the sorry state of affairs over there and your
desperate attempts to replicate our success.

My warning extends to any attempt you may make to hire employees of my
friends in the event-driven space: should you attempt to hire people
from them, I will consider it a similar act of war. My friends enemies
become my enemies.

Good luck extracting exorbitant management fees and generating mediocre
returns with your bloated organization and ego. By the way, there is
little I enjoy as much as watching from afar as your reputation and
"organization" declines at the same rate as your falling returns.

The most interesting part of the letter for Insider Monkey is Dan Loeb's
jabs at Griffin calling Citadel "over-rated" and his predictions about
the fate of Citadel in the last paragraph: "Good luck extracting
exorbitant management fees and generating mediocre returns with your
bloated organization and ego. By the way, there is little I enjoy as
much as watching from afar as your reputation and "organization"
declines at the same rate as your falling returns."

<http://www.insidermonkey.com/blog/wp-content/uploads/2010/12/Daniel-Loe
b-Ken-Griffin-Returns-Comparison.png> 

We believe the best way to test Daniel Loeb's prognostication is to
compare his most recent 5 year performance against Ken Griffin's.
Griffin seemed to be beating Daniel Loeb by a huge margin by the end of
2007, but Citadel performed terribly and barely survived the 2008
crisis. Overall, during the past 5 years Ken Griffin's Citadel returned
<http://www.insidermonkey.com/blog/2010/12/27/ken-griffins-citadel-retur
ned-10-in-2010-loebs-is-triple-that/>  a cumulative 36% after expenses,
whereas Daniel Loeb's Third Point returned
<http://www.insidermonkey.com/blog/2010/12/01/daniel-loeb-and-third-poin
t%E2%80%99s-returns-and-alpha/>  68%. In terms of returns Daniel Loeb is
much better than Ken Griffin, yet Ken Griffin made more money than
Daniel Loeb during the past 5 years.

 

Arlene Busch

312-498-9595 mobile

[email-masked]