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<img alt="Daniel S. Loeb's hedge fund, Third Point, has amassed a stake of about 6.5 percent in Sony." height="395" id="100000002223680" src="/Yen-tmagArticle.jpg" width="592">Steve Marcus/ReutersDaniel S. Loeb’s hedge fund, Third Point, has amassed a stake of about 6.5 percent in Sony. 3:42 a.m. | Updated An American hedge fund billionaire known for starting big fights has called for a breakup of the entertainment and electronics colossus Sony, according to people briefed on the matter, possibly setting off a battle that could roil Japan’s famously staid corporate culture.The call, which came on Tuesday, will most likely be viewed by government officials and corporate leaders in Tokyo as a shot across the bow from Wall Street, just as Western investors begin piling into Japanese stocks.The hedge fund manager, Daniel S. Loeb, is pressing Sony to spin off part of its entertainment arm, which includes one of the biggest film studios in Hollywood and one of the largest music labels in the world, responsible for movies like “Skyfall” and artists like Taylor Swift.Mr. Loeb — known for ousting Yahoo’s former chief executive and luring Marissa Mayer away from Google to run the company — also signaled that he would accept a seat on Sony’s board. His hedge fund has quietly amassed a stake of about 6.5 percent in Sony, making it one of the biggest shareholders. The holding, made up of stock and derivatives, is valued at about $1.1 billion.Still, even big Japanese investors have often faced resistance in seeking changes at companies, a hurdle that may be significantly higher for a foreign hedge fund manager.A spokesman for Sony, Shiro Kambe, said in a statement that the company welcomes investments. “We are focused on creating shareholder value by executing on our plan to revitalize and grow the electronics business, while further strengthening the stable business foundations of the entertainment and financial services businesses,” he said.But Mr. Kambe also pointed to repeated assertions by Sony’s chief executive, Kazuo Hirai, that Sony Entertainment contributes significantly to the overall company and is not for sale. “We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy,” he said.Mr. Loeb, 51, the founder of the hedge fund Third Point, flew to Tokyo this weekend for three days of meetings with government officials, regulators and senior Sony executives, according to people briefed on the matter. He hand-delivered a letter on Tuesday to Mr. Hirai that praised a turnaround effort but asked for more.“So while Third Point supports your agenda for change, we also believe that to succeed, Sony must focus,” Mr. Loeb wrote in the letter, which was reviewed by The New York Times.After the meeting, the hedge fund manager told associates that he was impressed by Mr. Hirai and supported management, according to a person briefed on the matter.Mr. Loeb said he believed that spinning off a portion of the entertainment business to Sony shareholders could sharpen the company’s focus and lead to higher profit margins, while helping to revive the core electronics business. He has also contemplated a potential spinoff or sale of other operations, including Sony’s insurance division, which accounted for much of the company’s profit last quarter.The campaign is a bet that Japan will prove the next gold mine for global investors. Long hobbled by a so-called lost decade of little economic growth, the country has come to life in recent months under the stewardship of Shinzo Abe, who as prime minister has promoted policies meant to attract private investment. Mr. Loeb is betting that Mr. Abe will expand deregulation.“Under Prime Minister Abe’s leadership, Japan can regain its position as one of the world’s pre-eminent economic powerhouses and manufacturing engines,” Mr. Loeb wrote in his letter.Despite its decade-long slump, Sony, the 67-year-old electronics pioneer, remains one of the most prominent companies in Japan, with a market value of roughly $18 billion.Still, Mr. Loeb has plenty of ammunition. Shares of Sony have plunged nearly 85 percent over the last 13 years. The company long ago ceded its crown as the king of cool electronics to Apple, and its dominance in televisions was eroded by the emergence of Korean rivals like Samsung and LG.Last week, Sony reported its first annual profit in five years. But it reached that milestone thanks largely to the weakening yen and some belt-tightening, including the consolidation of businesses and the sale of its American headquarters.Sony’s chief executive, Mr. Hirai, is scheduled to make a presentation about the company’s turnaround plan next week. He has argued that despite having come late to the era of digital media, the company that made the Walkman, the Trinitron television and the PlayStation can rebound.To Mr. Loeb, more must be done, starting with the spinoff of Sony Entertainment. Though the division accounts for more than 40 percent of the company’s enterprise value, he said in his letter that it needed discipline to raise its profit margins. Mr. Loeb estimated that a partial spinoff of the entertainment business could bolster Sony’s share price by as much as 60 percent.In his letter, Mr. Loeb proposed handing 15 to 20 percent of Sony Entertainment to existing shareholders. His firm would be willing to backstop the initial public offering up to $2 billion to ensure its success.Other underappreciated assets include the company’s 60 percent stake in Sony Financial, which largely sells life insurance policies, as well as real estate holdings and stakes in other companies. And Mr. Loeb is expected to argue that Sony’s electronics division must sharply reduce costs, including by taking a cue from its protégé, Apple, in focusing on a few core products.Mr. Loeb has recently expressed his interest in Japan. Referring to the changes by the Abe government, he called it “a huge game change” at an industry conference last week. “And there’s a lot more room to go,” he added.Mr. Abe has called his revival effort a plan of “three arrows,” including aggressive monetary easing by the Bank of Japan and enormous stimulus spending by the government.So far, that effort appears to have drawn investor plaudits. The yen weakened in value last week, to 100 to the dollar, a level unseen in four years, helping local companies like Sony and Toyota. And the Nikkei 225-stock index has risen 43 percent so far this year. At the same time two years ago, the Nikkei was down 5.7 percent.Shares in Sony rose 1.2 percent in Tokyo on Tuesday, while the Nikkei closed down 0.16 percent.But it is the third arrow that has Mr. Loeb’s attention. The Abe government hopes to shed Japan’s reputation as a land of strict hierarchy and bureaucracy. Business mistakes were often seen as shameful, and outright confrontation largely disdained.“There’s an entrenched management culture there,” said Lawrence B. Lindsey, a former top economist in the administration of President George W. Bush. “Activists aren’t particularly popular here among management, and they won’t be popular in Japan either.”No less than Howard Stringer, Sony’s own chairman, has criticized the status quo.“Japan is a harmonious society which cherishes its social values, including full employment,” he said in a speech last year. “That leads to conflicts in a world where shareholder value calls for ever greater efficiency.”Yet there have been changes. The percentage of foreign ownership in companies on the Tokyo Stock Exchange nearly quintupled, to 24 percent, from 1990 to 2008. And Japanese shareholders have increasingly adopted the aggressive tactics of Western fund managers.Sony is the biggest bet yet for Mr. Loeb, an intense California native who built his name largely upon acidly written letters, berating targets for mismanagement and calling for change.The strategy has proved profitable. Third Point’s returns are up 13.3 percent this year and up 2.6 percent for the first week of May. Forbes estimates Mr. Loeb’s net worth at about $1.5 billion.Perhaps the most prominent victory has been Third Point’s investment in Yahoo, where Mr. Loeb pushed for the dismissal of a chief executive after exposing the executive for falsifying academic credentials.Mindful of Japanese decorum, however, Mr. Loeb strikes a more conciliatory tone in his letter to Mr. Hirai of Sony. His calls are couched as suggestions aimed at improving the company, rather than aggressive demands.“Third Point would not have made this substantial investment if we did not believe in a bright future for Sony’s global brand, superior technology, and dedicated employees,” he wrote. “We are confident that by acting as partners, Sony will grow stronger.”Hiroko Tabuchi contributed reporting. <a href="http://dealbook.nytimes.com/2013/05/14/hedge-fund-manager-daniel-loeb-targets-sony-for-a-breakup/?partner=rss&emc=rss" target="_blank" rel="nofollow">View the original article here</a>

Steve Marcus/ReutersDaniel S. Loeb’s hedge fund, Third Point, has amassed a stake of about 6.5 percent in Sony. 3:42 a.m. | Updated An Amer...

<img alt="Ewan Kirk, left, and Erich Schlaikjer of Cantab Capital Partners, whose fee structure, investing strategy and entrepreneurial spirit have generated buzz." height="395" id="100000002223451" src="/Hedge-tmagArticle.jpg" width="592">Andrew Testa for The New York TimesEwan Kirk, left, and Erich Schlaikjer of Cantab Capital Partners, whose fee structure, investing strategy and entrepreneurial spirit have generated buzz.Ewan M. Kirk never quite fit the Wall Street mold.As a partner at Goldman Sachs, he wore a kilt to the firm’s annual black-tie dinner in New York. After leaving Goldman, Mr. Kirk, an astrophysicist by training, set up a hedge fund in Cambridge, England, a world away from the fashionable neighborhood of Mayfair in London where many hedge funds are based.But Mr. Kirk’s firm, Cantab Capital Partners, has been turning heads recently in London and New York with a new fund that aggressively undercuts its competitors on fees. The fund, which uses computer models to trade on trends in markets around the world, opened to outside investors in the first quarter and grew to more than $600 million by the beginning of April.Unlike rival funds, in which the price of investing is often 2 percent of assets and 20 percent of profits, Cantab charges a 0.5 percent fee and 10 percent of profits for its new fund. That structure has generated buzz in Mayfair at a time when lackluster returns have some big investors wondering whether hedge funds are worth the expense.“They’ve lowered the fees to a point that not everybody can afford to do,” said Phillip G. Chapple, an executive director at KB Associates, a consulting firm that advises London hedge funds. “It’s quite scary.”Cantab is not the only fund to lower its fees. Since the financial crisis, some other hedge funds have also moved to lower the cost of investing. The Children’s Investment Fund, which is based in London, charges performance fees of 15 percent to 16.5 percent, with hurdles that must be cleared before fees are paid, according to a person close to the fund. Two funds run by Renaissance Technologies, in East Setauket, N.Y., have performance fees of 10 percent, a person close to the firm said.About 11 percent of hedge funds in Europe charge performance fees less than 20 percent, compared with 5.7 percent of hedge funds in the United States, according to Hedge Fund Intelligence.To Mr. Kirk, 52, who founded Cantab in 2006 with Erich Schlaikjer, a colleague from Goldman, the new product is a logical outgrowth of his primary investing strategy. With the technological infrastructure in place, it was relatively inexpensive for Cantab to introduce the new program, which takes a more conservative approach with lower volatility.That technology puts Cantab — a relatively small firm with about 40 employees and $5.3 billion under management — in a position to shake up the market.“Do I think that another random hedge fund is going to suddenly decide to cut their fees to a half and 10? No, I don’t,” Mr. Kirk said. “That would effectively destroy their business model.”Run by scientists and mathematicians with ties to the nearby University of Cambridge, Cantab fosters an eccentric laboratory atmosphere. Certain devices, like a 3-D printer and a rice cooker powered by a neural network, are in the office simply to amuse the employees.A technophile, Mr. Kirk claims to have no view on the political and economic dramas that obsess some money managers. Even his Friday lunch order is steeped in science: the office uses an algorithm to determine what type of food to buy.But almost despite himself, Mr. Kirk is gaining recognition as a financier. Last year, Cantab’s flagship fund returned 15.3 percent when comparable funds in London suffered losses. In 2008, with the financial crisis gathering, Cantab returned 48.7 percent.Though the firm’s record is mixed — it lost 9.2 percent in 2009 — it has attracted billions of dollars to manage, growing from just $30 million. Last November, with investors clamoring to get in, Cantab determined it had reached capacity and shut the doors on its fund.As if to signal his arrival among the Mayfair elite, Mr. Kirk made his debut in April on a ranking of the wealthiest hedge fund managers in Britain published by The Sunday Times, which estimated his net worth at £280 million, or $433.3 million.Born in Swindon, England, and brought up in Glasgow, Mr. Kirk did not set out to work in finance. He developed a model of gravitational radiation for his Ph.D at the University of Southampton and started a career in computer systems design. When he landed at Goldman in 1992, he devoured books on futures and options to get himself up to speed.“I couldn’t balance my own checkbook,” he told an audience of Ph.D mathematics students at the University of Cambridge several years ago.But Mr. Kirk learned finance quickly, rising to become the head of the strategies group in Europe, where he oversaw Goldman’s quantitative technology.“Ewan was known to be very — at Goldman, we used the term ‘commercial,’ “ said Jay S. Dweck, a former head of equities strategies at Goldman, who was in Mr. Kirk’s partnership class. “He was good at generating profit for the business.”Mr. Kirk’s success helped him secure a deal on his departure to pay for continued access to Goldman’s in-house software — what Mr. Dweck called the “magic that every firm wanted to try to reproduce.”That deal, according to Mr. Dweck, who was involved in the negotiations, was “unique.” A spokeswoman for Goldman declined to comment.Cantab said in a letter to investors in December that it had been making progress in developing its own information-technology infrastructure. As part of that transition, the hedge fund revised its deal with Goldman last year; instead of fees, Goldman now has a small ownership stake in Cantab.As the only prominent hedge fund in a region dominated by technology companies, Cantab can make a unique pitch to university students who might not have considered finance as a career. One such hire, Tom Howat, now a partner at the firm, hurried to finish his Ph.D in mathematical biology so he could join Cantab on its first day.During the job interview in a local pub, Mr. Kirk described Cantab as a “start-up technology company that happens to apply itself to finance,” Mr. Howat, 31, recalled in a recent essay.That entrepreneurial spirit means Cantab can have some fun. Last year, in the Cambridge Dragon Boat Festival, a race on the River Cam, the team from Cantab finished second in the mixed division.The team also won best dressed, outfitted in the style of Noah’s Ark with zebra, giraffe and meerkat costumes.Such self-expression wasn’t part of the culture at Goldman, as Mr. Kirk learned the hard way.He wore the kilt only once, “given the slightly strange looks I got turning up at a fancy New York partners’ dinner wearing a dress,” he recalled. “It certainly created a little bit of a stir.” <a href="http://dealbook.nytimes.com/2013/05/13/british-hedge-fund-finds-success-by-forging-its-own-path/?partner=rss&emc=rss" target="_blank" rel="nofollow">View the original article here</a>

Andrew Testa for The New York TimesEwan Kirk, left, and Erich Schlaikjer of Cantab Capital Partners, whose fee structure, investing strateg...

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DealBook: Hedge Fund Manager Loeb Targets Sony for a Breakup

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