Dan Loeb turned $3 million into a $17.5 billion hedge fund empire in 20 years - here's his fabulous life
Daniel Seth Loeb is a West Coast kid born and raised.
Growing up near the beach, Loeb always been a life-long surfer.
Even in his early fifties, Loeb still catches waves.
During his talk at the Jewish Enrichment Center in 2009, Loeb said that he has a "secret spot" in the Caribbean and he second favorite place in the world to surf is in Indonesia.
Loeb, who's still known for his big mouth, had to hire a bodyguard to protect him in middle school.
Loeb used to get himself into trouble in the schoolyard with his big mouth.
So when he was 12 years-old at Paul Revere Junior High School in L.A., he hired his classmate Rob Schwartz for 25 cents a day to be "bodyguard" to protect him from bullies.
By the way, it looks like Schwartz works with Loeb today on his fund's venture capital arm, Third Point Ventures.
Here's Loeb in high school. That's when he first started investing in the stock market.
He attended Palisades Charter High School where he took AP classes and started his own skateboard company.
Because he loved trading stocks, one of his teachers nicknamed him "Milo Minderbinder"-- a character from Joseph Heller's novel "Catch-22" who was a World War II profiteer controlling the black market.
He actually became interested in investing from a very young age.
Loeb has said that he became fascinated in investing around the age of 5 or 6.
He said that's because entrepreneurship runs in his family.
Speaking of his family, Loeb's great-aunt is the creator of the Barbie doll.
His great aunt, Ruth Handler, and his great uncle, Elliot Handler, were founders of Mattel. Loeb's great aunt was the creator of the Barbie doll.
"I associated success in business with Hot Wheels and Barbie dolls. I think it was a very powerful enforcer early on to like business," he told the audience at the Jewish Enrichment Center in 2009.
Source: Jewish Enrichment Center
After two years at UC Berkeley, he transferred to Columbia University in New York.
Loeb studied economics. He also discovered a love for literature and art. Perhaps this is why he has a way with words.
"....For me, Columbia was transformative. I don’t remember much about the specifics of the Economics courses that I majored in – I apparently internalized the key concepts – but I still remember vividly the thrill of reading Don Quixote, Epictetus, The Aeneid, King Lear and Candide, and how contemporary the stories and ideas in these old and ancient texts struck me. To this day, I still chuckle when I consider the bawdy tales of Rabelais, who seems now to have anticipated and channeled my own 6 year-old son’s talent for potty talk. I fantasize that our politicians have been moved by the dialogues of Plato, and thus contemplate the ancient conflict of the sophists versus the lovers of truth. (I guess they determined that the former was the more expeditious course)"
During his senior year, he mad a terrible investment and also learned a valuable lesson.
Loeb had made $120K in profits from investing by the time he was a senior at Columbia.
However, he lost all of it on one really bad investment in Puritan-Bennett Inc, a medical respirator maker which suffered massive losses after its ventilators were associated with several deaths.
That bad investment taught Loeb a lesson about the problem of "overconcentrating positions."
After graduation, Loeb joined private equity firm Warburg Pincus and helped them make millions on an investment.
From early on, Loeb seemed to have a knack for picking out good investments.
During his stint in private equity, Loeb looked over the books for CNW Corp and said the company was undervalued.
Warburg Pincus ended up buying a stake in the Chicago-based company was able to make a $20 million profit.
He didn't always work in finance, though. Loeb left the private equity world in 1987 to work for a record label.
Loeb did a stint at Chris Blackwell's Island Records where he worked as director of corporate development.
His job there was to secure debt financing.
In 1991, he moved to LA to work for Jefferies.
Following his career in the music industry, Loeb did a brief stint at New York-based hedge fund Lafer Equity Investors LP.
Then, in 1991, Rich Handler, who is now the CEO Jefferies, hired Loeb to work in their Los Angeles' offices as a sell-side research analyst. He later became a senior vice president in Jefferies distressed debt department.
Then it was back to New York, to join Citicorp in 1994.
While at Citi, Loeb worked as a high yield sales vice president.
After only one year, he left to start his own hedge fund in 1995. 'I thought 'Oh my God. What am I doing? I'm a fraud.'
After leaving Citi, Loeb said he had to make sure he had some capital to launch his hedge fund.
While he hoped to raise $10 million for his fund, he was only able to secure a little over $3 million from five friends and family members and money out of his own pocket.
The night before he started investing, he said he "absolutely panicked."
"I thought 'Oh my God. What am I doing? I'm a fraud.' there no way I could do it. What was I thinking? This is crazy. Luckily, I was up 8% the first month and didn't have that fraud feeling again..." he said to the audience at the Jewish Enrichment Center in 2009.
His hedge fund Third Point got its name from Loeb's love of surfing.
Again, going back his surfing roots, Third Point is named after a break at Malibu's Surfrider Beach.
Clearly, he was obsessed with it.
"Any girls here? You know when you're in Junior High School you were in love with a guy and you would write his name over and over on a piece of paper?" Loeb said during his 2009 talk at the Jewish Enrichment Center. "I used to write 'Third Point Partners' over and over. 'Third Point Partners' 'Third Point Partners' 'Third Point Partners.'"
"I used to fantasize how I would start my fund...I'd do logos, like this was really like a dream of mine to get this thing going," he said.
By the way, Loeb didn't go to business school.
"I learned the hard way that there was a lot I needed to learn a lot more about leadership skills, organization, management, culture, process, and kind of tying it all together," Loeb said at the SALT Conference in Vegas.
"For me, it didn't come naturally. It didn't come easily. I didn't go to a business school. I didn't really study it. In fact, I thought studying these things were corny things that people you sold or had manufactured it."
Loeb thought that if you're a good trader and you put up the numbers that the business would take care of itself.
He attended a leadership class at Goldman Sachs called Pine Street. He met a coach there that he's worked with for seven or eight years now. They read books and talk about leadership and it's been integral to the fund's growth.
He's had some real challenges along the way. Third Point suffered tremendous losses during the financial crisis.
Prior to Lehman Brothers' demise, Loeb was running around $5 billion in AUM. By the end of the year, he had around $2 billion and was down 30%.
During his career as an activist investor, Loeb has earned a reputation for his strongly worded letters calling for board shakeups and CEO resignations.
The scathing letters, written to spur shakeups and CEO replacements, cut right to the chase. Loeb often calls the leaders the worst he's ever seen and accuses them of "tooling around."
But the best part is that he often signs them "Very truly yours, Daniel S. Loeb."
"These things read like spy novels, there's intrigue, hyperbole, there's revelations about things..." Loeb said during his talk at the Jewish Enrichment Center.
Speaking of those letters, he famously called out ex-Yahoo CEO Scott Thompson for his résumé.
Loeb was responsible helping shake up Yahoo's leadership a couple years ago.
He's the one who revealed Yahoo's CEO Scott Thompson had a huge inaccuracy in his biography regarding his college degree.
Loeb, who waged a proxy fight with Yahoo, also played a role in bringing in Marissa Mayer as the new CEO.
And one time he sent a nastygram to Ken Griffin. (We've heard that they've made up)
In 2005, Citadel founder Griffin's poaching of New York hedge fund employees caught the eye of Loeb. Griffin, who charges a higher management fee than most other funds, was allegedly luring the employees away with offers of higher salaries.
In the email, Loeb called Citadel a "gulag" and forbade Griffin from approaching any Third Point employees under any circumstances. He also told Griffin matter of factly that Citadel was "over-rated" and that Griffin does not know how to manage people.
I understand your need to hire employees from other firms, something that Third Point 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.
We've heard that they made up.
Source: Insider Monkey
Then there was the rumor Loeb used to post vitriolic things about companies on web message boards as 'Mr. Pink.'
The web pseudonym "Mr. Pink" comes from Quentin Tarantino’s 1992 film Reservoir Dogs.
It's never been completely confirmed, but it hasn't been denied either.
Outside of his hedge fund, Loeb has an impressive art collection, which has actually proved to be a good investment.
"I've enjoyed collecting art," Loeb said during his talk at the Jewish Enrichment Center.
"I've enjoyed art ever since, I'll tell you when, I went to Columbia. I went to the Met and I saw Poussin's 'Rape of the Sabine Women' and it's this incredible, epic, great, great painting. And anyway, I was at Columbia and luckily they had this core curriculum -- I had this art humanities class. There was the painting I felt like, I put up my hand, the painting 'It's Poussin.' All the prep school kids were like 'What a jerk.' They all knew so much more. The teacher, I got one of two A's, and all the prep school snotty kids didn't."
He said that's always followed art and after going to a collector's show at the MoMa he just really got into it.
"I really just started buying art as a passion. I never considered it an investment, but it ended up being a good investment."
Loeb's art collection is said to include mostly postwar and contemporary art, including Richard Prince, Basquiat, Andy Warhol, Mike Kelley, and Cindy Sherman.
He's a 'health nut.'
Aside from surfing, Loeb, a self-described "health nut," practices Ashtanga yoga. He has also competed in triathlons.
A few years ago, challenged three Navy Seals to participate in a half Ironman with him.
By the way, Loeb's father was an avid marathoner and cyclist, too.
Fun fact: He reportedly doesn't drink water out of plastic water bottles!
Friends and investors said his decisions are unequivocal. He doesn't drink out of plastic water bottles for environmental and health reasons, and has been active in education reform and the effort to legalize gay marriage in New York. "When Dan believes in something…he has a singular focus and is relentless in the pursuit of his objective," says Jefferies Group Inc. Chairman and CEO Richard Handler, who hired Mr. Loeb in 1991.
Maybe we should stop, too?
Loeb, who is also politically active, used to support his former classmate President Obama, but that changed.
Loeb was a classmate of President Barack Obama while at Columbia University.
At first he was a supporter of Obama, but that all changed.
Here's an excerpt from an email he sent in Dec. 2010:
Dear Friends/battered wives:
It is that time of year and I just thought of the perfect gift in light of some of you. In case the President’s hostage rant wasn’t enough to turn you off, I thought I’d buy any of you a great book for gals who just keep on pursuing the wrong guy. Made popular on Oprah a few years back, “He’s Just Not That Into You” seems like the perfect holiday stocking stuffer for true blue Democrats who just can’t get enough of our President’s smack downs on hard working successful Americans known as “the 2%”
....
He's a big supporter of charter schools.
Loeb is one of a handful of fund managers that's become heavily involved in education reform efforts, particularly by working with charter schools. Loeb is the chairman of the board for Success Academy in New York.
Back in 2013, Loeb and other money managers were placed on a so-called "watch list" by the American Federation of Teachers that was sent out to pensions. Some of the folks on the list viewed it as a "badge of honor." Loeb used the criticism from the unions as a chance to increase his support for Success.
He also made a huge donation to fund Alzheimer's disease research in memory of his father.
Loeb's father passed away from Alzheimer's in 2012. To honor his memory, Loeb donated $15 million to Mount Sinai Hospital in December 2014 to set up the Ronald M. Loeb Center for Alzheimer's Disease.
"When my father was sick, I learned how painful this disease is for those afflicted and their families. I also recognized that there is little hope for patients today beyond slowing the progression of Alzheimer’s. We urgently need more resources to find a cure or effective prevention," he said.
Loeb, who is a yogi, is married to a beautiful former yoga instructor.
On July 4, 2004, Loeb married the beautiful Margaret Munzer Loeb, a former yoga instructor who graduated from Brown University and from NYU's School for Social Work.
Together, they have three children.
"...whatever measure of success I have attained in my professional career would not have been possible without the love and support of my wife Margaret and pales in comparison to the happiness she and my children give me every day," Loeb once said during an award acceptance speech at Columbia University.
The Loeb family lives in a super swanky Upper West Side penthouse.
The Loeb's 8-bedroom,10,700 square-foot penthouse condo in the Upper West Side, which he bought for a record-breaking $45 million in 2005 before the building was even constructed.
They also own a stunning Hamptons home.
Loeb also owns a sick yacht.
In 2013, Loeb purchased former Citigroup CEO Sandy Weill's yacht "April Fool."
Today, the California surfer boy is the 737th richest person in the world.
He has an estimated networth of $2.5 billion, according to Forbes.
Now let's see some of the perks to moving to a hedge fund...
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