How activist Dan Loeb became a Wall Street icon

That language is all deliberate and calculated and has made Loeb – the founder and chief executive of Third Point – a market legend. And even at a forum like Sohn Hearts & Minds in Sydney on Friday, which is full of people who know how to grease the wheels that make markets go around, everyone loves watching a bomb-thrower in action. It’s exciting.

Loeb didn’t disappoint. He explained his fund’s rise from $US3.2 million in assets in 1995 to $US11 billion ($17 billion) today, how his activism had changed over the years, and that a lot of his best bets had been in credit.

Loeb started with an aggressive style of activism, targeting small caps with his colourful language and high-conviction calls, but changed his approach as his bets (and targets) got bigger.

He still likes letters and language to make his points, but says they are less personal these days. And when he turns up, boards know who he is, and bankers and lawyers will rush to a company’s defence.

He hasn’t had to pull the proxy fight trigger for a while. Third Point’s directors are in a minority position and have to figure out how to work constructively with others. They usually gel within a meeting or two, once the dust has settled.

Has he softened? Perhaps. Matured? Maybe. Or boards are less willing to fight.

Some companies like Third Point enough to seek its early feedback on earnings results and other releases (on a confidential basis), to work out what other investors may ask come results day.

Does it sadden him that his activist style has helped create a whole industry around defending activism for lawyers and bankers? Speaking straight after his appearance, he says companies are prone to overreact, hiring expensive advisers to try to win a public relations war.

“A lot of time they jump the gun,” he says. “But I can’t control that.”

Activism is just one of his strategies. Third Point runs equities and credit strategies, both value-based. The equities side is long-short and event driven, which includes the activism, while its high-yield credit team runs independently. Sometimes there is crossover for sharing investment ideas or knowledge on a sector.

That twin strategies sit inside the one asset manager is not something we really see in Australian hedge funds. Funds tend to be either equities or credit focused, not both.

There is a rising wave of active ownership starting up in Australia, including ventures from established shops Perpetual and L1 Capital. More activism is coming, whether boards like it or not.

As for his stock pick, Loeb went with out-of-fashion US retailer Bath & Body Works, only hours after its shares tanked 8 per cent on Friday morning.

It’s an activism bet – Third Point bought a stake, threatened a proxy contest, and got two board seats. He says the turnaround is on track – third quarter was “terrific” but guidance was slightly weaker than expected – and he likes its “obsessive” customer base, which sees 50 million store visits a month.

But is his stock tip what the crowd will remember? Probably not. They were more interested in hearing a Wall Street icon talk about blowing up the joint.