Institutional Investor's Alpha Magazine - March 2008 - (Page 6) Scott Galloway takes on the New York Times. ing wrong with the New York Times that can’t be fi xed with what is right with the New York Times,’” says a person familiar with the fund managers’ thinking. “Here’s a world-class, highly respected brand that is being undervalued.” The strategy seems to have worked — to some extent. On March 17 the company expanded its board to 15 seats from 13, and made room for two Firebrand/Harbinger representatives: Scott Galloway, the manager of Firebrand and the most public face in the dispute, and James Kohlberg of Mount Kisco, New York–based private equity firm Kohlberg & Co. In exchange, Firebrand and Harbinger agreed to drop their efforts to win four seats. The activists’ argument is that the company’s holdings are bizarrely unfocused, including stakes in such properties as a Nascar race team, the Boston Red Sox, several other newspapers and a billion-dollar office tower in Manhattan. The two funds began buying Times stock late last year, near its 52-week low of $14.01 a share, and have already amassed more than 19 percent of the company’s class-A shares. The class-B shares are owned by the Sulzberger family, which still controls 13 board seats. Firebrand’s Galloway, who declined requests for an interview, is a marketing professor at New York University’s Stern School of Business. In a letter to Times management in January, Harbinger said it wasn’t aiming to dismantle the dual-class stock structure that gives the Sulzbergers firm board control. The goal is to get the Times to sell off pe- InvestorForum With the U.S. Congress expected to revisit the issue of hedge fund taxation after this fall’s election, few investors who responded to our survey support higher tax rates for hedge funds. Less than 20 percent say legislators should increase hedge fund taxes or prevent managers from running offshore, taxfree funds. Many investors, however, remain uncertain as to what impact the proposed tax changes might have on their investments.* What type of institution do you represent? Corporate pension fund Public pension fund Taft-Hartley pension fund Endowment Foundation Other What is the size of your fund? More than $5 billion $2.50 billion to $5 billion $1 billion to $2.49 billion $500 million to $999 million $100 million to $499 million Less than $100 million If you answered “no” to the previous question, are you considering investing in hedge funds or funds of hedge funds in the future? Yes 30.0% No 70.0 If you do invest in hedge funds, how big is your hedge fund allocation? 26 to 50 percent 10.6% 16 to 25 percent 27.7 11 to 15 percent 17.0 6 to 10 percent 23.4 Less than 6 percent 21.3 In general, should U.S. legislators be seeking to increase the taxes that hedge funds are required to pay? Yes 17.7% No 36.7 Don’t know 45.6 Should hedge funds be subject to tax on carried interest? Yes 38.8% No 21.3 Don’t know 40.0 If hedge funds were charged tax on carried interest, would this make you less likely to invest in them? Yes 12.7% No 46.8 40.5 Don’t know Should legislators prevent hedge fund managers whose operations are predominantly in the U.S. from running offshore, tax-free funds? Yes 15.2% No 46.8 Don’t know 38.0 If the offshore fund option for U.S.based hedge funds were no longer available, would you be less likely to invest in hedge funds? Yes 15.4% No 41.0 Don’t know 43.6 18.8% 17.5 0.0 51.3 3.8 8.8 Do you view hedge funds and funds of hedge funds as tax-efficient Do you currently invest in hedge funds investments? or funds of hedge funds? Yes 24.3% Yes 62.0% No 14.9 No 38.0 Don’t know 60.8 10.0% 5.0 25.0 13.8 25.0 21.3 Should hedge fund firms that are publicly traded be taxed at a higher corporate rate than the current 15 percent level they pay? If you invest in hedge funds or funds of Yes 18.0% hedge funds, do you invest in onshore No 35.9 or offshore funds? Don’t know 46.2 Onshore 18.4% Offshore 30.6 Both 51.0 * Responses may not total 100 percent because of rounding. 6 • INSTITUTIONAL INVESTOR’S ALPHA • MARCH 2008 ELENA OLIVO/NYU PHOTO BUREAU
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