D. E. Shaw & Co. is a New York-based hedge fund, private equity[1] and technology development firm whose activities center on various aspects of the intersection between technology and finance. Based in New York City, New York, it was founded by David E. Shaw, who was formerly a faculty member in the computer science department at Columbia University. The firm, through various affiliates, specializes in applying quantitative and qualitative trading strategies to hedge fund management and other investments. It makes private equity investments in early-stage and established firms involved in technology, health care, and financial services. It also acquires assets of distressed companies. The company's D.E. Shaw Research unit focuses on long-term scientific and technological projects.
As recently as August 2008, the firm, described by Fortune in 1996 as "the most intriguing and mysterious force on Wall Street,"[2], managed nearly $40 billion in aggregate capital[3], making it one of the world's largest hedge funds by fund size [4]. As of April 1, 2009 the company manages approximately US $29 billion in aggregate capital[5].
History
In 1997, the firm returned capital to most of its early investors in favor of a structured credit facility of nearly $2 billion from Bank of America, with terms that allowed Shaw to keep a higher fraction of profits than hedge fund investors normally allow. Bank of America merged with NationsBank soon thereafter, and in the banks' due diligence for their merger, David Coulter, the CEO of Bank of America, said that his firm had no hedge fund exposure. After the Russian debt default in 1998, Shaw, like Long-Term Capital Management (LTCM) and many other hedge funds, suffered significant losses in its fixed-income trading. Bank of America took a $370 million writedown, Coulter lost his job, and the new management of the bank later declined its option to renew the credit facility.
Shaw suffered a couple of lean years thereafter, but attracted new investors as its investment performance recovered.
Many of D. E. Shaw's recent headline-making transactions deal with investing in bankrupt companies with valuable assets.[citation needed] In December 2003, a subsidiary of one of the D. E. Shaw group funds acquired famed toy store FAO Schwarz, which reopened for business in New York and Las Vegas in the fall of 2004. In the same year, D. E. Shaw affiliate Laminar Portfolios also acquired the online assets of KB Toys, which continued operating as eToys.com.[6] In August 2004, D. E. Shaw along with MIC Capital, proposed to inject $50M into the bankrupt WCI Steel. In December 2004, Shaw bought 6.6% of USG Corp, a wallboard manufacturer seeking bankruptcy protection as a result of rising asbestos liabilities.
Lawrence Summers, who served as Secretary of the Treasury during the Clinton administration, resigned as president of Harvard University in 2006 and started the same year as a managing director at D.E. Shaw. Summers had helped negotiate a bailout of hedge fund LTCM while with Treasury in 1998.[7] In 2008 Summers left D.E. Shaw after being appointed Assistant to the President for Economic Policy and Director of the National Economic Council, by then-President-Elect Barack Obama.[8] Summers received at least $5.2 million in compensation from Shaw, according to the first year's reporting of income when he returned to government service, in a 2009 report.[9]
In addition to its financial businesses, the D. E. Shaw group has also provided private equity capital to technology-related business ventures, most famously to Juno Online Services, which grew to become one of the nation’s largest Internet access providers.
In 2007, David Shaw sold a 20% minority stake in the Shaw group to Lehman Brothers, as part of a broader strategy to diversify his own holdings.
Employment
The D. E. Shaw group is known for its quantitative investment strategies, particularly statistical arbitrage, and its rigorous recruiting policies, which especially target the math and science departments of major universities. Notable former employees include Jeff Bezos, who was a vice president at D. E. Shaw before departing to found Amazon.com, and Lawrence Summers.
As of 2008, the D. E. Shaw group employs more than 1500 people.[10] Employment opportunities at D. E. Shaw are known to be extremely competitive, with only one applicant in several hundred being offered a position.[11] The firm is particularly known for its diverse hiring practices, generally favoring those from non-MBA programs.
Offices
Educational sponsorship
As a hedge fund built around traders and quants with heavy mathematics and problem solving backgrounds, D. E. Shaw supports several major educational programs:
References
- ^ "DE Shaw: Jumping more aggressively into private equity?"
- ^ "Wall Street's King Quant David Shaw's Secret Formulas Pile Up Money. Now He Wants a Piece of the Net.", February 5, 1996, Fortune magazine
- ^ The D. E. Shaw group - Who We Are
- ^ "Hedge Fund 100 Ranking"
- ^ The D. E. Shaw group - Who We Are
- ^ "D.E. Shaw Affiliate Acquires Online Assets of KB Toys" MultiChannelMerchant, May 14, 2004.
- ^ "The Summers Bubble" by Kevin Connor and Matthew Skomarovsky of the Public Accountability Initiative, The American Prospect, November 17, 2008. Retrieved 4/5/09.
- ^ http://www.marketwatch.com/news/story/Lawrence-H-Summers-Head-National/story.aspx?guid={2E6ED23A-1B64-47B3-8C80-172BC59C60C4}
- ^ "Hedge Fund Paid Summers $5.2 Million in Past Year" by John D. McKinnon and F. W. Farnum, wsj.online, April 4, 2009. Retrieved 4/5/09.
- ^ D.E. Shaw website
- ^ D.E. Shaw website - Staff page
- ^ ARML website
- ^ MIT Battlecode website
External links
