D.E. Shaw Said to Eliminate 10% of Workforce as Assets Decline
David Shaw, founder and chairman of D.E. Shaw Inc.
Kimberly White/Bloomberg News
David Shaw, founder and chairman of D.E. Shaw Inc.
David Shaw, founder and chairman of D.E. Shaw Inc. Photographer: Kimberly White/Bloomberg News
D.E. Shaw & Co., the hedge-fund firm founded by David Shaw, cut 10 percent of its workforce, or about 150 people, after assets fell by almost half in the past two years, according to two people familiar with the firings.
“The D.E. Shaw group has taken steps to strengthen our business and maximize value for our investors over the long term,” said Paul Welsh, a spokesman for the New York-based firm. He declined to comment on the specific actions taken.
The firm oversees $21 billion, down 46 percent from a peak of $39 billion in 2008, before it limited client withdrawals as the financial crisis deepened. Its Composite Fund, which uses computer models to make buy and sell decisions, dropped 3 percent this year through August, compared with the 6.4 percent gain by the Relative Value Index compiled by Chicago-based Hedge Fund Research Inc. The fund, D.E. Shaw’s largest, climbed 20 percent in 2009, less than the index’s 26 percent return.
“I think this is an isolated case and not reflective of trends in the hedge-fund industry at the moment,” said Ross Baltic, a managing partner at Mercury Partners Inc., a New York- based recruiting firm whose clients include hedge funds. “There’s a healthy level of sustainable hiring activity.”
Hedge funds returned 1.45 percent on average this year through August, according to Hedge Fund Research, compared with a decline of 4.6 percent by the Standard & Poor’s 500 Index. The $1.6 trillion industry pulled in a net $23 billion in the first half. At that rate, 2010 would be the third-worst year for deposits since 2001.
Redemption Restrictions
The job cuts were reported earlier today on the website of Institutional Investor magazine.
D.E. Shaw restricted investor withdrawals in November 2008 for both its Composite and Oculus funds, even though the Composite fund had dropped 11 percent, about half the industry average, and the Oculus fund was up about 10 percent.
At that time, the firm told clients it had enough cash to meet withdrawals. Even so, fund executives said they wouldn’t allow investors to pull their money because the funds’ documents stipulated that if redemptions reached a certain percentage of assets, the firm could halt outflows.
To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net
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