D. E. Shaw & Co.

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D E Shaw & Co, LP
Limited partnership
Industry Investment management
Founded 1988; 30 years ago (1988)
Headquarters 1166 Avenue of the Americas, New York City, New York, U.S.
Key people
David E. Shaw
Products Hedge fund, private equity
AUM US$50 billion (Jan 2018) [1]
Number of employees
1600
Website www.deshaw.com

D. E. Shaw & Co., L.P. is a multinational investment management firm founded in 1988 by David E. Shaw and based in New York City.[2] The firm has offices in New York, Boston, Hong Kong, Hyderabad, Shanghai, London and Bermuda. D. E. Shaw & Co. has delivered the fifth-highest returns of any hedge fund in the world since inception.[3]

History[edit]

The firm was founded by David E. Shaw, a former Columbia University faculty member with a Stanford PhD, and has more than 1,300 employees.[4] David Shaw directed the company from 1988 to 2001. In 2002, David Shaw removed himself from day-to-day involvement in the firm, and transitioned leadership to a team of six managing directors: Anne Dinning, Julius Gaudio, Louis Salkind, Stuart Steckler, Max Stone and Eric Wepsic.[5] The firm's management structure of the same six-member executive committee remained intact through 2010.[4][6]

Bank of America[edit]

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 D.E. Shaw & Co. to keep a higher fraction of profits than hedge fund investors normally allow.[7] In effect, Bank of America provided an infusion of $1.4 billion to D.E. Shaw, hoping to benefit from the latter's investment expertise.[8] One year later, Russia defaulted on its debt resulting in large losses for D.E. Shaw's fixed-income trading portfolio.[9] As a result, Bank of America lost $570 million due to its investment in D.E. Shaw, and paid out an additional $490 million to settle associated shareholder lawsuits.[8]

Private equity[edit]

In December 2003, a subsidiary of one of the company's funds acquired the 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 acquired the online assets of KB Toys, which continued operating as eToys.com.[10] In August 2004, D. E. Shaw & Co., along with MIC Capital, proposed to inject $50M into the bankrupt WCI Steel. In December 2004, D.E. Shaw & Co. bought 6.6% of USG Corporation, a wallboard manufacturer seeking bankruptcy protection as a result of rising asbestos liabilities.[11]

In late 2009 during the Financial Crisis, it was reported that D.E. Shaw & Co. had set up a portfolio acquisitions unit, the aim of which was to acquire illiquid assets from rival hedge funds.[12]

Expansion in India[edit]

D.E. Shaw entered the Indian market in 2006,[13] with Anil Chawla, then the CEO of GE-Commercial finance, India & South East Asia, as the Country Manager. The India operations were initially headquartered in Hyderabad, Telangana. D.E. Shaw entered into several large private equity deals in the country. These included a joint-venture with India's largest private sector company, Reliance Industries, to provide financial services.[14] Other investments included real estate company DLF Assets Limited and publishing group Amar Ujala Publications, which were subject to Indian regulatory scrutiny and legal disputes.[15][16] Chawla left his position with D.E. Shaw in 2012. D.E. Shaw scaled down its private equity activities in India after 2013.[17]

Lehman Brothers[edit]

In 2007, David Shaw sold a 20% stake to Lehman Brothers, as part of a broader strategy to diversify his personal holdings.[18] D.E. Shaw had $30 billion of assets under management in 2007.[8] At the time of its bankruptcy in September 2008, Lehman Brothers holdings in D.E. Shaw & Co. remained intact.[19]

In 2015, Hillspire, the family office of Google chairman Eric Schmidt, acquired the 20% passive ownership stake in DESCO from Lehman Brothers Holdings Inc.[20]

Investment strategy[edit]

The company manages a variety of investment funds that make extensive use of quantitative methods and proprietary computational technology to support fundamental research in the management of its investments.[4][21][22] The company also uses qualitative analysis to make private equity investments in technology, wind power, real estate, and financial services firms and in distressed company financing.[5]

In addition to its financial businesses, D. E. Shaw & Co. has provided private equity capital to technology-related business ventures, including Juno Online Services, an Internet access provider, and Farsight, an online financial services platform that was acquired by Merrill Lynch.[23][24] The company had $40 billion in aggregate capital[25][26] and $15.6 billion in hedge fund assets under management as of 2011, and was ranked as the 21st-largest hedge fund by Institutional Investor.[25]

In 2016, D.E. Shaw Group ranked 18th on Penta's Top 100 Hedge Funds.[27]

Corporate responsibility[edit]

D. E. Shaw supports educational programs such as Math-M-Addicts (teachers are D. E. Shaw & Co. employees),[28] American Regions Mathematics League,[29] Worldwide Online Olympiad Training (WOOT), United States of America Mathematics Olympiad and the International Mathematics Olympiad, Mathematical Olympiad Program, the MIT 6.370 Battlecode Competition,[30] and The Center for Excellence in Education.[31]

Prominent former employees[edit]

In 2006, Lawrence Summers was hired as managing director at D.E. Shaw & Co. He left in 2008, receiving $5.2 million in compensation for one year's work.[32]

Other former employees of DESCO include Jeff Bezos, Two Sigma founder John Overdeck, and mathematician Cathy O'Neil.

Office Locations[edit]

  • Hong Kong - Opened 2007 to focus on Chinese private equity[33]
  • Hyderabad - largest office with 600 employees after US[33]
  • New York City - Headquarters
  • London
  • Silicon Valley - Menlo Park
  • Boston - Wellesley
  • Kansas City - Overland Park
  • Princeton
  • Bermuda
  • Shanghai - 2010[33]

See also[edit]

References[edit]

  1. ^ Burton, Katherine (7 May 2018). "D.E. Shaw Fired Fund Manager Daniel Michalow for 'Gross Violations'". www.bloomberg.com. Retrieved 25 September 2018.
  2. ^ Mackintoshin, James (April 30, 2007). "DE Shaw considers new private equity fund". Financial Times.
  3. ^ Taub, Stephen (23 January 2018). "The Top-Earning Hedge Fund Firms of All Time". Institutional Investor. Retrieved 25 September 2018.
  4. ^ a b c Jones, Sam (28 September 2010). "DE Shaw cuts 10% of workforce". Financial Times.
  5. ^ a b "Power of Six: Profile of D.E. Shaw & Co" (PDF). Alpha Magazine. 2009.
  6. ^ "Rebounding from Near Death - World's Largest Hedge Funds Have Their Sights Firmly On Institutional Dollars". Institutional Investor, Inc. May 2010.
  7. ^ Derivatives Strategy (February 1998). "Inside D. E. Shaw". Derivatives Strategy Magazine. Archived from the original on 22 October 2013. Retrieved 8 June 2013.
  8. ^ a b c "Bloomberg's Hidden Gem, Shaw's Lehman Curse?". Wall Street Journal. 14 March 2007. Retrieved 25 September 2018.
  9. ^ The Battle for Wall Street: Behind the Lines in the Struggle that Pushed an Industry into Turmoil, Richard Goldberg Pub. John Wiley & Sons, 2009
  10. ^ "D.E. Shaw Affiliate Acquires Online Assets of KB Toys" MultiChannelMerchant, May 14, 2004.
  11. ^ "DE SHAW LAMINAR PORTFOLIOS LLC - Form Type: SC 13G/A)". edgar.secdatabase.com. 28 December 2004. Retrieved 25 September 2018.
  12. ^ Jones, Sam (February 8, 2010). "DE Shaw Eyes Rival Firm's Distressed Holdings". Financial Times. Retrieved 5 December 2013.
  13. ^ "Hedge fund major to enter India" Business Standard, April 26, 2006 2006
  14. ^ "RIL-DE Shaw brokerage business to take off this fiscal". The Times of India. 7 April 2012. Retrieved 25 September 2018.
  15. ^ Acharya, Nupur (14 July 2011). "DE Shaw: Investment in Amar Ujala Publications Compliant With All Laws". Wall Street Journal. Dow Jones. Retrieved 19 April 2018.
  16. ^ "D E Shaw runs afoul with RBI- again! This time on Amar Ujala deal". indianinvestorforum. 18 July 2011. Retrieved 19 April 2018.
  17. ^ Reporter, B. S. (10 November 2012). "DE Shaw scaling down India private equity business". Business Standard India. New Delhi. Retrieved 19 April 2018.
  18. ^ Ceron, Gaston. "Lehman Buys Into D.E. Shaw, Seeking Private Money Profits". Wall Street Journal.
  19. ^ Kishan, Saijel; Keehner, Jonathan (18 February 2009). "Hedge Funds Pressed to Consolidate as Losses Cut Fees". Bloomberg. Retrieved 5 December 2013.
  20. ^ Williamson, Christine (2015-04-23). "Hillspire acquires 20% stake in D.E. Shaw Group". Pensions & Investments. Retrieved 2018-03-27.
  21. ^ "At the Intersection of Technology and Finance". Computing in Science & Engineering (6). 1 November 1999. doi:10.1109/mcse.1999.10022.
  22. ^ "ISM Seminar abstract".
  23. ^ "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
  24. ^ Rose-Smith, Imogen (27 Feb 2007). "Cracking The Code". Institutional Investor. Retrieved 10 August 2011.
  25. ^ a b "The 2011 Hedge Fund 100 Ranking". Institutional Investor, Inc. May 12, 2011.
  26. ^ ""Hedge Fund 100 Ranking"".
  27. ^ "Penta Top 100 Hedge Funds". Barron's. June 17, 2017. Retrieved 5 November 2017.
  28. ^ "Math-M-Addicts: TEACHERS". 21 July 2014.
  29. ^ "American Regions Mathematics League". 1 August 2011.
  30. ^ "MIT Battlecode website". Archived from the original on 1 July 2010. Retrieved 1 August 2011.
  31. ^ "Center for Excellence in Education". Archived from the original on 25 July 2011. Retrieved 1 August 2011.
  32. ^ McKinnon, John (April 4, 2009). "Hedge Fund Paid Summers $5.2 Million in Past Year". Wall Street Journal. Retrieved 4 April 2009.
  33. ^ a b c Jones, Sam (10 March 2010). "DE Shaw broadens Asian reach". Financial Times.

External links[edit]