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Mega Hedge Fund DE Shaw Cuts 10% Of Staff Following $7 Billion In Redemptions
First Meredith Whitney highlighted the insult facing the banking industry this quarter as a result of the dearth of trading volume. Now quant hedge fund extraordinaire DE Shaw, which prides itself on hiring something like one in a thousand math geniuses, and only after they sign an NDA during interviews, has added the injury, by being the canary in the hedge fund coalmine, and letting 150, or 10%, of its highly paid workforce, go. And that's not all: after finally unlocking its "gates" the fund's AUM has plunged by $7 billion to $28 billion. This can not be good, as it means that the fund has had to unwind tens of billions in hedged positions over the past weeks. And if the fund's slant was bearish previously it may well have been responsible for the rapid move in the stock market, as its semi-forced liquidation would have seen it need to cover an abnormal amount of shares in a thin market, in which players like SAC and DE Shaw already account for a material fraction of total volume.
The FT is on the case:
Significant job cuts have been announced in New York and London, people familiar with the firm told the Financial Times, with further redundancies expected across the firm’s global operation in the coming weeks.
The move comes amidst one of the hedge fund industry’s most disappointing years on record and reflects the degree to which even the largest managers have struggled to maintain their profitability.
According to Hedge Fund Research, the average hedge fund has returned just 1.45 per cent so far this year.
The cuts at DE Shaw, some of the deepest in the firm’s history, follow a strategic review undertaken by management as a result of large investor outflows this year.
DE Shaw has suffered an estimated $7bn in redemptions over the past few months, according to investors.
As of September 1, the firm managed about $21bn across its range of funds.
Unfortunately, as we speculated in late August, and as DE Shaw demonstrates, a big portion of the hedge fund industry's fate now rests in the hands of the market ramp. Which is why a few more gray swan events like the GMCR announcement today (which will force all 9 sellside analysts covering the company to get bearish on the name and make the slow manager managers currently involved reevaluate their stance) could easily throw the entire rally overboard, as the falling dominoes of forced liquidations spread like bifurcated Lorenzian charts, impacting anything and everything, but mostly all those names which have surged, and which, far more than gold, will be liquidated first in acts of margin-call satisfying profit taking (very much like the massive Apple block earlier today which pushed the company down by 3%, when it could have easily, but far slower, traded at VWAP with no impact on the price). Once again, all those momentum traders who have been riding this inexplicable wave in stocks higher as the economy crashes, have our sympathies. It is not easy picking pennies in front of rollercoasters, especially knowing full well, that almost all other market players currently (most being HFTs) have an unfair advantage over you.
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"one in a thousand math geniuses"
yeah, like Larry Summers!! lol
"Madmen and idiots are the lifeblood of corporate imperialism. They give life its color and pizzazz with their belief in infinite growth in a finite world, a doctrine they share with a cancer cell.
...Let’s talk about the mainstay of American ascendancy, Feral Corporatism. ... Corporatism stomped capitalism into the ground decades ago. Though the public tends to conflate the two, there is a crucial difference between them: In capitalism, the owners [it's their own money] call the shots; in Corporatism, overpaid employees [hired managers/CEOs/hired guns] call the shots. [The latter's aim is to hollow-out the host corporation and fill his pockets].
Hat-tip to Belaqua Jones/Case Wagonvoord for paraphrased quotes.
+1
"Corporatism stomped capitalism into the ground decades ago."
Bingo, yet this gets zero attention on zero hedge.
Incorporation is the nemesis of freedom. Ray Charles can see corporations getting stronger at the direct expense of liberty.
"Corporatism stomped capitalism into the ground decades ago."
Bingo, yet this gets zero attention on zero hedge.
Corporations are the "get-away" vehicle used to plunder the common man and his treasury.
Incorporation is the nemesis of freedom. Even the blind can see corporations getting stronger (more rights and protections) at the direct expense of personal freedom -- in the land of liberty!
Non-accountable, catalysts of fraud, yet with money they are above the law including the benefits of influence and legal immunity. In other words they "get-away" with whatever they want (everything).
Woah! Hold on!
It must have taken a genius of some description to have lost the money that Larry did when he was at Harvard...
DavidC
Did you see today's Boston Globe? See this:
http://www.boston.com/yourtown/boston/allston_brighton/articles/2010/09/...
Thanks Larry!!
Cal, so you're the one reading the Globe. Who knew?
- Ned
What Harvard needs to do to become profitable again is to drop its allegiance to intellectual advancement and declare itself a Sovereign American Indian Nation so it can open a casino and sell cigarettes. Exactly what Wall Street and Congress have already done.
What? Not even the school who taught half these clueless f'ing morons how to rape society knows how to manage funds.
Debt forces Harvard back to drawing board ... you'll need to go back further than that.
Surely they'll just pass the hat around the auld guarde to raise some funding. I see they told they're bond raters? You bet they did!
“We’re paying a significant amount of the operating budget in debt service.’’ Hahahaha, somewhere this got lost in translation of your business class lecture notes. Haven't you heard there are CDO's for that! One of your illumni schmucks can find you a buyer. Look up MSFT if you have any difficulty.
"It’s a new world for the university" - better get used to it. You might even rewrite some lecture notes if you had enough of a spine to sit up straight with. Doesn't half of Congress owe you guys a debt of service for what you have provided for them?
As those famous American philosophers Sonny and Cher said...the beat goes on...
Isn't it the (dead)beat goes on?
FANMANTASTIC...150 superior math geniuses can NOW start do the real work of developing energy transfer schemes to get our culture out of the 19th Century fossil fuel engine paradigm. When they meet their maker, no cares how many toys or piles of cash you extracted from your dealing with losers.
*Applause*
~Misstrial
Good point indeed.
well maybe when (if?) fossil fuel prices go up enough to justify creating some new technologies then these guys will be attracted to the industry.
but prices are still very low, so i'm pretty sure these guys will work in info tech or finance, sorry.
Bit by bit the picture reveals itself with Shaw not being fully in the game.
http://www.zerohedge.com/article/daily-divergence-dementia
http://www.zerohedge.com/article/daily-divergence-dramatic-disconnects
How many of those geniuses saw that one coming? Probability is a bitch, bitches.
you are flaming gay wearing a dress
You are still annoying.
Paper bugs chasing ghosts!
Intereting info.
In the end even apple had only a 1.5% loss today. It seems no matter how much selling takes place the market still goes up.
Who needs math geniuses now? Just buy-buy-buy!
Apparently this whole quant thing isn't smart enough to turn a profit...
C-Mutant
I've been thinking about it as Spy vs. Spy, e.g. :
http://www.myfreewallpapers.net/cartoons/pages/spy-vs-spy.shtml
or, in college, we'd go to Cornell and say "our Canucks are better than your Canucks"
algo vs. algo in a sumo contest.
- Ned
you get to granular, you may realize that precisely because these late-to-the-party math geniuses (tools of their social amd corporate environments) are here in size, their older kin did indeed turn a mighty profit...fast forward to the weak soup today and you have them eating their own children as the Boomers did earnestly pricing their children out of housing and chaining them to 10x school cost and currently irremedial debt that they paid.
The math wizards will easily get jobs thanks to the Obama Education Initiative....teaching Algebra to inner city 9th graders. False dignity segways perfectly with demeaning obscurity. That would be proper penance.
"Segway"?
No disrespect but I think you need an education initiative.
False dignity segways
Segways may be an interesting, if not particularly practical, mode of transportation. But I have never heard of anyone imputing any dignity, false or otherwise, to either them or their drivers.
Mode of transportation is irrelevant. The quantifiers are back room enablers to fraud for a price. No tears for them. Sorry.
Mode of transporatation is relevant as the owner of the machine went off a cliff to his death in UK...
Segue.
+1000
the segway will be stripped to its basic parts within 39 seconds of being locked up to prevent its theft.
- Ned
Uh oh....
http://www.marketwatch.com/investing/stock/gmcr
yipes...that 29 p/e mighta' really been a hundred. Guess they've been making a run after Fivebucks......a share that is.
Theres worse, check out CRM.
If the people pushing those survey buttons are half way right GMCR is headed back up tomorrow...
genius math bitchez
The wheels are coming off this mkt. XLF is pricing in Recession 2 not Qe2. See the high beta names acting funny? Goog, AAPl, GMCR.
I love your icon. The resemblance is uncanny, isn't it?
WSJ reporting that the US Mint has suspended Gold Eagle sales again due to inability to keep up with demand.
It will be interesting to watch how the premiums react this time.
I got the weirdest questionnaire from DE Shaw after making an employment enquiry. I filled the thing out with crayon drawn rebuses and cutouts of Smurfs and Golden Corral coupons. I scanned it, but never bothered returning it.
I kinda wish I had... I probably could have helped make this happen years earlier and made the percentage bigger than ten.
I bet you would have been in the top 0.001% of the top 0.001% of applicants. Wonder if their HR or hiring manager would have understood? McGeorge Bundy did that and got into Hah'vad.
- Ned
Tyler -
You wrote "AUM has plunged by $7 billion to $28 billion."
The article you referenced says "As of September 1, the firm managed about $21bn across its range of funds.
They can still practice math at home:
unemployment check X 99 weeks = ?
Never hire a quant to do a mans work.
Sure he can count toothpicks in a box but present him with a problem that requires deduction, historical reference and psychology and all the math is useless when you discover your working with false figures.
The math never lies but people and politicians tend to.
the universe, while a complex system, consists of mostly simple components that behave in a generally predictable nauture, thus enabling accurate applications of math. Human behavior does not suffer the same rigid bounds of physics/math.
the universe, while a complex system, consists of mostly simple components that behave in a generally predictable nauture, thus enabling accurate applications of math. Human behavior does not suffer the same rigid bounds of physics/math.
Oy gevalt...
Math is a type of deduction, quants are probably the most historical people ever, and as for psychology, I can't think of a subject more riddled with false figures.
If "real men" have no need for fancy doo-dads like addition and subtraction, we're in real f*cking trouble.
maybe the reference is to assuming Gaussian distributions for situations that then result in "... ooh, that was an 11 standard deviation move."
and other such nonsense that results in commitments of large sums of money.
Just a thought.
- Ned
who cares if people make errors and lose money?
as long as government does not insist on getting involved and rewarding their failure, i could not care less.
the real issue is the idea that government solves problems.
You're (not your)....contraction of "you are"
Since we are picking on the Segway/segue post.....
Let's see, the DOW and S&P had their "Best September in 70 years" and the biggest runup since the depression;
How does anyone square all this?
UE abysmal, GDP has 3 consecutive quarters of contraction, the housing market sucks and because of the GMAC/Ally and other MSB shennanigans on the bearer transfer affidavits which is going to string out the foreclosure resolution, the dollar is debased and getting worse thanks to the helicopter man and his criminal cabal (that need a bloody hole in their collective heads), ECRI, CPI, CCI, Manufacturers Indx, case shiller, ALL are bad, bad or worse, and now the hedgie funds are now laying off their people because they have had their worse year ever??
That is all the indication I need to show me that POMO and PPT and the debasement of our currency is the only explaniation for the "gains" in the markets and the pumping and ramp jobs. Those that did this need to forfiet their most valued possession and get off the planet.
"Contradictions do not exist. Whenever you think you are facing a contradiction, check your premises. You will find that one of them is wrong."
-Ayn Rand
Ayn Rand gets credit for logic 101? palease.
Ayn never integrated the well known fact that the universe is deterministic in her childish philosophy of selfishness... talk about false premises.
pan-
what?
Dude, that went out of style even before Newton was dead. Counter-example that dis-proves your comment:
"Shit Happens."
- Ned
I enjoyed The Fountainhead, but i still don't have a true opinion as to whether 'shit happens' or the universe is deterministic is right.
Care to enlighten me some?
Taleb's basic points in "Fooled by Randomness" and "Black Swan" good start (world as random variables vs. able to be (pre-)determined). Discussions following/disproving LaPlace's conjectures that given complete system definition and known initial conditions all future states of a system can be defined. Heisenberg uncertainty. Mandelbrot both on markets and chaotic systems.
A chaotic start.
- Ned
Heisenberg uncertainty is weakness in measurement, not (by necessity) a fundamental component of the universe.
Mandelbrot 'chaos' is actually a contradiction to your point. (Cellular automata follow simple deterministic rules to make beautiful pictures-- by definition.)
Complexity and apparent randomness (give me a good definition) do not contradict determinism. The fact is that there are a lot of variables, but it is still clockwork.
We cannot measure the universe precisely enough to predict the next state, but that doesn't mean it isn't a stateful system.
Determinism has never gone out of style.
Dog: I've got a million proofs that we're not free.
Cat: I've got one proof that we are.
Dog: What's that?
Cat: Who asks "What's that?"
Seriously?
The existence of a subject is a rule of grammar, not a rule of the universe.
Yea, Wouldn't it be nice to know what we have in our portfolio. Bernanke is going to be the last fund manager standing.
So true. The Fed must prop up the stock market or all is lost. They will do everything and anything to do so. That is a political imperative. Don't fight the Fed until they're dead.
Citizens wanting their cash before the dead head fed goonzi's race it to zero! Imagine that! Citizens wanting to keep wall street and greedy government out of their affairs!! Soon we will know the self evident truth of possession being 100% the law among the lawless rat bastards of wall street/dooosch central DC! We'll know by our personal preparedness or through sad experience!!
DE Shaw will be fine, they've got huge positions in solars.; On a more serious note, investors will punish hedge funds that put up gates and invest in black box strategies. Liquidity & transparency is the key to survival in hedge fund la-la land.
Transparency is for losers. ;=)
That is my favorite Obama quote!
Transparency. You make me laugh Leo.
Solar equipment is not too efficient without transparency, don't knock it.
lol
I guess they'll have to go back to string theory and
sell some more bullshit to The Stupid Taxpayer.
Oh wait, they're tapped out too.
Build a better battery or die assholes.
Why would anyone pay 2&20 when they can exactly replicate DE Shaw's positions trades via ETF's for a few bps? One day, (when the HFT-ignited 100% correlation in all things traded dis-appears), there will be some value-added in these overpaid ding-bats.
The Fed provides liquidity. The 'market makers' suck it all up. Drought for the rest. Bottoms up!
The cannibalizing begins...
Speaking of redemptions, I've been making a few lately myself. I imagine they're accelerating. Call it a run the first run of the 21st century on the banks.
On average, hedge funds could not outperform the most basic bond funds. All those brilliant minds being wasted and can't outperform Pimco Total Return. Most of them need to get real jobs in productive industries. How many Chinese and Indians are working in their capital markets as compared to us ?
Not many - last I knew investing in stock markets in India (and probably China) was only for the elites and for gamblers and treated more like a sin. Brokers were never exalted to such high levels as in the US although lately equity trading has been catching on with the newly rich (thanks to outsourcing) class !!
PIMCO is the greatest hedge fund of all time.
"OF ALL TIME!!!"
You are obviously very mis-informed.
Bingo. Ben, not Pimco, is now running the biggest fund in town. Bill Gross' strategy is to just front run the big brother funds moves. Anyone not doing that is going down.
Off the Reservation, the mountain men ain't going down.
Uncle Larry is coming home!! (not to be confused with Uncle Buck, Uncle Jesse and the Ripper or Uncle Fester)
When one fast neutron collides with a U-235 nucelus, no big deal; but get a bunch of them together for a party and it turns into a blow-out! Rock'nRoll dudes/dudettes!
Here's a direct effect... There goes RI's Wind Farm
http://www.wpri.com/dpp/money/business_news/deepwater-winds-key-backer-h...
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