This page has been archived and commenting is disabled.

Mega Hedge Fund DE Shaw Cuts 10% Of Staff Following $7 Billion In Redemptions

Tyler Durden's picture




 

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.

 

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 09/28/2010 - 18:02 | 611393 10044
10044's picture

"one in a thousand math geniuses"

yeah, like Larry Summers!! lol

Tue, 09/28/2010 - 19:12 | 611485 anonnn
anonnn's picture

"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.

Tue, 09/28/2010 - 21:48 | 611687 spekulatn
spekulatn's picture

+1 

Wed, 09/29/2010 - 08:36 | 612257 Widowmaker
Widowmaker's picture

"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.

Wed, 09/29/2010 - 09:03 | 612258 Widowmaker
Widowmaker's picture

"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).

Tue, 09/28/2010 - 19:55 | 611545 DavidC
DavidC's picture

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

Tue, 09/28/2010 - 22:06 | 611714 Calvin Jones an...
Calvin Jones and the 13th Apostle's picture

Did you see today's Boston Globe?  See this:

 

http://www.boston.com/yourtown/boston/allston_brighton/articles/2010/09/...

Thanks Larry!!

Tue, 09/28/2010 - 23:39 | 611842 New_Meat
New_Meat's picture

Cal, so you're the one reading the Globe.  Who knew?

- Ned

Wed, 09/29/2010 - 05:41 | 612012 ugmug
ugmug's picture

 

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.

 

 

Thu, 09/30/2010 - 06:28 | 614990 euclidean
euclidean's picture

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?

Tue, 09/28/2010 - 18:03 | 611397 Getagrip
Getagrip's picture

As those famous American philosophers Sonny and Cher said...the beat goes on...  

Wed, 09/29/2010 - 09:54 | 612385 genieous
genieous's picture

Isn't it the (dead)beat goes on?

Tue, 09/28/2010 - 18:08 | 611405 ToNYC
ToNYC's picture

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.

Tue, 09/28/2010 - 19:08 | 611478 Misstrial
Misstrial's picture

*Applause*

~Misstrial

Wed, 09/29/2010 - 07:04 | 612137 ZeroPower
ZeroPower's picture

Good point indeed.

Wed, 09/29/2010 - 09:10 | 612312 VWbug
VWbug's picture

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.

Tue, 09/28/2010 - 18:37 | 611408 etrader
Tue, 09/28/2010 - 18:19 | 611419 Nihilarian
Nihilarian's picture

How many of those geniuses saw that one coming? Probability is a bitch, bitches.

Tue, 09/28/2010 - 18:29 | 611437 kato
kato's picture

you are flaming gay wearing a dress

Tue, 09/28/2010 - 21:52 | 611667 Commander Cody
Commander Cody's picture

You are still annoying.

Tue, 09/28/2010 - 18:23 | 611423 zaknick
zaknick's picture

Paper bugs chasing ghosts!

Tue, 09/28/2010 - 18:25 | 611428 shushup
shushup's picture

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.

Tue, 09/28/2010 - 18:26 | 611431 bugs_
bugs_'s picture

Who needs math geniuses now?  Just buy-buy-buy!

Tue, 09/28/2010 - 21:49 | 611690 carbonmutant
carbonmutant's picture

Apparently this whole quant thing isn't smart enough to turn a profit...

 

Tue, 09/28/2010 - 23:46 | 611847 New_Meat
New_Meat's picture

C-Mutant

"... this whole quant thing..."

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

 

Wed, 09/29/2010 - 12:49 | 612297 ToNYC
ToNYC's picture

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.

Tue, 09/28/2010 - 18:42 | 611452 Rainman
Rainman's picture

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.  

Tue, 09/28/2010 - 20:14 | 611566 lumen ex lumine
lumen ex lumine's picture

"Segway"?

 

No disrespect but I think you need an education initiative.

Tue, 09/28/2010 - 20:19 | 611571 KevinB
KevinB's picture

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.

Tue, 09/28/2010 - 20:30 | 611582 Rainman
Rainman's picture

Mode of transportation is irrelevant. The quantifiers are back room enablers to fraud for a price. No tears for them. Sorry.

Tue, 09/28/2010 - 20:50 | 611605 Sqworl
Sqworl's picture

Mode of transporatation is relevant as the owner of the machine went off a cliff to his death in UK...

Tue, 09/28/2010 - 21:37 | 611672 Commander Cody
Commander Cody's picture

Segue.

Tue, 09/28/2010 - 22:36 | 611767 TwelfthVulture
TwelfthVulture's picture

+1000

Tue, 09/28/2010 - 23:48 | 611849 New_Meat
New_Meat's picture

the segway will be stripped to its basic parts within 39 seconds of being locked up to prevent its theft.

- Ned

Tue, 09/28/2010 - 19:13 | 611486 Rainman
Rainman's picture

yipes...that 29 p/e mighta' really been a hundred. Guess they've been making a run after Fivebucks......a share that is.

Wed, 09/29/2010 - 07:06 | 612138 ZeroPower
ZeroPower's picture

Theres worse, check out CRM.

 

Tue, 09/28/2010 - 21:44 | 611679 carbonmutant
carbonmutant's picture

If the people pushing those survey buttons are half way right GMCR is headed back up tomorrow...

Tue, 09/28/2010 - 18:57 | 611466 Mae Kadoodie
Mae Kadoodie's picture

genius math bitchez

Tue, 09/28/2010 - 19:08 | 611474 virgilcaine
virgilcaine's picture

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.

Wed, 09/29/2010 - 02:34 | 611961 Dirt Rat
Dirt Rat's picture

I love your icon. The resemblance is uncanny, isn't it?

Tue, 09/28/2010 - 19:06 | 611475 NotApplicable
NotApplicable's picture

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.

Tue, 09/28/2010 - 19:11 | 611483 Steve Dallas
Steve Dallas's picture

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.

Tue, 09/28/2010 - 23:51 | 611851 New_Meat
New_Meat's picture

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

Tue, 09/28/2010 - 19:19 | 611488 bob_dabolina
bob_dabolina's picture

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.

Tue, 09/28/2010 - 19:24 | 611498 Cactus Rocky
Cactus Rocky's picture

They can still practice math at home:

unemployment check X 99 weeks = ?

Tue, 09/28/2010 - 19:31 | 611507 John McCloy
John McCloy's picture

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.

Tue, 09/28/2010 - 21:11 | 611634 Bay Trader
Bay Trader's picture

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.

Tue, 09/28/2010 - 21:11 | 611636 Bay Trader
Bay Trader's picture

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.

Tue, 09/28/2010 - 21:17 | 611645 jm
jm's picture

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.

Tue, 09/28/2010 - 23:54 | 611853 New_Meat
New_Meat's picture

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

Wed, 09/29/2010 - 09:19 | 612326 VWbug
VWbug's picture

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.

Wed, 09/29/2010 - 09:58 | 612395 genieous
genieous's picture

You're (not your)....contraction of "you are"

 

Since we are picking on the Segway/segue post.....

Tue, 09/28/2010 - 19:35 | 611512 Everyman
Everyman's picture

Let's see, the DOW and S&P had their "Best September in 70 years" and the biggest runup since the depression;

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.

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.

 

 

Tue, 09/28/2010 - 19:46 | 611533 hedgeless_horseman
hedgeless_horseman's picture

How does anyone square all this?

"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

Tue, 09/28/2010 - 22:44 | 611773 pan-the-ist
pan-the-ist's picture

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.

Tue, 09/28/2010 - 23:58 | 611855 New_Meat
New_Meat's picture

pan-

"... the well known fact that the universe is deterministic ... "

what?

Dude, that went out of style even before Newton was dead.  Counter-example that dis-proves your comment:

"Shit Happens."

- Ned

 

 

 

Wed, 09/29/2010 - 07:08 | 612144 ZeroPower
ZeroPower's picture

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?

Wed, 09/29/2010 - 07:26 | 612177 New_Meat
New_Meat's picture

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

Wed, 09/29/2010 - 09:29 | 612344 pan-the-ist
pan-the-ist's picture

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.)

Wed, 09/29/2010 - 09:22 | 612330 pan-the-ist
pan-the-ist's picture

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.

Wed, 09/29/2010 - 06:38 | 612093 StychoKiller
StychoKiller's picture

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?"

Wed, 09/29/2010 - 09:24 | 612334 pan-the-ist
pan-the-ist's picture

Seriously?

The existence of a subject is a rule of grammar, not a rule of the universe.

Tue, 09/28/2010 - 20:01 | 611549 Cruel Aid
Cruel Aid's picture

Yea, Wouldn't it be nice to know what we have in our portfolio. Bernanke is going to be the last fund manager standing.

 

Tue, 09/28/2010 - 21:42 | 611675 Commander Cody
Commander Cody's picture

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.

Tue, 09/28/2010 - 19:54 | 611543 buzlightening
buzlightening's picture

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!!  

Tue, 09/28/2010 - 20:07 | 611562 Leo Kolivakis
Leo Kolivakis's picture

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.

Tue, 09/28/2010 - 20:38 | 611594 MrTrader
MrTrader's picture

Transparency is for losers. ;=)

Tue, 09/28/2010 - 21:00 | 611619 hedgeless_horseman
hedgeless_horseman's picture

That is my favorite Obama quote!

Tue, 09/28/2010 - 21:43 | 611677 Commander Cody
Commander Cody's picture

Transparency.  You make me laugh Leo.

Wed, 09/29/2010 - 06:39 | 612094 StychoKiller
StychoKiller's picture

Solar equipment is not too efficient without transparency, don't knock it.

Wed, 09/29/2010 - 10:44 | 612500 aheady
aheady's picture

lol

Tue, 09/28/2010 - 20:14 | 611563 StarvingLion
StarvingLion's picture

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.

Tue, 09/28/2010 - 21:23 | 611653 PBRmeASAP
PBRmeASAP's picture

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.

Tue, 09/28/2010 - 21:46 | 611684 Commander Cody
Commander Cody's picture

The Fed provides liquidity.  The 'market makers' suck it all up.  Drought for the rest.  Bottoms up!

Tue, 09/28/2010 - 22:55 | 611797 reading
reading's picture

The cannibalizing begins...

Tue, 09/28/2010 - 21:53 | 611699 gwar5
gwar5's picture

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.

 

 

 

Tue, 09/28/2010 - 22:55 | 611795 George Costanza
George Costanza's picture

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 ?

Tue, 09/28/2010 - 23:17 | 611823 whatsinaname
whatsinaname's picture

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 !!

Tue, 09/28/2010 - 23:22 | 611830 jm
jm's picture

PIMCO is the greatest hedge fund of all time.

Wed, 09/29/2010 - 00:57 | 611892 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

"OF ALL TIME!!!"

Tue, 09/28/2010 - 23:45 | 611848 kalasend
kalasend's picture

You are obviously very mis-informed.

Wed, 09/29/2010 - 00:35 | 611879 jpk
jpk's picture

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.

Wed, 09/29/2010 - 09:00 | 612301 ToNYC
ToNYC's picture

Off the Reservation, the mountain men ain't going down.

Wed, 09/29/2010 - 06:03 | 612053 The Real Fake E...
The Real Fake Economy's picture

Uncle Larry is coming home!!  (not to be confused with Uncle Buck, Uncle Jesse and the Ripper or Uncle Fester)

Wed, 09/29/2010 - 06:43 | 612100 StychoKiller
StychoKiller's picture

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!

Wed, 09/29/2010 - 11:38 | 612631 LOVELIFE
LOVELIFE's picture

Here's a direct effect...  There goes RI's Wind Farm

http://www.wpri.com/dpp/money/business_news/deepwater-winds-key-backer-h...

Tue, 11/16/2010 - 10:07 | 730421 daniel
daniel's picture

i love zerohedge policy cheap hosting

Do NOT follow this link or you will be banned from the site!