D. E. Shaw & Co. facts for kids

Kids Encyclopedia Facts

D. E. Shaw & Co., L.P.

Headquarters at 1166 Avenue of the Americas, in New York City
Type	Limited partnership
Industry	Hedge fund
Founded	1988; 37 years ago (1988)
Founder	David E. Shaw
Headquarters	1166 Avenue of the Americas, New York City, New York, U.S.
Key people	Anne Dinning Max Stone Eric Wepsic Eddie Fishman Alexis Halaby Edwin Jager
Products	Hedge fund, Private equity
AUM	US$60 billion (Dec 2022)
Number of employees	2,500 (2022)

D. E. Shaw & Co., L.P. is a big company that manages money for others. It was started in 1988 by David E. Shaw in New York City. This company is famous for using complex math and computer programs. They look for small differences in how money markets work to make smart investments.

As of December 2023, D. E. Shaw manages about $60 billion. This includes different types of investments, like special funds called "alternative investments."

History

How it Started (1988–1996)

The company was founded by David E. Shaw. He used to be a computer science professor at Columbia University. He also had a special degree (PhD) from Stanford University.

D. E. Shaw started investing in June 1989. They began with $28 million from other investors. Their first office was small, above a bookstore in New York City. Over the years, they moved to bigger offices. In 2010, they moved to their current main office at 1166 Sixth Avenue.

The company kept its special computer programs for trading a secret. Many of their first employees were scientists, mathematicians, and computer experts. Later, they also hired people with different study backgrounds.

David Shaw always made sure the company was careful with risks. He wanted to protect the money they managed. Later, a special team was put in charge of checking risks. They used different tests to see how investments might be affected by bad situations.

In 1994, the company made a good profit of 26 percent. They managed hundreds of millions of dollars using strategies like "statistical arbitrage." This means finding small price differences in similar things to make a profit.

Besides managing money, they also started other businesses in the mid-1990s. They created an email company called Juno Online Services. They also started an online bank and brokerage firm. An office in India was opened to help develop software for their trading and online businesses.

Working with Bank of America (1997)

In 1997, D. E. Shaw made a deal with Bank of America. Bank of America gave them nearly $2 billion to invest. This deal allowed D. E. Shaw to keep more of the profits than usual. Bank of America hoped to benefit from D. E. Shaw's smart investing.

However, a year later, in 1998, Russia had a financial crisis. This caused D. E. Shaw to lose a lot of money on some of its investments. Because of this, Bank of America lost $570 million from its investment in D. E. Shaw.

After this, D. E. Shaw had to let go of many employees. Their staff went from 540 people in 1999 down to 180. The money they managed also shrank a lot.

New Leadership (2002)

David E. Shaw led the company from 1988 to 2001. In 2002, he stepped back from daily work. He wanted to focus on D. E. Shaw Research, which is a science research company.

A team of six senior managers took over the daily running of the company. This team, called the Executive Committee, stayed mostly the same for many years.

The Financial Crisis (2007)

When the big financial crisis started in August 2007, D. E. Shaw managed $20 billion in one of its main funds. A large part of this fund was invested in stock markets. Because of the crisis, the fund lost five percent of its value. This was its worst month ever at that time.

By September 2008, the company had borrowed a lot of money to invest. In the last months of 2008, the gains they had made on their $15 billion fund were lost.

Some of the company's investments were in "credit strategies." These were hit the hardest during the financial crisis.

To stop losing more money, D. E. Shaw temporarily paused allowing investors to take their money out. This made some investors unhappy because they had to wait to get their funds back. By 2009, D. E. Shaw had given back about $2 billion to clients. Later, they returned an additional $7 billion.

Overall, the total money D. E. Shaw managed dropped from $34 billion in 2007 to $21 billion in 2010. The company also had to reduce its number of employees by 10%.

New Rules for Employees (2019)

In 2019, D. E. Shaw asked all its employees to sign "non-compete agreements." These are rules that stop employees from working for a competing company right after they leave. This is common in the money management world, but it was new for D. E. Shaw. Some employees did not like this new rule.

How They Invest

D. E. Shaw manages many different investment funds. They use a lot of math and special computer programs to help them make decisions. They also do research to understand companies better.

The company also invests in private companies. These are companies that are not traded on the stock market. They invest in areas like technology, wind power, real estate, and financial services. For example, they invested in Juno Online Services, an internet provider. They also invested in Farsight, an online financial service that was later bought by another company.

Money They Manage

In 2011, the company managed $40 billion in total. About $15.6 billion of this was in hedge funds. By June 2021, the company had grown a lot. They managed $55 billion in total. About $35 billion of this was in "alternative investments," and $20 billion was in "long investments."

In 2011, they were ranked as the 21st largest hedge fund. By 2020, D. E. Shaw & Co. was ranked as the 10th largest hedge fund in the world.

Investing in Private Companies

In the U.S.

In 2004, a part of D. E. Shaw bought the famous toy store FAO Schwarz. This happened after the toy store had financial problems. FAO Schwarz reopened in New York and Las Vegas later that year. In the same year, D. E. Shaw also bought the online parts of KB Toys, which continued as eToys.com.

In 2006, D. E. Shaw was involved in helping Penn National Gaming (a casino and racetrack company) get money. This showed how many different types of companies D. E. Shaw invested in.

In 2009, D. E. Shaw started a new team. This team's goal was to buy assets (things of value) from other hedge funds that were having trouble during the financial crisis.

In India

D. E. Shaw started working in India in 2006. They made several big investments in private companies there. This included a partnership with Reliance Industries, a very large company in India. They also invested in a real estate company and a publishing group. However, some of these investments faced legal issues.

After 2013, D. E. Shaw reduced its private investing activities in India.

How the Company is Organized

Management

Today, the Executive Committee manages the company. The members are Anne Dinning, Max Stone, Eric Wepsic, Eddie Fishman, Alexis Halaby, and Edwin Jager. The company has about 1,700 employees.

Ownership

In 2007, David Shaw sold a 20 percent part of the company to Lehman Brothers. This was a way for him to spread out his own investments. At that time, D. E. Shaw managed $30 billion. Even when Lehman Brothers went bankrupt in 2008, their part of D. E. Shaw & Co. remained.

In 2015, a company called Hillspire bought that 20 percent share. Hillspire is the family office of Eric Schmidt, who used to be the chairman of Google.

Company Activities

Helping the Community

D. E. Shaw supports educational programs. These include math competitions like the American Regions Mathematics League and the International Mathematical Olympiad. They also support The Center for Excellence in Education.

Famous Former Employees

Many notable people have worked at D. E. Shaw, including:

Jeff Bezos, who founded Amazon
MacKenzie Scott, a novelist and giver of money to good causes
Cathy O'Neil, a mathematician
David Siegel and John Overdeck, who co-founded another big investment company called Two Sigma
Charles Ardai, an author
Lawrence Summers, a well-known economist, worked there from 2006 to 2008.

Office Locations

The company has offices in many countries around the world:

USA - New York City (Headquarters), Menlo Park (Silicon Valley), Wellesley (Boston), Overland Park (Kansas City), Princeton, Rye (Westchester)
China - Hong Kong (opened 2007), Shanghai (opened 2010)
India - Hyderabad (largest office outside the U.S. with 600 employees), Bengaluru, Gurugram
United Kingdom - Baker Street, London
Singapore
Bermuda
Luxembourg

Company Rankings

D. E. Shaw's investment funds have often been highly ranked. For example, in 2016, their D. E. Shaw Valence fund was ranked 18th among the top 100 hedge funds. Their D. E. Shaw Composite fund was ranked 32nd in 2016. This Composite fund has only lost money in one year since 2001. It has also made double-digit profits seven times between 2010 and 2020.

Images for kids

D. E. Shaw & Co. logo
Headquarters at 1166 Avenue of the Americas, in New York City