This year has not been kind to hedge funds. Seemingly every week we learn of another big-name hedge fund firm shutting down, suffering billions of dollars in redemptions, or running afoul of federal investigators.
Industrywide assets are down in 2016, following years of mediocre performance by a number of hedge funds. Several of these funds are operated by the old-guard hedge fund firms that built their reputations during a time there were a fraction of the number of funds there are today — and markets were less efficient and easier to exploit.
Few of these firms have been able to consistently perform at a high level in recent years. But one that has decidedly bucked that trend is D.E. Shaw & Co., the New York–based, mostly quantitative firm founded by David Shaw, which in recent years has incorporated discretionary strategies as well.
Its flagship D.E. Shaw Composite Fund has posted very consistent double-digit gains in each of the past four years, ranging from 11.6 percent to 15.3 percent. This year the fund is up 5.7 percent through the middle of September. This is better than most of the large, high-profile mulitstrategy funds have done this year.
D.E. Shaw Composite, launched in 2001, is a multistrategy fund that invests in more than 11 of the quantitative and qualitative strategies offered by the firm, mostly on a market-neutral basis. They include various equity and credit-related strategies.
The fund’s only losing year, when it fell 9.9 percent, came in 2008, when many other hedge funds lost two and three times as much amid the global financial crisis. Few of the old-guard firms that have been around more than two decades can boast similar success, although East Setauket, New York–based Renaissance Technologies and Chicago-based Citadel are exceptions.
David Shaw founded D.E. Shaw in 1988 but no longer runs the firm on a day-to-day basis. Its various funds are run by a team of four: Anne Dinning, Julius Gaudio, Max Stone, and Eric Wepsic. These days the firm manages more than $38 billion.
Shaw, who has a Ph.D. in computer science from Stanford University, spends most of his time serving as chief scientist of D.E. Shaw Research, heading an interdisciplinary research group in computational biochemistry. He is also a senior research fellow at the Center for Computational Biology and Bioinformatics at Columbia University and an adjunct professor of biochemistry and molecular biophysics at Columbia’s medical school.
D.E. Shaw’s Oculus Fund, launched in April 2004, has been less successful than Composite. It invests in six main strategies: equity and equity-linked securities, futures, discretionary macro, reinsurance, energy, and asset-backed securities. This year Oculus is up about 1.3 percent through August. It was up 8 percent last year and about 5 to 6 percent in 2014, and was flat in 2013. The two previous years it was up just above and just below 20 percent.
