One of the biggest hedge funds of the industry is closing its doors to new capital. D.E. Shaw closed the last of its funds, the Composite fund, to new investors in the summer of this year, Sam Jones reports for Financial Times.
D.E. Shaw Group manages $32 billion across the firm, which includes its hedge funds Oculus, Heliant and the flagship Composite. These assets are up from $27 billion in October 2012, implying that the group has raised new capital and/or generated good returns. Oculus and Heliant are also closed to new investments since the start of this year. The hedge fund does not enjoy media attention and has done a good job of keeping its investment returns private; there is no information available on how its strategies are doing this year.
D.E. Shaw Group tried to shun its image
Oculus has managed a +20 percent return in 2012 and a +18 percent return in 2011. It is hard to pinpoint what strategy D.E. Shaw employs, as the firm uses equity long/short, macro, fixed income and trend following strategies among several others. Last year, D.E. Shaw Group tried to shun its image of being a high-frequency trading firm, saying that less than half of its assets are managed in short-term computer-driven models. The firm’s founder, David Shaw, now retired, was a mathematician and pioneered the trend of statistical arbitrage trading when he founded the group in 1988.
Sam Jones writes that the reason behind hedge funds closing to new clients has been the recent disturbance in the global macro environment, which has upset the tried and tested approaches to investing. Most of the big ones in the hedge fund industry have been closed to new investors; only London-based Man Group is still taking new capital. Another large and equally secretive hedge fund, Baupost Group, is set to return some client capital by the end of this year, because they don’t find the available investment opportunities attractive enough.
D.E. Shaw underwrites can be invested in the hedge fund strategies
However, those who want to invest with the firm can enter through the reinsurance business, which has been estimated to manage $2 billion. The premiums from the contracts D.E. Shaw underwrites can be invested in the hedge fund strategies, just like every hedge fund-reinsurer does.