Shaw stumbles, and investors take a hike

Wed Jan 30, 2008



How can a big hedge fund firm keep growing when markets are rocky - and investors want more disclosure?

By Carolyn Sargent

D. E. Shaw has worked for years to expand beyond its model-driven quantitative strategies, but to many investors it's still a black box. The firm's penchant for secrecy, along with the multistrategy fund's worst results ever, led to such substantial investor redemptions that the firm nearly had to invoke its 6.25% gate last year.

"We are redeeming because of the opacity," explains one longtime Shaw investor. Saying that he is deeply dissatisfied with the answers he receives from Shaw about the Composite's holdings, he adds: "It is not a necessary risk for us to take." It is his responsibility, he says, to get a handle on the components and risks in his own book.

Such comments illustrate that when funds are earning the healthy returns D. E. Shaw...

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