Wall Street legend Leon Cooperman… fell off The Forbes 400 for the first time in years.

Nor can he blame the global pandemic he’s not so sure about or the fact that he’s technically retired, because neither impeded his peers’ ballooning bank accounts.

The 25 wealthiest hedge funders are worth a combined $220 billion, up an impressive $35 billion from last year…. Eighty three-year old Jim Simons, founder of quantitative trading firm Renaissance Technologies, is yet again the richest hedge fund manager in America, for the 4th year in a row, according to Forbes. Though he technically retired more than a decade ago, Simons remains co-chairman at Renaissance….

Even more galling is that those of vastly lesser intellectual means than he managed to hold on to their places. Any chance he could get that $100 million back, Saint Barnabas? No? Well, it would still leave him $300 million shy anyway, and at least he has something to take about with his old phone buddy and fellow grievance machine Donald Trump, who we’re sure is taking this news in stride.

Donald Trump is worth an estimated $2.5 billion, leaving him $400 million short of the cutoff to make this year’s Forbes 400 list of America’s richest people. The real estate mogul is just as wealthy as he was a year ago, when he stood at No. 339 on the ranking, but he is down $600 million since the start of the pandemic.

If only he hadn’t been so skeptical of cryptos or COVID vaccines, both of which minted their fair share of new members of the 400.

As far as those we’re concerned with, though, there’s not much new to report. Only one—John Paulson, of course—lost money in what seems likely to be his last year on the list, although it must be said he’s making the most of it and going out in style. As well as hedge fund managers did over the past year, they did relatively poorly vis-à-vis their fellow multi-billionaires, as most lost ground on the 400. The richest 10 hedge fund managers this year are the same as last (with the exception of Two Sigma’s John Overdeck and David Siegel, who dropped out of a tie for the last spot with David Shaw). Carl Icahn bounced back from a disappointing 2020 to leapfrog Ken Griffin and Steve Cohen, and Izzy Englander and Chase Coleman each padded their wealth by more than $3 billion to overtake a stagnant George Soros, as did Ray Dalio, although he’s still got a ways to go to catch the aforementioned retiree. But none did quite so well as Coatue Management’s Philippe Lafont, who made at least $4.5 billion over the last year to enter the list in fine style. Blackstone Group founded Steve Schwarzman, however, blows that out of the water: His net worth nearly doubled to more than $37 billion, putting him in the top 20 overall. (Oh, god, don’t tell Leon about that one.)

On the other side, joining Cooperman and Trump among the have-nots, are Ron Perelman, a fixture among the 400 for even longer than Trump; hedge funder Noam Gottesman; private equity magnates Jim Coulter, Alec Gores, Bruce Karsh, Howard Marks; man of many enthusiasms Jeff Gundlach; and Nikola Motors founder Trevor Milton, whose frankly has bigger problems to worry about.

The Forbes 400 [Forbes]
The Richest Hedge Fund Managers On The 2021 Forbes 400 List [Forbes]
The Richest Private Equity Billionaires On The Forbes 400 List 2021 [Forbes]
Donald Trump Falls Off The Forbes 400 For First Time In 25 Years [Forbes]
Oprah, Trump And 49 Other Billionaires Who Dropped Out Of The Forbes 400 Ranks [Forbes]
Six New Crypto Billionaires Join The 2021 Forbes 400 [Forbes]
Moderna’s vaccine profits propel three new names onto Forbes’s list of the 400 richest Americans. [NYT]

Still, even there, given the time it takes for those hedge funds to report their performance, and then the time it takes to compile those reports and calculate rankings, these lists can prove more or less useful depending on events more contemporaneous than the New Year’s ball drop, and also slightly comic compared to other such lists. And so it is with Bloomberg’s annual list of the 15 hedge fund managers earning the biggest paydays of the year.

At the top of this list we find Tiger Global Management’s Chase Coleman, no surprise given his impressive debut this year on LCH Investments’ own career-based league table. Not on that list? Renaissance Technologies’ Jim Simons, on account of all the money his firm lost for its outside clients in 2020 (and, in early going, 2021). But he’s on the Bloomberg list, thanks to the $2 billion he made on a fund that’s not open to clients.

Likewise, Bill Ackman and David Shaw celebrated the $1.3 billion and $856 million they made, respectively, last year by immediately losing clients 3.2% and 2.3%, respectively, in January.

But no inclusions are quite as funny as those of mentor and protégé Steve Cohen and Gabe Plotkin, who on account of certain recent difficulties are going to have a hell of a time making this list next year.

Melvin Capital Management’s Gabe Plotkin made about $850 million in 2020 as his firm’s flagship fund returned 53%. But in January, it was caught on the wrong side of the retail mob that pushed up the price of stocks Melvin had bet against. That led to a 53% decline and an estimated $460 million loss for Plotkin personally, illustrating how quickly paper gains can vanish.

Coleman Leads $23 Billion Payday for 15 Hedge Fund Earners [Bloomberg]
Renaissance, Pershing Square among hedge funds that got clobbered in January [MarketWatch]
Two Sigma, DE Shaw Posted Losses in Some Funds in January: FT [Bloomberg]

The ur-quant founder of D.E. Shaw & Co. hates nothing more than seeing his name in the media, so this feature-length piece on his apparently monomaniacal approach to raising his children and investing in their futures is the kind of thing that will almost certainly send him into private paroxysms of rage. And it won't help that the reporting was helped along by people inside DESCO, a reality that was unheard of just 15 months ago but is increasingly commonplace since the firm got into a public squabble with former macro trading exec Daniel Michalow [ed note: much more on that tomorrow, so watch this space].

Throughout the piece, we are treated to many tasty facts and anecdotes [the Shaw household being staffed by Ivy League-educated servants doing absurdly detailed menial labor, Shaw's young son writing a children's book with help from literally Jules Feiffer, and the handbook of hand signals that was written for DESCO employees to communicate with their dear leader in lieu of speaking to him, thus wasting his time, during the rare moments they laid eyes upon him] but the one we can't stop thinking about was this one:

Even though their children were by all accounts excellent students, the Shaws pursued a remarkably elaborate and expensive pattern of philanthropy to seven of the most renowned universities in the country.

Starting in 2011, when the oldest of their three children was about two years away from applying to college, the Shaw Family Endowment Fund donated $1 million annually to Harvard, Yale, Princeton, and Stanford and at least $500,000 each to Columbia and Brown. The pattern persisted through 2017, the most recent year for which public filings are available, with a bump in giving to Columbia to $1 million a year in 2016 and 2017. 

Listen, you can bemoan the wealth gap and the codified existence of a ruling class and blah blah blah, but you should also have the courtesy to remember that David Shaw is a hdege fund manager and what you're looking at is simply a brilliantly simple hedge. Why would Shaw and his wife throw the same amount of money at all these schools when two of them are Columbia and Brown? In fact, the only part of this passage we take exception with is not sticking to your investment thesis and plowing into Columbia so late in the trade.

After all, what kind of child reared for world domination ends up getting bribed into Brown? Shaw and his wife, Beth Kobliner, took a very quanty approach to this and we dig it. Mostly because it worked. The couple's two older kids both matriculated at Yale, and mom can barely contain her pride:

Yale’s acceptance of Adam and Rebecca gratified Kobliner, who had applied there herself and been rejected. “I walk around Yale and tell all their friends that I didn’t get in”...

So, once again, put down your populist pitchforks for a moment and think about the meaning of being a parent; loving someone so much that you do whatever it takes to give them a life better than your own, even if yours is as comfortable as possible. After all, what is money for if not to ensure that you create a situation in which your child is not subject to the disappointments that you were forced to endure? Shaw and his wife simply took their wealth and built a hedge on preventing that they end up rejected from Yale and forced to attend a second-rate university, reliving their mother's own horror,

...Kobliner, who attended Brown instead, said in a 2018 radio interview.

Exactly.

The Shaw Family Admission Plan [NYMag/ProPublica]

Anne Dinning, one the most prominent women in quantitative finance, has rejoined the executive committee of DE Shaw, the secretive New York hedge fund where she helped pioneer algorithmic trading that has since spread across Wall Street.

Cool right? A venerated female quant rejoining the leadership of a major hedge fund in this difficult era for gender politics in finance. That's a great look for DESCO, a firm that usually loathes leaking this kind of stuff to the press.

Except for, hold on...

Although the move has not been announced, DE Shaw’s website has already been updated to reflect Ms Dinning rejoining the hedge fund’s main management body, where she will work alongside Max Stone, Julius Gaudio, Eric Wepsic and Eddie Fishman. Founder David Shaw is primarily focused on research in computational biology, leaving the executive committee to run the hedge fund.

The website biography indicates that Ms Dinning will “jointly” supervise its global asset management business, but does not yet specify any particular areas that she will oversee, as it does for other executive committee members. A DE Shaw spokesperson confirmed that she has rejoined but declined to comment further on Ms Dinning’s return.

Okay, so Dinning is ostensibly coming back to offer some chromosomal diversity to David Shaw's replacement hivemind while he figures out how to become immortal by uploading his consciousness into The Singularity or whatever. That's totally normal for a quant fund in 2019. But why is Dinning's return such a big deal considering that she has no concrete portfolio? And why is DE Shaw not commenting on a move that is clearly being done at least in part for optics?

Because this is DE Shaw, you guys.

We won't dive back in too deep, but Michalow's firing over what DE Shaw alleges was improper sexual behavior was handled clumsily, and Michalow is still actively litigating his termination as improper. The prolonged scandal of L'affaire Michalow has created some schisms within DE Shaw and forced the firm's leadership into being a little more public with how they do things. It's not been an easy shift, and the re-appointment of Anne Dinning to the executive committee seems to be a sterling example of that.

While someone at DE Shaw seems to be peddling Dinning's return as a nice positive #MeToo era story to a press unfamiliar with writing about DE Shaw, the founder himself has been as honest and quanty as ever while communicating the news of Anne Dinning 2.0 to DE Shaw's rank and file.

According to an email from David Shaw to staff that has found its way to us, Dinning's return is being pitched thusly:

You may recall that in early 2017, Anne switched to part-time status, with 20% of her time spent on the firm's activities. As part of that transition, she stepped down from her official role as a member of the EC, although she continued to work closely with its members on strategic decision-making. I'm happy to announce that Anne has now agreed to increase the fraction of her time that she spends with the firm to 35%, to resume her role as a member of the EC, and to reassume oversight of the Corporate Development unit (which focuses on growing existing and building new businesses for the firm), while maintaining her current focus on long-term strategy and leadership development.

Based on some napkin math by a DE Shaw insider, Dinning's return to the EC should yield up to $20 million more in annual compensation, which is a pretty sweet deal for upping your active management time from one workday a week to like one day and a few hours. That's an incredible deal for Dinning, who should never be doubted as an investor based on her track record. But it's a weird look for DE Shaw, who seems eager to let it be known that its most talismanic female figure will rejoin the figurehead group that runs it. 

After all, if you're going to spend money and effort looking "Woke" in the #MeToo era, why not spend it all promoting an exceptional younger woman from inside your organization who is interested in spending 100% of her time improving it?

That said, congrats to Anne Dinning on another brilliant trade.

Anne Dinning returns to hedge fund DE Shaw [FT]

Since Michalow's letter was published, Dealbreaker has spoken to a number of current and former D.E. Shaw employees, and the picture they paint is consistently much closer to the one shared by Michalow than the one presented by D.E. Shaw.

According to our sources, D.E. Shaw is a massive hedge fund staffed by people who work long, hard hours and play rather hard as well. It's a closed environment that organically fosters intramural sexual relationships, hard-partying social situations, and sometimes brusque, rude or inappropriate styles of communication between colleagues. In essence, the people who work at D.E. Shaw behave like the people who work at almost every other major hedge fund, the only difference being that D.E. Shaw is a doggedly secretive organization liturgically opposed to admitting what's going on inside of it.

D.E. Shaw declined to comment in response to this piece.

To fully understand what D.E Shaw comports itself to be, it's perhaps most useful to take a look at the "Who We Are" section of the D.E. Shaw website:

Our culture rewards analytical rigor and adherence to the highest possible ethical and legal standards, and we've cultivated a collegial work environment that promotes collaboration across disciplines, geographies, and investment strategies. Our firm has been built in part by attempting to do what other companies might consider impossible, or never imagine at all. A single transformative idea that ultimately works—for a new business, a new trading model, or an improved back office process—is worth a dozen ideas that lead nowhere. We've learned that when an extraordinary team sets extraordinarily ambitious goals, astonishing breakthroughs can be expected.

David Shaw was an ur-quant trader, founding his fund in the 1980s above a communist bookstore and becoming a billionaire pioneer in the algorithmic trading game. He was also famous for eschewing Wall Street types in favor of academics and computer scientists, letting them dress how they wanted and trade how they wanted. D.E. Shaw started off quirky and different, but 30-plus years is a long time.

To maintain its outsider image, D.E. Shaw [or DESCO as it is referred to almost exclusively by those on the inside] has, according to our sources, cultivated an environment of deeply-ingrained clannishness that seems to go a step beyond the average tribal mentalities of hedge fund life. D.E. Shaw famously bills itself as a place for the poet-quant to find Alpha amongst fellow moralists and seekers of truth, yet the fund has also demonstrated an almost baroque fear of the press. If there was a Dealbreaker League Table for most inscrutable hedge funds, D.E. Shaw would come in first every time.

And there's a reason for that. Shaw's staffing vision lives on today. You're not going to find a room full of Wharton frat douches and MIT quant shut-ins. It's a potent sales routine, a promise of a well-rounded trading floor, a true investment differential. A 'liberal arts value prop' if you will. But according to one former D.E. Shaw employee, "They hire really smart kids who don't know their own market value and teach them how to work at D.E. Shaw... It's a great deal for DESCO." It also creates an environment of true believers who don't really question the company line.

By almost every measure, it works. Success at D.E. Shaw relies very heavily on buying into the DESCO way of life. That opinion was dominant across the sources we spoke to, with one current employee adding, "The way things are at DESCO, the things you have to believe, make it really hard to hire from an outside fund." For those who succeed at D.E. Shaw, insiders say, the unique culture they grew up in makes it very difficult to leave.

Every single D.E. Shaw insider we spoke to used some version of the word "cult" to describe the ethos inside the fund, but almost all of them did it with a blithe nonchalance that belied the more negative connotations of the notion. If anything, D.E. Shaw appears to operate with a motto of "radical opaqueness," with an executive committee of four communicating with the rarely-seen and technically not-in-charge David Shaw. That committee runs the firm via a very top-down management structure. "Have you read about Scientology?" one former employee asked us, "It's not unlike Scientology."

But while many workers can come to see management as controlling culty or even evil, the majority of D.E. Shaw insiders we spoke to see the fund in much grayer tones. "There are a few bad people at DESCO, sure, but that's true anywhere. I think it's a mostly good place with a very intense culture and some serious blinders," said a current employee. "The Michalow thing has made [stuff] harder to ignore."

And the "Michalow thing" does appear to have been a true inflection point for D.E. Shaw. As we wrote at the time, Michalow was generally charged by his former employer with "gross violations of [D.E. Shaw's] standards and values." More specifically, Michalow had said out loud that he wanted an assistant he could refer to as "sugar tits" and was known to offer and solicit hugs from colleagues, some of whom were female. Michalow's firing seemed part and parcel of the #MeToo exegesis on Wall Street and beyond. But then there was the letter.

Understandably, we found our puerile interest piqued by Michalow's letter. Aside from the obvious, it broke down its allegations of life inside D.E. Shaw into a list of bullet points that varied in detail but contained phrases like "drunk," "inappropriate sexual imagery," "drug use," "strip club," and "received oral sex from another employee." All in all, it was a laundry list of misbehaviors that we at Dealbreaker have always referred to internally as "normal crazy hedge fund stuff."

Once we published the post about Michalow and his letter, a strange thing happened. A D.E. Shaw insider reached out to us to share information. The feelers were cautious, almost paranoid, and then there were more, and then more. Every single source we spoke to made a point to tell us that they were taught to never speak to the press. They all also uniformly told us that Michalow's description of D.E. Shaw culture was much closer to reality than the one that D.E. Shaw presents to the outside world.

"Dan's letter was amazing," said one former employee. "It looked crazy to a lot of people, but not to anyone who worked at DESCO." Another current employee told us that Michalow's firing has left a real schism within the fund, with some feeling that D.E. Shaw burned Michalow after he made it clear that he was not actually retiring. "It's insane that they thought Dan would stop working, he's like 35," said one current employee. "But how did Dan think it was going to go?" Many of our sources were very clear that D.E. Shaw is known to turn adversarial when former employees attempt to leave and start their own funds. Again, not the kind of behavior that shocks anyone with a working knowledge of financial cultural norms. But from what we've learned about Michalow, his case might be a little different.

Four people with knowledge of the macro group at D.E. Shaw portrayed Michalow as the de facto manager of the group. His boss, executive committee member Max Stone, relocated to Boston years ago and - unlike his company bio suggests - had surrendered much of the day-to-day management to Michalow. When asked if Michalow was maybe an ideal mid-level sacrifice to the #MeToo movement, one current D.E. Shaw employee responded, "Dan was not mid-level. He was the heir apparent to Max's EC [executive committee] spot. He knows everything."

The handling of Michalow's departure also rankled some inside the fund. Aside from the tangled nest of subjective emotions and cultural politics that pervade almost every case like this, numerous sources told us that Michalow's firing was minimized before the story hit the press. And the confusion was not just internal: Two sources told us that at least one investor was told that "Dan is going kite surfing" before Bloomberg published news of his firing in May. Other sources told us that the fund might have believed that to be true at the time.

In that context, it makes sense that Michalow, who declined comment for this story, would be the person to light the match on a cultural shift within the fund. After walking through Michalow's letter with a handful of D.E. Shaw insiders, it's hard to find an accusation the letter that isn't corroborated by at least three or four of the people we spoke to, and we have now heard a few more stories that are some pretty fun yarns. Michalow's firing and the resulting fallout have pulled back the curtain on a big hedge fund that employs some people who apparently evince the kind of human frailties seen at most financial institutions where people work excruciatingly long hours and make millions of dollars.

Nothing we learned about D.E. Shaw in our conversations with D.E. Shaw insiders was illegal, morally outrageous or even worthy of a lazy FINRA investigation. But the way these things were communicated to us, the paranoia about talking to the press, the cloak and dagger machinations to meet [the idea that DESCO might hack emails was brought up by thee separate sources], and the overall fear of D.E. Shaw's retribution made us wonder time and again why the stakes seemed so high for such barely scandalous information.

In the end, it seems like D.E. Shaw is spending twice the time and effort to contain the truth about its jejune cultural shortcomings than it needs to acknowledge and address them. We trust any quant to see the possible error in that.

He's the former DE Shaw managing director who openly yearned for a colleague to call "Sugar Tits" and then took his firing in stride by writing David Shaw a letter that basically alleged DE Shaw to be a non-stop, booze and drug-fueled nerd fuckfest that sometimes manages assets.

Yeah, that Daniel Michalow.

Well, there's an update. According to Business Insider, Michalow is not looking to just set let the bridges he has burned lead his way to a settlement package. He's looking to make a real stink here.

Daniel Michalow, a former senior portfolio manager in the firm's discretionary macro group, plans to take legal action against his former employer next month, a person familiar with the matter said. Michalow plans to file a statement of claim in arbitration next month with the Financial Industry Regulatory Authority. Michalow plans to claim that the New York hedge fund, in its response to Michalow's termination, defamed him in internal and external communications and to the media.

Oh, yeah, tattling to FINRA. Now we got a fight on our hands...

Michalow now alleges that D.E. Shaw should have stated publicly that he was not fired for misconduct, according to the person familiar with the matter. Michalow also alleges that D.E. Shaw should not have said that he violated the firm's values. He plans to make these claims in a FINRA action.
"From day 1, my primary goal has been for David Shaw and his team to tell the truth and they have not," Michalow alleges in a statement to Business Insider.

While we assume he means that DE Shaw wasn't clear about his behavior, we are also choosing to assume that he wants the firm to provide clarity about all the special people at DE Shaw banging the hell out of each other after snorting Molly in the morning meeting. And we definitely want details about any female Wharton MBAs bending a first-year male poet turned quant over a Bloomberg terminal and just going...to...town on him.

And maybe we'll hear about all of it, because apparently Daniel Michalow will not be paid to go away...

D.E Shaw offered Michalow more than $10 million in compensation after his separation under conditions that he not sue the firm, the person close to the matter said. D.E. Shaw continued to offer that figure after Michalow published his letter to David Shaw on May 7, the person added. Michalow has rejected the offer.

We're just gonna make some popcorn and get ready for this one to develop.

The hedge fund manager who says he's a #MeToo scapegoat plans to take legal action against $50 billion D.E. Shaw [BI]

According to a report from Business Insider, DE Shaw managing director Daniel Michalow was fired from the firm after an internal investigation prompted by complaints from several female subordinates about his behavior. As in keeping with the self-celebrated culture of creativity and collaboration that DE Shaw has always said defines the heart and soul of DE Shaw, it appears that Michalow's douchey office persona was - allegedly - hilariously specific:

The investigation was sparked after Michalow allegedly said to a former assistant that one of the requirements for hiring a new assistant was someone that he could "call sugar tits," people familiar with the matter told Business Insider.

While this is a very dumb thing to say out loud in an office during the last thirty-odd-years, we are sure that Michalow had a pretty good excuse for it...

Michalow maintains that the remarks that launched the initial investigation were a joke and that he was quoting actor Mel Gibson, according to a person close to Michalow.

Oof. "I was doing my Mel Gibson impression" is somewhere on the excuse scale between "I was obviously kidding, I'm famously an ass man" and "I can also call a chubby dude 'Sugar Tits.'" But Michalow doesn't even seem to want to argue that he is the kind of guy who impersonates notoriously bigoted celebs in the office. In fact, in a [now open] letter to DE Shaw founder David Shaw, Michalow admits to being something of an intolerable asshat, but also sees his sexual behavior as pretty vanilla and innocent compared to the drunken bonkfest that is DE Shaw HQ.

After proclaiming his innocence of all sexual harassment charges (Michalow also says that he was told by DE Shaw colleagues handling his investigation that he was innocent), Michalow moves on to alert Shaw to some of the filthy tomfoolery going on at his fund:

Consider, for example, the Firm’s “policy” on dating: [REDACTED]
As you may know, many employees, including senior management, have availed themselves of this “policy.” As everyone knows, an executive committee member had a relationship with his junior trader while they were both employed at the firm (and the fact that they ultimately stayed together doesn’t necessarily make it right). My predecessor in the Macro group was in a relationship with his female report for years. There are many, many stories of employees hooking up over the years after the company’s lavish, alcohol-filled parties. 

And in the off-chance that Shaw wanted details on this, Michalow has them...in spades:

A culture is set not just by its official policies but, even more importantly, by the actions and practices of its most senior members. I have mentioned some specific examples and offer just a few more here to illustrate my point:
● My first introduction to the wild side of the DE Shaw culture was early on. At the first bonus night after I joined the firm, following a party where everyone got completely drunk, I was invited by a group that included fairly senior executives to go to a strip club.
● The group I was in at the time had an extremely sloppy group dinner at Sammy’s Roumanian, organized by an MD, where everyone got so drunk that a handful of employees forgot articles of clothing at the restaurant.
● On my first bonus night after moving to the Macro group, a group that included an Executive Committee member and another Managing Director -- both male and female employees -- ended up at The Box. We drank and watched women dance topless on stage and perform the debaucherous acts that the place is famous for.
● An MD repeatedly sent text messages with inappropriate sexual images during different meetings.
● On another trip to a strip club (where I was not present), it was reported that one employee received oral sex from another employee.
● The company continues to host themed happy hours with free-flowing alcohol even after similar kinds of events led to at least one incident of inappropriate sexual behavior for which an employee was rightly terminated.
● Senior executives have spoken openly about drug use.
● An MD sent many many emails that had sexualized versions of words such as “possibilititty.”

Of course there's a possibilititty that Michalow is trying to set fire to the people who wronged him and leave chaos in his wake, but we prefer to just sit back and admire the allegation that DE Shaw is an endless booze-fueled orgy that invests in its spare time.

We look forward to learning more about all of this.

D.E. Shaw fired a high-profile hedge-fund manager after an investigation into alleged inappropriate behavior, and now he's fighting back [BI]

As a reminder, Jim Simons has been retired for several years now and only lifts a finger to pick up his Pall Malls.

The 2016 Rich List Of The World's Top-Earning Hedge Fund Managers [Alpha]