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Sale of Lehman's Stake in D.E. Shaw Proves That Valley People Will Buy Anything

Sometimes, only Valley money can kill the White Walker that is Lehman Brothers.

D.E. Shaw is a hedge fund with $36 billion under management and a strategy famed for its bold mixing of quant trading with the hiring of poetry majors from liberal arts colleges... or something. But despite all of its modern bona fides, up until yesterday, 20% of D.E. Shaw was held in the icy death grip of what used to be Lehman Brothers.

For more than a year, Goldman Sachs bankers working for the Lehman estate had struggled to drum up interest in the stake, which the bank bought a year before it collapsed. At the time, the biggest hurdle for prospective buyers was not the price — which was said to be between $550 million and $800 million — but the terms of the stake itself, according to people who were briefed on the matter last year.
Blackstone Group, Dyal Capital and Affiliated Managers Group were among the investment firms that considered buying the stake.
But ultimately the others firms declined, some because of the terms of the agreement that were negotiated in early 2007. Lehman paid about $800 million and a contingency based on future performance for the stake. As part of the deal, Lehman paid a large upfront sum and then additional payments in 2009 and 2012.

Who didn't want to buy part of D.E. Shaw?

They hired Larry Summers once for f-ck's sake, and he's famous.

Maybe the ship of Wall Street insiders had sailed. Maybe it was time to look outside the box and find a buyer with cash to burn and no fear of Lehman's ghost. But where do you find that kind of mythical creature?

The family office for the Google chairman Eric E. Schmidt has purchased a large stake in the $36 billion hedge fund, D. E. Shaw.

Of course! Silicon Valley billionaires are the answers to almost every money crisis these days, so D.E. Shaw found a whale. Eric Schmidt has that Google money fo' real and has been a Shaw fan for years now.

Mr. Schmidt has been a longtime investor in D. E. Shaw, he said in a statement.

So, this is like Jay-Z buying a piece of the Brooklyn Nets, but way less cool.

But in Schmidt's crowd, buying a piece of a hedge fund is the new hotness. These days, only common millionaires park their money in high-profile hedge funds. Billionaires buy the hedge funds.

Passive stakes in hedge funds have become increasingly popular among investors like family offices and pension funds. Last month, the private equity unit of Neuberger Berman Group bought a 20 percent stake in the activist hedge fund Jana Partners. 

Family Office of Google’s Eric Schmidt Buys Stake in Hedge Fund D.E. Shaw [NY Times]


D.E. Shaw Geniuses Build Their Greatest Model Yet

Do you worship at the Temple of Chipotle? Do you refuse to make use of the online order option that allows you to bypass the line, as one half of Team Dealbreaker does, but unlike said burrito lover, prefer not to show up before 12 so as to beat the rush? Would you die before patronizing some inferior establishment for lunch but would also like to know what kind of wait you're going to be dealing with before making the trip, or, alternatively, not really care how long you have to wait but just get off on predicting stuff to a 3-sigma confidence level? Some enterprising D.E. Shaw employees have got covered. FYI- D.E. Shaw employees have built a model that predicts the length of the line at the Chipotle down the street from the 1166 Ave of the Americas office. Not only that, they are really excited about how accurate it is. Obviously this needs to be shared and disseminated ASAP, for the greater good, unless it's being kept proprietary at this time for reasons that involve a little something called the DE Shaw Chipotle Line Length Fund I and investors who would pay 2 and 20, nay, 3 and 50 to get in on this little money-making machine. Related: Tools Of The Trade: How To Prove To DE Shaw You’re DE Shaw Material


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