3.1

Investment Approach

Within the D. E. Shaw group, we run on collaboration, not internal competition. Teams work together to share trade ideas, identify and address risks, build tools, and explore new opportunities. Our staff includes world-class mathematicians, physicists, computer scientists, economists, analysts, business-builders, and system architects relying on specialized trading, operational, and compliance expertise developed over 30 years.

3.1.1

Assets Under Management

As of September 1, 2021, the D. E. Shaw group had more than $60 billion in investment and committed capital. Our investment activities fall into two broad categories:

$40bn+

Return

Our alternative investment capabilities date back to 1989 and consist of both larger, multi-strategy investment vehicles and more focused, strategy-specific investment products. These strategies focus on the delivery of absolute returns, with low targeted correlation to traditional assets like equities. Together, they account for more than $40 billion of the firm’s investment and committed capital.

$20bn+

Return

Long-oriented strategies focusing on major, tradeable asset classes represent more than $20 billion of the firm’s investment capital. Launched in 2000, a suite of strategies allows institutional investors to customize their exposures to particular equity indices. A discretionary strategy launched in 2013 aims to offer exposure to several global asset classes, alongside other select alpha opportunities.

3.1.2

Strategies

Our systematic strategies run on quantitative and computational techniques developed by the firm over 30 years of research and trading. We believe a strong culture of rigorous analysis and scientific research, supported by a robust infrastructure, is the bedrock of a successful quantitative investment process. We aim to identify statistically robust market inefficiencies through hypothesis formulation, testing, and validation based on practical knowledge of markets and advanced computational methods.

Mathematical formulas and equations written on a blackboard.

We also devote a large share of our attention to discretionary investment activities based on the identification of potentially profitable opportunities by experienced staff. These strategies rely primarily on human analysis to discover, and capture, pricing inefficiencies across a broad array of asset classes spanning public and private markets. Our discretionary investment groups benefit from a highly rigorous and process-driven investment approach that is generally focused on attempting to isolate idiosyncratic profit opportunities while maintaining a low correlation to broader markets and macroeconomic variables. We believe our collaborative investment approach allows us to optimally deploy the deep domain expertise of our investment teams, adapting and reacting to ever-evolving market conditions.

Several of the strategies deployed by the firm seek to identify investment opportunities through a hybrid approach that combines aspects of our systematic and discretionary strategies. For example, an initial quantitative idea or “forecast” may be unaware of an unusual market event that is known to our analysts, or a fundamental view might be best vetted through the use of quantitative tools.

We apply the same analytically rigorous approach to investing across a number of systematic, discretionary, and hybrid strategies.

Systematic

  • A suite of benchmark-relative long-only and extended equity strategies that seek to generate attractive long-term excess returns through a systematic, risk-aware approach to stock selection.

  • Encompasses the firm’s longest-running strategy, which applies proprietary quantitative models based on perceived technical, event-related, or fundamental inefficiencies in the global equity markets.

  • Engages in trading of systematic forecasts generally based on technical inputs or on macroeconomic data; instruments traded relate to equity indices, government bonds and interest rates, currencies, and commodities.

Hybrid

  • Concentrates on relative-value trades involving, among other things, convertible and derivative securities.

  • Involves a rigorous discretionary investment process that leverages the firm’s considerable alternative investment resources to pursue long-biased investments across a range of global asset classes.

Discretionary

  • Invests in a broad range of asset-backed products—including mortgage-backed securities and consumer assets—in both cash and synthetic markets.

  • Conducts fundamental financial, operational, and legal analysis in connection with secondary market trading, credit extension, and control investments in distressed securities in the global credit markets.

  • Focuses on identifying discretionary investment opportunities and predicting changes in the prices of asset classes in markets around the world.

  • Pursues inefficiencies in the global markets for electricity, natural gas, crude oil and refined products, and other energy-related commodities.

  • Includes traditional, activist, and event-driven investments covering a broad range of industry sectors across global markets.

  • Involves equity and debt investments at various stages of the corporate life cycle and across the capital structure, including less-liquid opportunities in credit and related markets in the U.S. and Europe.

  • Concentrates on various forms of property catastrophe risk arising from natural disasters and other types of peril.

  • Develops, constructs, owns, and operates high-quality renewable energy projects in the U.S.; developed the nation’s first offshore wind farm.