D. E. Shaw & Co. - History

History

The firm was founded by David E. Shaw, a former Columbia University faculty member and has more than 1,300 employees. David Shaw directed the company from 1988 to 2001 but by 2010, the firm's management structure had evolved into a six member executive committee.

In 1997, the firm returned capital to most of its early investors in favor of a structured credit facility of nearly $2 billion from Bank of America, with terms that allowed D.E. Shaw & Co. to keep a higher fraction of profits than hedge fund investors normally allow. After the Russian debt default in 1998, the company suffered losses in its fixed-income trading as did many hedge funds.

In December 2003, a subsidiary of one of the company's funds acquired the toy store FAO Schwarz, which reopened for business in New York and Las Vegas in the fall of 2004. In the same year, D. E. Shaw affiliate, Laminar Portfolios, acquired the online assets of KB Toys, which continued operating as eToys.com. In August 2004, D. E. Shaw & Co., along with MIC Capital, proposed to inject $50M into the bankrupt WCI Steel. In December 2004, D.E. Shaw & Co. bought 6.6% of USG Corp, a wallboard manufacturer seeking bankruptcy protection as a result of rising asbestos liabilities.

In 2006, Lawrence Summers became managing director at D.E. Shaw & Co. and left in 2008, receiving $5.2 million in compensation for that period. In late 2009 during the Financial Crisis it was reported that D.E. Shaw & Co. had set up a Portfolio Acquisitions Unit, the aim of which was to acquire illiquid assets from rival hedge funds.

At the time of its bankruptcy in September 2008 Lehman Brothers Holdings Inc., had holdings in D.E. Shaw & Co.