ETF News

Hedge fund D.E. Shaw makes staff cuts -source

* Firm said to cut 10 pct of workforce

* UK and Dubai units post 9 mln stg loss in 2009

* Fund down 2.6 pct so far this year

* Investor unrest over access to cash

By Laurence Fletcher and Emily Chasan

LONDON/NEW YORK, Sept 29 (Reuters) - D.E. Shaw & Co, the world’s third-biggest hedge fund firm, has cut 150 staff, according to a person familiar with the matter, as it battles losses and investors’ unrest over access to their cash.

The U.S.-based firm, which manages around $21 billion in assets, laid off about 10 percent of its workforce on Tuesday, ranging from partners to portfolio managers as it aims to run a leaner operation after conducting a strategic review.

In response to questions about job cuts, a spokesman for D.E. Shaw said: “The D.E. Shaw group has taken steps to strengthen our business and maximize value for our investors over the long term.” He did not elaborate.

The layoffs were first reported in Institutional Investor on Tuesday.

Many hedge fund firms have had to adapt to lower revenues since the credit crisis after suffering big losses in 2008 and seeing clients exit.

D.E. Shaw was founded by computer science professor David Shaw in 1988. It is still one of the world’s largest hedge funds, but its assets have dropped from $39 billion in mid-2008 to $29 billion under management in mid-2009. Its assets at present are about $21 billion, and the firm had yet to make major changes to its staffing levels.

D.E. Shaw’s UK and Dubai units made a pretax loss of 9 million pounds ($14.23 million) last year, according to a regulatory filing this month, compared with a loss of just over 430,000 pounds for the UK unit in 2008, after earning lower fees on the assets it runs.

Meanwhile, its Composite International fund has fallen 2.6 percent so far this year, according to one investor who asked not to be named, while the average hedge fund is up 2.46 percent, according to Dow Jones Credit Suisse.

The firm, which uses computer models to trade markets, may also be feeling investors’ wrath after limiting investors’ access to their cash during the crisis, added the investor, who said they had been trying to withdraw money for some time.

“My feeling is that they haven’t been rushing to return money to investors,” the investor said. “We haven’t seen an investor-friendly process.”

A number of hedge fund firms are being punished by investors for limiting access to their cash, especially if those limits were seen as avoidable.

“Gating certainly would have been a big issue for investors, especially in strategies where it’s not seen as highly necessary,” said one fund of funds manager who declined to be named.

$1 = 0.6326 pound (Reporting by Laurence Fletcher and Emily Chasan, editing by Matthew Lewis)