D.E. Shaw & Co. is raising money for a new hedge fund, where for the first time the firm will ditch the algorithms and let human traders call all of the shots.
The New York-based firm will take in between $3 billion and $5 billion in the D.E. Shaw Cogence Fund over the coming months, people with knowledge of the matter said. Most of the initial capital is coming from existing investors and the fund is oversubscribed, the firm has told clients. Cogence starts trading on October 1, the people said, asking not to be identified because the information is private.
A representative for D.E. Shaw, which manages more than $70 billion, declined to comment.
D.E. Shaw moved beyond its roots in pure quant trading more than two decades ago and over half of its hedge fund capital is run in discretionary strategies where traders can make judgment calls.
Still, the multistrategy Cogence fund is the first to use only this approach. Traders will rely on their fundamental analysis to evaluate risk, pricing and timing in markets, betting across stocks and credit trading opportunities globally.
It’s one of just a few big funds raising money right now, while a growing number are closed to new cash and some, including D.E. Shaw, are even returning part of their capital to investors to control their size. This has caused capacity problems for investors who are looking for new homes to park their assets.
Both D.E. Shaw’s flagship multistrategy Composite hedge fund and Oculus, the firm’s second-biggest fund that mostly makes macro wagers, have generally remained closed over the past decade.
These two funds, and the new one, do not charge pass-through fees, which have become a popular way for multistrategy money pools to charge clients for anything from compensation and research to entertainment.
Both Composite and Oculus funds were up just over 10% through August this year, one of the people added. Multistrategy hedge funds tracked by PivotalPath were up 6% on average during the period.
Founded by David E. Shaw in 1988, the firm was one of the earliest to focus on using complex algorithms to trade, later incorporating some human-run investing, private equity and long-oriented wagers. Shaw stepped back from day-to-day management of his eponymous company in the early 2000s, leaving it in the hands of an executive committee.
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