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Hedge fund DE Shaw is prolonging the amount of time it will take for investors to pull out their money as the industry moves towards greater control over redemptions.
The more-than $90bn multi-strategy hedge fund told investors this week that it was extending the redemption period to retrieve money from its flagship multi-strategy Composite fund to four years and its macro-focused Oculus fund to three years, according to people familiar with the matter.
DE Shaw is following in the steps of rivals including Millennium Management and Citadel, which are both well known for having some of the longest lock-up periods in the industry. Top hedge funds have been able to make such demands in part because they have had relatively high annualised returns, giving them leverage to ask investors for more stringent terms.
Composite and Oculus have both had remarkably profitable starts to the year. The multi-strategy fund is up 10.4 per cent through to the end of May, while the macro-focused fund is up 20.6 per cent respectively, the people added.
DE Shaw declined to comment. Bloomberg previously reported the changes.
Hedge funds have argued that extended lock-up periods give them greater stability, especially during times of intense market volatility or financial crashes. They eliminate the risk of an exodus of investors over the course of weeks or months, as took place during the 2008 financial crisis, when hundreds of hedge funds went bankrupt as investors ran for the exits.
The hedge fund also told staff on Wednesday that the firm planned to launch a new fund by the end of the year specifically for employees called “Phasor”, according to people familiar with the matter. As the war for talent continues to rage on Wall Street, funds tailored for employees have become a popular way to retain staff.
Computer-driven hedge fund Renaissance Technologies has long been famous for its Medallion fund, which is primarily made up of employees’ money and is often called the greatest moneymaking machine in history.
DE Shaw’s new fund would focus on systematic equities and futures, it told employees in an email on Monday. Investors in the new employee-focused fund would be required to pay a 4.5 per cent management fee and 45 per cent performance fee for access, the email said.
This story has been amended to reflect that DE Shaw’s new fund is employee-focused and not open to external investors