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DE Shaw issued an ultimatum to its investment staff, asking them to sign a non-compete agreement that will prevent them from quickly moving to a competing hedge fund or being fired.
The request comes as the New York-based firm is in the middle of a legal dispute with one of its former senior partners, Daniel Michalow, who would be free to hire DE Shaw employees and could start planning the creation. from his own firm at the same time. at the same time that the new contracts would enter into force.
DE Shaw employees have until mid-September to accept the new terms of non-competition, according to three people familiar with the company's plans. If they decide not to sign the agreements, they will be fired, but will be allowed to retain the deferred compensation that they would normally have lost.
The company's leaders, which with more than $ 50 billion under management, is one of the largest hedge funds using computer algorithms, told staff in April that they had chosen to impose non-profit agreements. competition to align DE Shaw on the practice of the hedge fund industry.
Conditions vary from three to twelve months in the United States and up to nine months in Hong Kong and London, according to one of the people, during which a person leaving the company will no longer be able to work for a competitor.
Agreements are only required by DE Shaw's investment staff. The company employs 1,300 people worldwide. Some staff members, such as those with access to algorithms, trading infrastructure or other confidential information, or senior management, may be asked to sign non-competitors at the top of this page. beach.
The date of entry into force of the agreements, September 16, coincides with the moment when Mr. Michalow, left in March of last year under the fallout of a badist remark, is free of charge. Engage DE Shaw employees or partner with them to create their own hedge fund. The last day of Mr. Michalow's employment being March 15, 2018, the 18-month "interference restriction" clause in his employment agreement expires on the night of September 15.
Sources at DE Shaw said that although the company's management did not mention Mr. Michalow's name in the new agreements, the fact that the coinciding dates did not go unnoticed.
Mr. Michalow left after the executive committee of the hedge fund decided to put him on leave after hearing that he had pointed out to a colleague that he wanted to hire an badistant whom he could call. "Sweet tits". The fund then stated that a review of Mr. Michalow's conduct revealed "a flagrant violation of our standards and values".
He is now suing the firm for defamation, claiming hundreds of millions of dollars in damages and apologizing publicly for leaving.
In an open letter that he wrote to company founder, David Shaw, last year, Mr. Michalow stated that DE Shaw was creating a "false story". He only acknowledged that he could have deserved to be fired for his "abrasive pattern".
When he left the company, Mr. Michalow, 36, was earning $ 40 million a year in co-managing the $ 6 billion macro discretionary strategy, one of the most important non-quantitative books of the company. He was promoted to partner in 2011 at the age of 29, served on the company's Risk Committee from 2014 to 2016 and represented the company in Davos last year, shortly before his departure.
"Clearly, DE Shaw remains worried about competition with Mr. Michalow," said Tom Clare, one of his lawyers. "A year ago, when he left voluntarily, the firm attempted to obtain a non-competition from Mr. Michalow. Then they defamed her in the press. Now, seemingly unwilling to take the risk, DE Shaw is trying to prevent Mr. Michalow's former colleagues from working with him. "
A DE Shaw spokesman denied the existence of any link between the effective dates of non-competitors and the expiration of Mr. Michalow's restrictions on # 39; interference. He declined to comment on the dispute or departure of Mr. Michalow.
John Singer, another lawyer for Michalow, said the public statement of the hedge fund was a way to prevent competitors from wanting to hire him. "The firm naively armed the #MeToo movement to defame it in the press," Singer said.
"There really is a sense of annoyance," said a DE Shaw employee about the imposition of non-compete agreements. "We do not agree with that. This obviously lowers the compensation over time. "
The person said that it was still too early to say how many people could leave the company with the new terms of employment. Those who choose to leave may wait until September to be fired in order to retain their deferred compensation.
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