shaw capital management: Hedge Fund Born in Senator's Basement After Son Has D.E. Shaw Internship

U.S. Senator Ron Wyden has a new hedge fund in his basement. That doesn’t mean he’s getting in on the ground floor.
His son, Adam, started a fund under the name ADW Capital Partners LP that he runs from the Wyden family’s residence in Washington, according to a private placement notice filed last month with the U.S. Securities and Exchange Commission. The fund is modeled after the investment partnership billionaire Warren Buffett ran in the 1950s and 1960s before acquiring Berkshire Hathaway Inc., Adam Wyden said in an interview.
The younger Wyden, whose father hasn’t invested in the fund, is among the first generation of post-crash money managers, many of whom must keep a lid on expenses in the face of a difficult money-raising environment. Before graduating last year from Columbia University’s business school in New York with a master’s degree, Adam Wyden worked as an intern at the $19 billion hedge fund founded by David Shaw, a Democratic fundraiser who backed Ron Wyden’s campaigns in 2004 and 2010.
“Right now it’s just me,” Adam Wyden, 26, said when reached at the Wydens’ house in the Palisades neighborhood of Washington, from where he’s been running his $3 million fund since September. “I am the CEO, I am the secretary, and I am the chief marketing officer.”
Ron Wyden, a Democrat from Oregon who serves on the tax- writing finance committee, moved to Washington after winning a seat in the House of Representatives in 1980. Wyden, elected to the Senate in 1996, said that while he hasn’t invested in the new fund, he supports his son’s career choice.

‘Conservative’ Investing

“I just want my kid to be happy,” the 61-year-old Senator said in a telephone interview. “If this is the career he wants, I am all for it.”
ADW seeks to produce high risk-adjusted returns through “conservative equity investing” in small, under-followed businesses in the U.S., Canada and Western Europe, according to an investor presentation. The fund, modeled after the philosophy and structure of Buffett Partnership Ltd., will charge the standard management fee of 2 percent a year along with 20 percent of profits, according to the presentation.
The number of hedge-fund start-ups shrank to 715 during the first nine months of 2010 from a peak of 2,073 in all of 2005, according to Chicago-based Hedge Fund Research Inc. The industry lost $131.2 billion to net redemptions in 2009 in the wake of the global financial crisis, then took in $55.5 billion of new capital last year, still below the high of $194.5 billion added in 2007, HFR said.

Best Trade

Wyden’s best personal trade last year was an investment in IDT Corp. starting in February, when the Newark, New Jersey, telecommunications company traded at an average of $4.84 a share, he said. IDT now is at $23.90.
Adam Wyden, a self-described “serial entrepreneur” with office space in the basement and second floor of the family home, began trading stocks for his own account while attending the University of Pennsylvania’s Wharton School as an undergraduate from 2002 to 2006, where he earned degrees in economics and management. In 2005, he landed a paid summer internship at D.E. Shaw & Co., working as an analyst on what he described as a $700 million long-short fund that bet on and against media, technology and telecommunications stocks.
“Not many college kids get to intern on a D.E. Shaw portfolio for the summer,” Brian Marshall, who ran the D.E. Shaw fund and now works as a senior analyst in the San Francisco office of investment bank Gleacher & Co., said in an interview.

‘Rigorous Vetting’

Kari Elassal, a spokeswoman for New York-based D.E. Shaw, confirmed in an e-mail that Adam Wyden worked there as a stock analyst during his internship. While Wyden was the only intern that summer in D.E. Shaw’s long-short technology group, the firm had a number of paid interns in other departments that year, Elassal said. It has hired about 160 interns to date, she said.
“Adam went through the same rigorous vetting and interview process as all other D.E. Shaw group interns,” Elassal said.
David Shaw, who is no longer active in day-to-day operations, lent $100,000 to the Presidential Inauguration Committee for Bill Clinton in 1993, the Center for Public Integrity reported in 2000. He and other D.E. Shaw employees ranked third among hedge-fund donors last year with $569,049 in campaign contributions, 97 percent going to Democrats, according to OpenSecrets.org and the Center for Responsive Politics.
Ron Wyden received contributions totaling $9,600 from Shaw and his wife, Beth, during 2009, with each giving the maximum $4,800 that individuals are allowed to donate for any election cycle, OpenSecrets.org said. Shaw gave $5,000 last year to Holding Onto Oregon’s Priorities, a political action committee set up by Wyden to help other Democratic candidates, and $33,500 to the party’s senatorial and congressional campaign committees.
Shaw, 59, didn’t respond to a telephone request for comment. He now works as chief scientist at D.E. Shaw Research laboratory in New York, in the field of computational biochemistry.
To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net