The world of hedge funds is one of the most competitive in the financial industry. It is not uncommon for hedge funds to make employees sign strict non-compete contracts. Now, one quant fund is giving the ultimate ultimatum to their current employees, “sign our new non-compete agreement or leave.”
The hedge fund in question is the $50 billion-dollar quant fund DE Shaw. The company recently sent out a memo to its current employees. In the memo, the employees were given up until the middle of September 2019 to sign a new non-compete contract. If an employee fails to sign the new non-compete contract, the employee will be terminated. However, the employee would be able to keep their deferred compensation which they would normally forfeit.
According to the senior managers at DE Shaw, this new non-compete is designed to bring the hedge fund in line with other hedge fund industry practices. As a $50 billion-dollar algorithmic hedge fund, DE Shaw has a huge incentive to ensure that their employees don’t run to the competition with any corporate secrets.
So why is the Mid-September date so important? That is because recently departed DE Shaw executive Daniel Michalow’s non-compete happens to run out in Mid-September. This would give the former fund manager the green light to raid current DE Shaw employees.
Now DE Shaw insists that the date of the non-compete ultimatum is coincidental to the expiration of Mr. Michalow’s non-compete. However, it is hard to believe that these two dates just happen to coincide. It is expected that most current DE Shaw employees will remain with the hedge fund. However, this type of non-compete only underlines how critical it is for hedge funds to hold on to their current talent.