Institutional Investor's Alpha Magazine - March 2009 - (Page 3) Letter from the editor Brain Drain EDITOR Michael Carroll EDITOR Michael Carroll EXECUTIVE EDITOR Michael Peltz MANAGING EDITOR David Schutt INTERNATIONAL EDITOR Tom Buerkle ART DIRECTOR Nathan Sinclair EDITOR-AT-LARGE Firth Calhoun ASSISTANT MANAGING EDITORS Tom Johnson ART DIRECTOR Irene Ledwith (Research), William Loob (Editorial Production), ASSISTANT MANAGING EDITORS Lewis Knox Steve Rosenbush (Wall Street, Corporate Finance), Tracy Tjaden (International) (Research), Jeffrey Kutler (Global Technology and BUREAU CHIEFS Loch Adamson (London), Banking), Deborah F. McClellan (Editorial Allen T. Cheng (Asia) Production), Barbara Rudolph (Money ManageSENIOR EDITORS Steven Brull (Los Angeles), ment) Karl Cates, Jane B. Kenney (Editorial Research), EUROPEAN EDITOR Tom Buerkle (London) Jo Wrighton (Paris) SENIOR WRITERS Frances Denmark, Michael Shari BUREAU CHIEF Kevin Hamlin (Hong Kong) STAFF WRITERS David Lanchner (Paris), SENIOR EDITORS Steven Brull (Los Angeles), Andrew Capon (London), Jane B. Kenney SENIOR ASSOCIATE EDITOR Tucker Ewing (Editorial Research) ASSOCIATE EDITORS Sivert Hagen, SENIOR WRITERS Deepak Gopinath, Justin Lu Julia Leikin (Research Specialist), WeiQing (Research Specialist), Carolynn B. Tetro Schack COPY CHIEF David Wray STAFF WRITERS Rich Blake, Imogen Rose-Smith, Julie Segal David Lanchner SENIOR CONTRIBUTING EDITORS Fran Hawthorne, (Paris) SENIOR ASSOCIATE EDITOR Tucker Ewing CONTRIBUTING WRITERS Pam Abramowitz, ASSOCIATE EDITORS Emily Fleckner, Sivert Danielle Beurteaux, Phil Davis, Katie Gilbert, Harvey D. Shapiro, Stephen Taub Udayan Hagen Gupta, Scott Martin, Neil O’Hara, Nick Rockel, Robert Rosenberg, Jaye Scholl, COPY CHIEF David Wray Henry Scott Stokes SENIOR CONTRIBUTING EDITORS Fran Hawthorne, COPY DEPARTMENT Deputy Copy Chief: Hal Lux, Harvey D. Bill Christophersen; Shapiro, Charles Smith Copy Editors: IngridTaub, Joan Warner (Tokyo), Stephen Accardi, Ruth Hamel ASSISTANT TO THE EDITOR Elizabeth Simroe CONTRIBUTING EDITORS Colin Barraclough, ART DEPARTMENT Deputy Art Director: Diana Panfil; Lucy Conger (Mexico City), Jonathan Kandell, Associate Art Director: Anthony Scerri; Lois Designer: Jennifer Kazuhiko Shimizu SeniorMadison Reamy,Klock; (Beijing), Leah Nathans Spiro Photo Editor: Katie Constans; Acting Associate Photo Editor: Frannie Ruch; COPY DEPARTMENT Deputy Copy Chief: Jeff CranColor Imaging Manager: John Miliczenko mer CHAIRMAN & CEO Gary Mueller ASSISTANT TO THE EDITOR Elizabeth Simroe GROUP PUBLISHER Christine Cavolina ART DEPARTMENT Deputy Art Director: Patrizia Bove; PUBLISHER Joy DeSanto PUBLISHER, INTERNATIONAL SpencerPhoto Editor: Associate Art Director: Stephanie Lora; Wicks PUBLISHER, ASIA Wendy Gallagher Anastasia Pleasant; Color Imaging Manager: PUBLISHER, ONLINE Michael Feinberg John Miliczenko OF MARKETING EXECUTIVE DIRECTOR Louis Cassetta PRESIDENT & CEO Christopher R. Brown PRODUCTION DIRECTOR Brian Gill DIRECTOR OF FULFILLMENT Robert Tonchuk PUBLISHER Christine Cavolina CHIEF OPERATING OFFICER David E. Antin PUBLISHER, INTERNATIONAL Lisa Traeger WHEN BARACK OBAMA signed the American Recovery and Reinvestment Act into law on February 17 at the Denver Museum of Nature & Science, I was left wondering whether the “unity of purpose” that the 44th U.S. president had spoken about so eloquently at his inauguration just four weeks earlier could ever be achieved. The $787 billion fiscal stimulus plan, which Obama and his economic team had made the top priority of the new administration, passed Congress with virtually no bipartisan support (only three Republican senators and nary a House Republican voted for the bill). The Republicans, for their part, have been fairly unified in their criticism of the stimulus bill, attacking it for being heavy on spending and light on job creation. Democrats have displayed significantly less singularity of purpose. Despite strong opposition from the Obama administration, Connecticut Senator Christopher Dodd added an 11th-hour provision to the bill restricting pay at financial institutions that receive money in the bailout. The rule, which limits bonuses to no more than one third of total annual compensation for the 25 highest-paid executives at firms that accept more than $500 million in government assistance, is much more far-reaching than the $500,000 salary cap previously proposed by the administration (that would have applied only to the very top executives at fi rms that receive “exceptional assistance” from the government). David Axelrod, a senior Obama adviser, warned that the pay limits attached to the stimulus bill could put U.S. fi nancial institutions at a competitive disadvantage and lead to a “brain drain,” an argument typically heard from banks. What’s unclear, of course, is where all the brains are going to drain to. Most banks are firing, not hiring, as they scale back operations in the face of what almost everyone agrees is the worst fi nancial crisis since the Great Depression. Hedge funds are also hunkering down, especially those that suffered sizable double-digit losses in 2008, and are unlikely to start increasing head count before next year at the earliest. Then there is D.E. Shaw & Co., the subject of this month’s cover story, “The Power of Six” (page 32). The $30 billion hedge fund giant, founded two decades ago by onetime computer science professor David Shaw, added nearly 400 employees last year, as it expands well beyond its geeky roots into more qualitative investment strategies. D.E. Shaw also seems to have found a successful formula for coping with troubled times — a six-member executive committee that epitomizes the “unity of purpose” that is eluding our government. Institutional Investor’s AlphaTM and AlphaTM, 225 Park Avenue South, New York, NY 10003; (212) 224-3300; Fax: (212) PRODUCTION DIRECTOR Brian Gill 224-3171. © 2009 Institutional Investor, Inc. No statement in this magazine MANAGING DIRECTOR OF RESEARCH PRODUCTS is to be construed as a recommendation to buy or sell securities. Denise Murrell Neither this publication nor any part of it may be reproduced or transmitted in any form or by any means, electronic or mechaniDIRECTOR OF FINANCE AND OPERATIONS cal, including photocopying, recording or by any information David E. Antin storage and retrieval system, without the prior written permission of Institutional Investor’s Alpha magazine. For reprints contact Dewey Palmieri (212) 224-3675; Fax: (212) 225 Park e-mail: Institutional Investor’s Alpha TM and Alpha,TM224-3563; Avenue dpalmieri@institutionalinvestor.com. Subscription hotline: South, New York, NY 10003; (212) 224-3300; Fax: (212) 224(800) 437-9997; Overseas: (44 -20) 7779 8999 3171. MICHAEL PELTZ EXECUTIVE EDITOR mpeltz@iimagazine.com MARCH 2009 • INSTITUTIONAL INVESTOR’S ALPHA • 3
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