Continuing to defend Larry Summers

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As promised, I asked Larry Summers what he does for D.E. Shaw. Being the hedge fund guy that he is now, he wouldn’t tell me anything on the record. But I can quote from the D.E. Shaw press release announcing his arrival:

Dr. Summers will be involved on a part-time basis in various strategic initiatives and high-level portfolio management activities and, along with the firm’s other managing directors, in reviewing the overall operations of the D.E. Shaw group.

Also in the release (which I’d link to except it’s a pdf; you can find it here), is this fawning praise from Julius Gaudio, a D.E. Shaw managing director:

Larry has both a world-class mind and a finely honed sense of what’s feasible in practice. His involvement will meaningfully enhance our ability to identify and critically evaluate new investment opportunities throughout the world’s capital markets.

Okay, so he’s not in sales. And as the third-largest hedge fund company on the planet already, according to Alpha magazine, D.E. Shaw probably doesn’t need to sign up any new clients. (Here‘s a great, if 11 year old, story on the firm, which is best known to people outside the hedge fund business as the place Jeff Bezos came from.)

Summers, by the way, did some important academic work in the 1980s and early 1990s showing how the prices of stocks and other securities can stray far enough from their correct values to allow smart speculators to make money. One of his partners in this research, Andrei Shleifer, co-founded what is now a giant money manager, LSV Asset Management. Another of them was blogger Brad DeLong, who will surely be announcing the launch of his hedge fund any day now.

To conclude: I still suspect that the hedge fund industry as a whole has jumped the shark. But Larry Summers is not Fonzie.

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