Quant pioneer D.E. Shaw & Co. raised more than $450 million for its first dedicated private equity fund, just shy of the $500 million target it set a year ago.
The Voltaic fund is debuting after a drop in private-company valuations, and portfolio manager Edwin Jager said he expects to capitalize on further declines this year as startups grow more desperate for cash.
While the fund will back businesses in a variety of industries, those that D.E. Shaw sees as particularly compelling are “largely in the enterprise space, software security, AI and consumer internet,” Jager said in an interview.
Startups, grappling with higher borrowing costs after a sharp run-up in interest rates, are slashing jobs and reining in other costs as they seek to extend their remaining cash. That’s depressing valuations and complicating efforts to raise additional funds.
D.E. Shaw is seeing valuations in series B and C funding rounds tumble by roughly 50% from their peak, so “we’re looking predominantly in that space right now, where there are prices coming back down to reality,” Jager said. Still, the fund has a wide mandate to invest across early and growth-stage companies.
Voltaic is expected to deploy the committed capital over the next two years and may consider structured equity deals. That’s when companies offer perks in their fundraising terms, such as discounted shares in a public offering.
D.E. Shaw, with more than $60 billion of assets under management, also raised more than $650 million in commitments for its private credit fund, Diopter, which focuses on bank-securitization products. The fund deployed most of that cash in the fourth quarter.
The firm’s funds and insiders contributed more than $150 million combined to Diopter and Voltaic, which are now closed to new cash.
While D.E. Shaw is mostly known for quant trading, it has been making private equity investments through its main hedge funds since the 1990s. Since 2012, it has raised $3.5 billion to invest in private credit.
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