SAN FRANCISCO (Dow Jones) - Leading hedge funds, including D.E. Shaw & Co., Eton Park Capital Management and Och-Ziff Capital Management, may be dented by PXRE Group's descent into crisis. The three hedge funds were the top investors in the reinsurer at the end of 2005, owning more than 22% of the company's shares, according Thomson Financial data. Eton Park's stake remained at almost 5.5 million shares, according to a Feb. 14 Securities and Exchange Commission filing. SEC filings this month by D.E. Shaw and Och-Ziff also show their stakes remained at 5.8 million shares and 4.5 million shares respectively.
PXRE (PXT) shares lost about two-thirds of their value on Friday after the reinsurer almost doubled its loss estimate from last year's record hurricane season and lost key financial-strength and credit ratings from A.M. Best, an influential industry rating agency. The company also said it hired Lazard to explore strategic alternatives. PXRE shares slumped 65% to $4.19 during afternoon trading on Friday. Almost 27 million shares changed hands, more than 60 times the average daily volume. D.E. Shaw, Eton Park and Och-Ziff are among the largest and most respected hedge funds in the business.
D.E. Shaw, founded in 1988 by Stanford University Ph.D. David Shaw, has about $19 billion in assets and focuses on quantitative trading and opportunities where technology and finance meet. Eton Park, run by former Goldman Sachs (GS) trading star Eric Mindich, became one of the largest hedge fund startups in history when the firm raised billions in 2004. Och-Ziff, which oversees more than $10 billion, was founded in 1994 by Daniel Och. Och worked at Goldman Sachs's risk-arbitrage group in the 1980's alongside other future hedge-fund leaders such as Richard Perry of Perry Capital, Thomas Steyer of Farallon Capital Management, and Eddie Lampert of ESL Investments. Och declined to comment and Eton Park and D.E. Shaw weren't immediately available for comment.
Hedge funds trade frequently and also, as their name suggests, use a wide variety of investing techniques to protect - or hedge - themselves against losses. That means the PXRE stakes held by D.E. Shaw, Eton Park and Och-Ziff may not have resulted in direct losses for those firms. Still, the holdings illustrate the risks some hedge funds have taken on by entering the reinsurance business recently. Beyond investing in the equity and debt of reinsurers, some hedge funds have invested in catastrophe bonds that are triggered in the event of huge disasters. Others, such as Citadel, have even started their own reinsurance companies.
(END) Dow Jones Newswires
